IBM witness reveals MS OEM price threats and deals

Want to know what everything costs, and why? Read on...


MS on Trial According to a deposition by Garry Norris of IBM, Microsoft proposed a Windows Desktop Family Agreement in March/April 1996, and wanted IBM to give up the right to have Windows 3.11 for $9 (the agreement at this price lasted until September 1997), as it wanted to discourage installation of the product. Microsoft wanted $62 for Windows 3.x in the agreement. IBM was concerned to obtain a good price for NT 4.0, which was offered for $127, or a 40 per cent discount on the per-copy price of $195, as a result of signing the Family Agreement, probably in August 1996. In the end, IBM agreed to $40 for Windows 3.11, which reduced to $25.50 after MDA discounts, which was believed to be only marginally more than Compaq paid. IBM was to receive a discount of $6 if the percentage of Windows 3.x was below a certain threshold. A further incentive for the deal was that IBM would be able to recover $5 million being held in an escrow fund that was established as part of the settlement of the audit (see separate story). Norris detailed in his deposition how Microsoft dealt with IBM: "We were offered on several occasions, from time to time, offerings from Microsoft, financial offerings, financial incentives, to stop shipping products from time to time, or reduce or eliminate them. They began with what I told you earlier about the MDA, by offering us $8 in MDA royalty reductions to stop shipping or eliminate OS/2. Navigator was around the fall of '96/winter of '97 time frame. We had similar offerings that gave us - that would give us financial incentives if we stopped shipping Navigator and start shipping IE. In return, we would get favourable price, MDA reductions, et cetera. We rejected these deals from time to time. And as a result of the rejection of the deals, we were told repeatedly that we would suffer in the marketplace with higher prices. And we were. We would suffer below-par support in their support programs. And we did. We would not be allowed to anticipate in the any of the enabling programs, the Solution Provider program, the Authorized Technical Education program and the Authorized Support Center program. We were told that we would not be allowed to certain events and other things that our competitors got that I can't recall at this time." IBM's Consulting Practice for Microsoft Technologies became a Microsoft Certified Solution Provider, but the membership was not renewed (by Microsoft apparently). IBM was verbally offered a financial incentive ("below $10", for IE and several other applications) to ship IE and not Navigator, providing what Microsoft called "no objectionable applications" (Lotus, Netscape) were included. This occurred in March 1997, after IBM had stopped shipping OS/2 with PCs. IBM was allowed to add icons to the start menu and the desktop, but was not allowed to have an icon that made it possible for a user always to boot to an alternative interface if an icon was clicked once: the user had to click the icon each time. Pepperman teased away at Norris, trying to find out any additional information as to why Lotus decided to drop Navigator. It appeared that Lotus felt threatened by Netscape Communicator, a potential rival to Notes. Norris established a Microsoft project office consisting of 18 team members. Norris said that he rejected a chart prepared by Dubinsky, dated 21 May 1996 (although this could well be a production date for legal discovery) and which contained a remark "Turned the tables on Kempin". Reading between the lines, Dubinsky may have been moved sideways in 1995, since some time after Norris' appointment, Dubinsky began to report to Norris. Dubinsky was probably also particularly disliked by Kempin for being instrumental in the sting that Kempin had received in November 1994, at a meeting involving Gates, when he thought he had succeeded in getting IBM to suppress OS/2, only to find IBM making war cries about it. Gates was clearly annoyed at Kempin about this. In a document concerning bonuses, produced by Microsoft lawyer Richard Pepperman, a suggestion that Dubinsky received a $5,000 bonus is crossed out. Norris said he thought that Dubinsky had created the document requesting a bonus. Pepperman was interested in other content that reflected well on Microsoft, but he was most curious about the award to Dubinsky: "Well, this has been killing me to ask this. The last sentence of this says: 'I would like to give an award to Dean of $5,000. It's crossed out. Did Dr Dubinsky get an award here?' " Norris confirmed that he did, as did several other team members. ® Complete Register trial coverage


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