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AOL deal consumes trial
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November 30, 1998: 6:03 p.m. ET
Microsoft says $4.2B Netscape merger proves it cannot stifle competition
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NEW YORK (CNNfn) - As Microsoft Corp. Monday continued its cross-examination of economist Frederick Warren-Boulton, both sides kept the focus on last week's America Online Inc.-Netscape Communications Corp. merger.
In day four of often tedious cross-examination, Microsoft lawyer Michael Lacovara used that alliance to challenge Warren-Boulton's assertions that the company fits the economic definition of a monopoly.
Warren-Boulton has testified that Microsoft's actions, which includes bundling the Internet Explorer Web browser with the Windows operating system, amount to anticompetitive practices.
Lacovara, however, pointed to AOL's $4.2-billion purchase of Netscape as proof that competitors have a variety of ways to market Internet browsers.
But lead government attorney David Boies emphasized that last week's deal does nothing to dilute the issues involved in the antitrust suit.
"There are a variety of ways people can market browsers," Boies said. "The question is: Are they effective ways to market browsers?"
Also on Monday, Microsoft took out a series of advertisements in national newspapers lauding the AOL-Netscape deal as a positive development for consumers and for Microsoft.
Boies said while the ads continually refer to thriving competition in the high-tech industry - a notion Boies said he does not dispute -- they dismiss the central issue in the antitrust case -- that Microsoft has worked to preserve its monopoly in operating systems and extend it to other markets that threaten its monopoly.
"Microsoft's interest is in dominating technology that would prevent an alternative [operating system] platform, even if it means giving away [software] for free," Boies said. "Microsoft is not interested in revenues, they're interested in blocking competition."
The Justice Department and 20 states sued Microsoft in May, accusing the company of abusing its dominant share in the computer operating systems market to take over the Internet browser market from Netscape
Boies had previously stated that the AOL-Netscape merger offers proof that Microsoft's actions effectively forced Netscape out of business. But Bob Herbold, Microsoft chief operating officer, told CNNfn the deal illustrates that Netscape was able to build an attractive business in the face of increased competition.
"What we see here is an American success story, where over the course of four years the company [Netscape] has gone from a small number of people with a bright idea to being sold for $4 billion to a partner that will provide a great set of alternatives for the consumer," Herbold said.
"Obviously, that company had developed enough attractive properties that a very high price has been paid."
The government will call James Gosling, Sun Microsystems Inc. vice president, as its next witness, though Boies said he isn't likely to take the stand before Wednesday. Judge Thomas Penfield Jackson told Lacovara he expected Microsoft to wrap up its cross-exam of Warren-Boulton Monday. The government will then redirect questions, and Microsoft will have the opportunity for recross-examination.
Gosling, the creator of Sun's Java programming language, is expected to testify that Microsoft used its monopoly power to eliminate Java as threat to its operating system dominance.
Earlier this month, Sun won a preliminary injunction in federal court, forcing Microsoft to make the Java that runs on its Windows 98 and Internet Explorer 4.0 compatible with Sun's programming or pull them from the market.
Microsoft (MSFT) shares dropped 6-1/16 to close at 122. Sun (SUNW) shares fell 6-5/16 to 74-1/16. 
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