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IBM details MSFT threats
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June 7, 1999: 1:05 p.m. ET
Executive says Microsoft threatened to withhold Big Blue's Windows license
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NEW YORK (CNNfn) - An IBM Corp. executive testified Monday that Microsoft Corp. threatened to withhold its Windows operating system because IBM intended to include software from a Microsoft rival in its personal computers.
The testimony of Garry Norris at the Microsoft antitrust trial appeared to bolster the government's charges that the Redmond, Wash.-based software titan uses its alleged monopoly power as a weapon to threaten companies that attempt to use products from Microsoft's rivals.
Norris' presence is also significant because he is the first representative of a PC maker to testify against Microsoft in the landmark antitrust trial in Washington.
As a manager in Big Blue's PC unit, Norris frequently negotiated with Microsoft (MSFT) regarding use of its Windows operating system and other software in IBM (IBM) PCs.
Under direct questioning during the trial, Norris said that in 1995 IBM was stalled in efforts to reach a licensing agreement to include the then-upcoming Windows 95 operating system in its PCs.
Norris said Microsoft balked at IBM's inclusion of its own OS/2 operating system in its PCs. Norris also testified that Microsoft wanted to charge IBM $75 for each copy of Windows 95, a higher price than Microsoft charged such favored firms as Compaq Computer Corp. (CPQ).
The situation became more intense in June 1995, according to Norris, when IBM acquired Lotus Development Corp. At the time, rumors swirled that IBM intended to include Lotus' SmartSuite collection of software, a direct competitor of Microsoft's Office product, in its computers.
According to Norris -- currently director of IBM's networking hardware division -- Microsoft Chairman and Chief Executive Officer Bill Gates was irate over the prospect of IBM bundling a rival's software suite in its PCs, and negotiations for a Windows 95 licensing agreement came to a screeching halt.
Norris later said Microsoft grudgingly granted IBM its Windows license just 15 minutes before Microsoft launched the product in August 1995. Because of the delay, Norris testified, IBM was late to market with its new PCs for the back-to-school and holiday shopping seasons.
When asked by Justice Department attorney Phil Malone what would have happened to IBM's PC business had Microsoft refused to issue a Windows 95 license, Norris said the unit would be out of business.
The Justice Department and 19 states sued Microsoft last year for using its alleged monopoly on the Windows operating system to stifle competition in other segments of the computer industry.
Microsoft shares were up 5/8 at 80-3/16 in midday trade. 
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