|
MSFT worried over prices?
|
 |
November 19, 1998: 8:00 p.m. ET
Fed witnesses says company memo is evidence that Microsoft is a monopoly
|
NEW YORK (CNNfn) - An internal Microsoft Corp. memo read in federal court Thursday indicated the software giant so feared its high prices might drive computer makers to support an alternative to its Windows operating system that it even considered changing its future pricing policies.
In his written direct testimony, government witness Frederick Warren-Boulton, a principal at MiCRA, a Washington-based economics consulting firm, said Microsoft used its monopoly in supplying operating systems to raise prices above the level competition would otherwise permit.
Warren-Boulton said even Microsoft had qualms about its own pricing, citing a December 1997 Microsoft memo about the amount it was charging Compaq Computer Corp., (CPQ) the No. 1 PC maker.
"Our high prices could get a single OEM (Compaq might pay us $750 million next year) or a coalition to fund a competing effort (say in India)," wrote Joachim Kempin, Microsoft's senior vice president for sales to personal computer makers.
Annual fee for Windows?
In the same memo, Kempin suggested Microsoft begin charging PC users an annual fee to use Windows beginning in 2001. Customers who buy new computers now pay a single fee for Windows, which is bundled into the cost of the overall computer.
Microsoft spokesman Mark Murray, however, downplayed the significance of Kempin's suggestion.
"This is not a licensing option that is near reality," Murray said. "It is simply an idea that is thrown out there to look into."
Warren-Boulton's testimony is important because the government hopes to provide an economist's perspective of what constitutes a monopoly. Whether Judge Thomas Penfield Jackson rules Microsoft is a monopoly is a key element in the case.
Microsoft has argued, however, that if it were a monopoly, as the government charges, it would charge a lot more for its Windows operating system. The company has also maintained that it can be supplanted by any company that develops a superior technology with consumer demand.
"If we ever stop innovating we will quickly be passed by other companies in this industry, and that's why Microsoft invests over $3 billion a year in research and development to continually improve our products for consumers," Murray said.
The Justice Department and 20 states filed suit against Microsoft last May accusing the software giant of leveraging its dominance over operating systems into the browser market.
Microsoft (MSFT) shares gained 2 to close at 111-3/4. 
-- from staff and wire reports
|
|
|
|
|
 |
|
