Compaq-MS murky secrets II – an analysis

We piece together the story of how these two lovable companies conduct their business


In court, Rose told Boies that he wasn't aware that featuring Netscape "was an explicit goal". He confirmed to Boies that the 10/13 May MOU said that Compaq would ship IE as the default browser in future "on all Compaq desktop and server platforms".

Rose said: "We feature Netscape and we allow Netscape to be the default browser or we allow IE to be the default browser. It's a customer's choice."

Boies questioned whether Compaq shipped two default browsers on the same PC? Rose said: "No, we ship the icons displayed on the PC and the customer can choose whether they want Internet or whether they - whether they want the Netscape Navigator or they want the IE Explorer Internet, and the customer can choose."

Judge Jackson asked some questions about Compaq's contractual obligations, and it was clear that his suspicions were aroused.

30 May 1996: Microsoft issued a Notice of Intent to Terminate License Agreement #1107-3053, dated October 1, 1992, in a letter addressed to David Cabello at Compaq.

6 June 1996: Hardwick wrote to Dunn. "Microsoft is requesting that Compaq replace the Microsoft Network and Internet Explorer icons on the Windows 95 desktop on all Compaq Presario machines."

25 June 1996: Second letter from Hardwick to Dunn, after Compaq's capitulation. "Based on the representations in your letter [of 21 June 1996] that Compaq has replaced the Microsoft Network and Internet Explorer icons on the Windows 95 desktop as executable icons, and have placed the Microsoft Network, Internet Explorer and Internet Setup Wizard icons in their original locations under the Start button on the Windows 95 desktop, Microsoft hereby withdraws its Notice of Intent to Terminate the Agreement."

June 1996: The 15 August 1995 MOU was signed.

12 November 1996: Compaq internal email from Bob Friedman [Compaq San Bruno office] to Steve Flannigan, Steve Decker [director of purchasing] and others. "Joe Williams [of Microsoft] came to San Bruno last week to discuss revenue sharing from the Microsoft ISP agreements. Why is Microsoft making the offer? (a) Microsoft is unhappy with the Netscape icon on the North American Predators [a Presario model] desktops and wants to get it off. ... Compaq has been adamant of wanting to earn revenues from ISP agreements. Microsoft's stance to date raises questions of improper use of a monopoly position. Making this offer could reduce Microsoft's exposure."

The next page notes under a heading "Fine print and land mines" that Microsoft will be expecting an exclusive arrangement that would prevent us from putting Netscape on the desktop." Although Rose had strategic responsibility at Compaq for the Microsoft relationship, he claimed he was "never aware of Microsoft wanting us to exclude the Netscape icon from the desktop".

Richard Pepperman [conducting the redirect examination for Microsoft] read into the record from Decker's deposition that "Microsoft will be expecting an exclusive arrangement that would prevent us from putting Netscape on the desktop." Decker said that "Quite frankly, Bob was wrong there." Rose also confirmed that Microsoft never "proposed an exclusive arrangement for Internet Explorer".

Rose said in court: "I was never aware of Microsoft wanting us to exclude the Netscape icon from the desktop." Rose maintained that "Compaq never removed the Internet Explorer or MSN icon from the desktop ... we never put the icon for the Internet Explorer or MSN on - displayed on the Presario screen as an icon, so we didn't remove it." However, three people from Compaq describe the situation as "removing the icons".

Rose's semantic argument was nullified by his direct testimony: "I understand that, in early 1996, Compaq did remove, on some consumer products, the Internet explorer icon (as opposed to Internet Explorer software) from the Windows 95 default desktop on its Presario line of personal computers."


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