(FORTUNE Magazine) – MONDAY, JAN. 25: The afternoon session at the Microsoft antitrust trial has barely begun, and we're already shaking our heads in amazement. Paul Maritz, a top Microsoft executive, has been sworn in and is stoically awaiting the torture he will soon endure: cross-examination by David Boies, the government's chief prosecutor. First, though, we're going to watch a short video. Microsoft is about to screen a product demonstration that will illustrate the sheer fabulousness of competing operating systems. I'm not making this up.

There are moments in this trial when it feels as though we've just gone through the looking glass with Alice--when the world seems so upside down it makes your head hurt. Microsoft's first witness, economist Richard Schmalensee, who finished up this morning, made so many logic-defying claims that he could have doubled as the March Hare. Among other things, Schmalensee claimed that there is no such thing as an operating system market, that browser "market share" is meaningless, that Microsoft lacks market power, and that its accounting system is so rudimentary that it can't break out profit margins for its operating system.

But no moment has been quite so Alice in Wonderland as the one we're about to see. In the real world, of course, Microsoft dismisses competing operating systems as vastly inferior to Windows; just a year ago Maritz himself described Linux, an operating system that until recently was of interest only to hackers, as a "curiosity." But in this forum, the company can't say enough good things about its competitors.

The video begins. "Hello," chirps an effervescent young Microsoft employee. "This is a demonstration of the Caldera OpenLinux operating system." Caldera is a small company that, in a delicious irony, is currently suing Microsoft on antitrust grounds. The young Microsoftie continues: "The demonstration will show that Caldera's operating system provides effective functionality for end users."

Effective functionality? What an understatement that turns out to be! In the next few minutes we see how OpenLinux has a "graphical user interface"--just like Windows! It has a built-in browser--just like Windows! It runs word processing and other key applications--just like Windows! In fact, says our host, sounding more and more like the guy who sells Veg-o-matics on late-night TV, "the Caldera operating system is...powerful and easy to use."

When several reporters guffaw, three Microsoft people glare at the press section. But we can't help it; listening to a Microsoft employee tout a competitor is funny. "Caldera could do an ad campaign around this," whispers one reporter. "Just think of the punch line: 'Powerful and easy to use' --Microsoft."

TUESDAY, JAN. 26: "This is going to be fun," says Boies just before court begins today. Fun for him, maybe. But not for his victim, the 43-year-old Maritz. By the time the session ends, Maritz will resemble a boxer who has been beaten to a pulp but staggers to his feet again and again for more punishment.

Maritz's title at Microsoft is group vice president for platforms and applications, which makes him, by general reckoning, the No. 3 man, after Bill Gates and Steve Ballmer. That fact alone makes him an important witness--he is the highest-ranking Microsoft executive to testify on behalf of the company.

But Maritz is critical for another reason: He was involved in almost every strategic decision under attack in this trial. His name is on dozens of e-mails the government has entered into evidence. Most of the eight other Microsoft execs scheduled to testify will focus on a specific aspect of the case--the June 1995 "market division" meeting with Netscape or the alleged threat to withhold a version of Mac Office unless Apple chose Microsoft's Internet Explorer as its browser. Maritz alone must answer for all of it.

In his 160 pages of direct testimony, Maritz offered strong denials of every government claim. His problem is that his testimony does not exist in a vacuum. For instance, Maritz testified that Microsoft included "Web-browsing functionality" in Windows not to nail Netscape but "to make a better product...with great benefits to consumers." Yet we know that Maritz told his colleagues two years ago that "to combat [Netscape], we have to position the browser as 'going away' and do deeper integration of Windows." That e-mail clearly implies that Microsoft's main purpose was "to cut off Netscape's air supply." Maritz is the Microsoft official alleged to have uttered that infamous remark, and one of the first things he does on the stand is to deny ever saying such a thing.

Boies knows just what to do with all these e-mails. He puts up one after another and uses them to make the witness look like a fool. He first wielded them yesterday as he engaged Maritz on the question of Apple. Throughout the trial Microsoft has contended that the main issue between the two companies was not browsers but the threat of a $1 billion patent suit by Apple.

But where, Boies wanted to know, is the proof to back up this claim? He threw up an e-mail from Gates to Maritz. It began, "I have two key goals in investing in the Apple relationship. One, maintain our applications share...and two, see if we could get them to embrace Internet Explorer...." Why didn't Gates mention the patent dispute? Boies asked. He tossed up a second Apple-related e-mail, and a third, and a fourth, following each with the same damning question. Maritz's answer--that the patent dispute was so obvious that Gates didn't have to mention it--is, at best, a little hard to believe.

If Boies drew blood yesterday, he's virtually opening Maritz's veins today. For instance: Maritz denies that he and Gates ever spent any time talking about Netscape as a browser competitor, a claim that just seems absurd. He refuses to concede that Microsoft cared about browser market share--even though he himself wrote e-mails that talk about the critical importance of gaining share. At one point Boies asks Maritz a question about market share, and the witness replies, "Depends on what sense you are using the word 'market.' " This truly unfortunate answer sounds like something from the Gates deposition--or even from a Clinton deposition.

In the middle of the afternoon, Boies brings up the June 1995 meeting with Netscape. A key government contention, of course, is that during that meeting Microsoft proposed that the two companies divvy up the browser market. Boies asks surprisingly few questions about that allegation--surprising, that is, until you realize that on this critical question, there are no damning Microsoft e-mails. (The main evidence consists of notes taken by Netscape's Marc Andreessen.) Boies focuses instead on areas where there is lots of e-mail evidence. For instance, there are tons of e-mails--written in blunt, impossible-to-misread language--suggesting that Microsoft deeply feared Netscape's potential to usurp Windows as the dominant "platform." Those same e-mails also suggest that the company's goal--as Maritz himself wrote just before the Netscape meeting--was "to ensure that we keep control" of Internet software and cut off the competitive threat to Windows.

Again and again, Boies asks Maritz a variation of this question: If Netscape had done as you wanted and agreed to build on the Windows platform, wouldn't that have reduced Netscape's threat to Windows? The fact that this is true seems obvious. But Maritz simply will not concede it. He squirms and twists and dances around the question. He offers explanations for the e-mails that are simply pitiful. Boies, for his part, will not let up. For one excruciating hour, he pounds away at Maritz. It's painful to watch.

Late in the day Microsoft's chief litigator, John Warden, rises to complain that Boies is cutting Maritz off. "The witness," replies Judge Thomas Penfield Jackson, "is awfully difficult to get an answer...from." That remark will make all the newspaper accounts tomorrow, but there is a more subtle reaction from Jackson that will go unreported. At one point the judge gives Boies a glance and a shrug. The meaning is unmistakable. Wordlessly, he is saying to Boies: "Can you believe this guy?"

WEDNESDAY, JAN. 27: Today we get a small glimpse of the real Microsoft. Not the Alice in Wonderland Microsoft of Monday or the evasive Microsoft of yesterday, but the ruthless and paranoid Microsoft that feels surrounded by enemies.

Boies and Maritz are tangling yet again over whether new operating systems, like Linux and and another from a company called Be, are genuine threats to Windows. Boies, of course, scoffs at the idea, and to underscore his point, he enters into evidence an interview with Be CEO Jean Louis Gassee. In the interview, Gassee denies that his company's operating system is a Windows competitor--or ever wants to be. "We can co-exist with Windows," he insists.

But Maritz can see right through Gassee. Oh, yes, he can! "He's articulating his strategy for entry into the operating system marketplace," replies Maritz. "But on the other hand, I know that Be has built a full-featured operating system." His voice starts rising. "So what I believe he's doing here is outlining his strategy about how he will initially co-exist with Windows and, over time, attract more applications to his platform."

In other words, Gassee's spiel is little more than a trick intended to lull Microsoft. But Microsoft isn't so easily fooled! Microsoft will never ignore a potential threat to its Windows fortress, no matter how slight. The software giant may be in the middle of an antitrust trial, but--as Andy Grove says--only the paranoid survive.

THURSDAY, JAN. 28: Does Maritz know how badly he's been beaten up? I wish I could tell you, but I can't. At every break he leaves the courtroom with his head down, never making eye contact. His body language says, "Stay away." He seems isolated, lonely even, torn from the comfort of Redmond, Wash., and inserted into this strange environment to confront a foe who is his intellectual equal and then some. It must be enervating to be cross-examined by Boies, who breaks you down with your own words. Under Jackson's rules, Maritz may not even consult with Microsoft's lawyers while he's a witness. Talk about isolated--the very people who prepared him for the trial are now forbidden to help him improve his performance.

Finally, though, it's over, and the judge tells Maritz he's excused. "Free at last," he says with a sigh of relief. Then he walks straight up to his tormentor and puts out his hand. "I'd love to meet you sometime under different circumstances," Maritz says.

"So would I," replies Boies.

MONDAY, FEB. 1: Before last week, Microsoft's next witness, James Allchin, had never been in a courtroom. The slender, soft-spoken, 47-year-old is the executive in charge of Windows--"the Windows guy," he's been known to call himself. At heart he's a computer geek. He has a doctoral degree in computer science and speaks fluent computerese--meaning that half the time no one in the courtroom can understand him. And Allchin has the classic geek's deep distaste for confrontation. That is to say: He is utterly ill-equipped for what he is about to face.

One senses that he knows this. Allchin was in court last Tuesday morning--the day Maritz was being pummeled by Boies. He sat with the Microsoft PR staff, but didn't talk to them much. He spent most of his time staring at his shoes, his hands tightly clasped. He looked like a lobster who's just been informed that he's next in the pot.

Today he doesn't look much better. He has brought with him his wife, Catherine, a pretty woman in her mid-30s who used to work at Microsoft's outside PR agency, Waggoner Edstrom. At least Allchin won't have to face the ordeal alone. Before court begins, the two sit together in the spectator section. They're in their own little world, whispering, giving each other occasional affectionate pats. But they both have that deer-in-the-headlights look. When Allchin is called to the stand, his wife puts her hand on his back and gives him a last comforting pat.

Then he's sworn in. He looks frightened as he takes his seat on the witness stand. He is now the lobster in the pot.

TUESDAY, FEB. 2: Allchin is on the Microsoft witness list for one reason: As the Windows guy, he is the executive best positioned to make the case that the integration of Internet Explorer into Windows 98 is a Good Thing. He can describe the technical advantages to developers and the benefits to consumers. He can argue that browser integration was something Microsoft conceived of before Netscape even existed. And he can make another key Microsoft argument: that Internet Explorer and Windows are not two different products that have been illegally "tied" but are one seamless product. If Allchin can succeed in persuading the judge to this view, Microsoft will have made great strides toward winning this case.

Like Maritz's, Allchin's direct testimony is long: 139 pages. At first glance it seems strong, filled with concrete examples of technological advantages and detailed illustrations of how browsing has become part of the operating system. Allchin, too, has brought a video to court; it purports to demonstrate some points in his testimony. The government tried to prevent its being shown, but Jackson overruled the objection.

Microsoft played the video yesterday just after Allchin took the stand. It soaked up the entire morning and the early part of the afternoon. No matter: When Boies began his cross-examination, he still had enough time to score some direct hits. The prosecutor started by replaying the portion of the video that displayed the supposed benefits of browser integration. As soon as the first benefit was shown, Boies stopped the tape and asked Allchin a simple question: If you had a Windows 95 computer without a browser, and you loaded a stand-alone copy of Internet Explorer, wouldn't you get exactly the same benefit as shown on the video?

Allchin paused for a moment. "Yes, I believe that's correct," he conceded, giving a heavy sigh.

Boies went to the next benefit. Same question. Same grudging answer. Moving through every benefit shown on the tape, Boies asked that question 17 more times; 17 times Allchin gave the same answer. In one hour Boies had undercut one of the key points of Allchin's testimony. His wife looked so pained during this exchange that I could scarcely bear to glance at her.

This morning Boies has moved to another portion of the video--a 4 1/2-minute segment that attempts to undermine the testimony of Edward Felten, a government witness. Back in December, Felten, a Princeton University professor, testified that he had devised a small program that could remove Internet Explorer from Windows 98--something Microsoft insists cannot be done. In this section of the video, Microsoft's narrator demonstrates how the Felten program does not eliminate web browsing but only hides it. He also explains that a "Feltenized" computer is likely to suffer serious "performance degradation." To show this, the video focuses in on the screen of a PC loaded with Windows 98. "We have not made any other changes to this computer ... except to run Dr. Felten's program," says the narrator. Then he accesses the "Microsoft Update" Web page. "As you see," he says, "we're connecting out to the Internet.... It's taking a very long time, however.... That's a result of the performance degradation that has occurred."

When this portion of the tape was played early yesterday afternoon, it seemed awfully persuasive. But Felten and two associates have noticed something that no one else seems to have caught, not even Allchin, whose staff performed the tests. The so-called title bar--a line at the very top of the computer screen--reads MICROSOFT WINDOWS UPDATE--MICROSOFT INTERNET EXPLORER. But Boies knows, because Felten has told him, that after the program has run, the words MICROSOFT INTERNET EXPLORER are supposed to change to WINDOWS 98.

Boies sets his trap. First he gets Allchin to say that the words WINDOWS 98 should be in the title bar after the Felten program is run. Then he freezes the video and points at the title bar. To Allchin's horror, he sees that it says MICROSOFT INTERNET EXPLORER. This clearly suggests that the Felten program was not run. As Allchin begins to stammer, Boies moves in for the kill. "This video that you brought in here and vouched for and told the court how much you checked it," he says, his voice rising dramatically, "is a video that purports to show right here on the screen a performance degradation...and how it's due to the Felten program. And that's just wrong, right?"

Allchin can see no way out. "I do not think the Felten program has been run," he admits. In other words, whether wittingly or not, Microsoft has entered into evidence a video that appears to misrepresent the truth. And everyone in the courtroom understands that that's what Allchin has just admitted. The whole place goes dead silent. The Microsoft lawyers stare into their legal pads. Catherine Allchin seems close to tears. The witness himself looks as if he's been run over by a truck.

At the morning break, the Microsoft spinners put on a brave face. "It's all smoke and mirrors," says one. But behind the scenes, Microsoft is frantically trying to figure out what happened. They are soon insisting that, Allchin's admission notwithstanding, the demonstration was accurate--they just don't know why the title bar didn't change. Several members of Allchin's team hop on a plane from Redmond to D.C. They run and rerun the Felten program on their laptops. Allchin himself works the phones over lunch. Microsoft flacks ask the press for some time and insist that the company was not trying to snooker anybody. It was a glitch, they say. They'll get an explanation.

For the rest of the day, confusion reigns. Although it is clear that Boies has damaged Allchin's testimony, it is unclear whether the video was doctored by Microsoft or whether all we saw were courtroom theatrics. When the Associated Press files an early story saying that the government accused Microsoft of "falsifying" the video, an argument breaks out in the press room over whether the AP went too far. Allchin, of course, is devastated. When he and his wife exit the courthouse at the end of the day, a photographer moves in. Allchin walks away quickly, his arm blocking his face. Last week he entered a courtroom for the first time. Today he leaves like a criminal trying to keep his picture out of the paper.

WEDNESDAY, FEB. 3: Can this really be happening? After the tape fiasco of yesterday, can it really be possible that Microsoft has presented Boies with an opportunity to decimate its video evidence for a second straight day? And that this destruction is far more devastating and far more dramatic? And that it's happening over the exact same four minutes of videotape? I did not, I confess, imagine that such a thing was possible. But I was wrong. If Maritz had his Terrible Tuesday, then this is Allchin's Wretched Wednesday. It's almost too horrible to watch.

It begins innocently enough. This morning, during the soothing redirect examination by a Microsoft lawyer, Allchin testifies that there is an innocent explanation for what we saw yesterday. The PC used in the video had software loaded onto its hard disk that had somehow affected the default setting on the title bar. That's why the words didn't change after the Felten program had been run. Simple as that.

But then Boies begins his re-cross. For two-plus hours, he asks Allchin bruising questions that clearly wound the witness. But he doesn't ask a thing about the video. With his usual flair for the dramatic, Boies is saving the best for last. The courtroom is jammed. The atmosphere is electric. And at 3:40 P.M., when Boies says to the witness, "Now, Mr. Allchin, I would like to turn to the video demonstration," the spectators literally move to the edge of their seats.

The first thing Boies does is get Allchin to admit that his team rehearsed the demonstrations. Then he runs a large portion of the "Felten segment" so that everyone can remember how it goes. He asks Allchin whether a single PC was used for the demonstration. Allchin says he's not sure--but concedes that multiple machines were used for the tests. Boies asks whether the entire segment shows a machine that has been "Feltenized." Yes, says Allchin.

Then Boies rewinds the tape and begins the segment again. This time, however, he asks to freeze it every few frames. The first time he stops it, he points to two icons, one above the other. "Do you see that?" "Yes," says Allchin. "Now," says Boies, "clearly the impression that's being given here is, this is [one] machine, right?" But Allchin says he can't answer that question--since multiple machines were used in the test, it is possible that multiple machines were used in the tape--despite the fact that it appears to be a seamless piece of taping. The judge, incredulous by now, cuts Allchin off: "How can I rely on it if you can't tell me whether it's the same machine? It's very troubling, Mr. Allchin." Allchin looks as if he wants to crawl into a hole.

But Boies is just warming up. "Stop there, please!" He points to the frozen screen--and directs the witness' attention to the spot where there had been two icons. One icon has vanished. Among the spectators there are audible gasps. "Now that indicates that something has happened to this in the last two minutes, right?"--something, clearly, that the company failed to videotape. "Yes," Allchin concedes mournfully.

The next 15 minutes will undoubtedly rank among the longest of James Allchin's life. Boies stops the video at least ten more times, every time pointing out one more thing nobody on the Microsoft side had noticed. The video seems more and more phony. He points to a frame where the second icon reappears. How did that happen? He shows a portion where the "Feltenized" machine speedily accesses the Internet, without any so-called performance degradation. Could it be, Boies implies, that this PC, too, didn't have the Felten program on it? And on and on. All the witness can do is die another death every time Boies freezes another frame. The packed courtroom is stunned, speechless. This sort of thing is supposed to happen only on television.

By 4 P.M. Boies has finished. Immediately Microsoft asks for a bench conference--during which its lawyer pleads for one more chance to videotape the demonstration and play it in court tomorrow. Jackson agrees. "Mr. Boies," he adds, "had done a very professional job of discrediting" the video.

As the lawyers talk, the marshal instructs Allchin to move away from the witness stand. As he slumps in a different chair, he puts his head up against the wall and stares at the ceiling. His wife is still here. But at this moment James Allchin looks like the loneliest man on earth.

THURSDAY, FEB. 4: You know what the great shame of this week is? Allchin is actually a sincere, funny, honest guy. Under different circumstances, he could have been a terrific witness. We know this because this afternoon we saw the video Microsoft shot last night. In it Allchin "Feltenizes" several new laptops and talks us through the tests he conducts. Watching him during this 70-minute video, I cannot help but like him; even Judge Jackson smiles sympathetically at several points. The tests do indeed show that a "Feltenized" computer does not remove Web browsing. But Allchin still has to admit that he has been unable to test for the performance degradation shown in the earlier video. Boies doesn't press the issue. This seems an act of mercy.

After the session, Microsoft makes one final, awful admission. Its spokesman concedes that its original video was merely an "illustration" of the tests rather than the tests themselves. In the end, what we saw in court was not an example of Boies' "trickery" but rather an example of Microsoft's arrogance.

Still, general counsel William Neukom stresses how sympathetically Allchin came across today, and he insists that neither Allchin nor Maritz was damaged by Boies' cross. "The drama has been engaging," he says. "But the substance is still with us."

But that's what Microsoft's been saying since this trial started. It simply does not jibe with what we're seeing in court. What we're seeing is a great lawyer--Boies--who has completely taken control of this trial. We're seeing him attack Microsoft not on the margins but on subjects that are the substance of the case. Did Microsoft integrate its browser to crush Netscape? Are the consumer benefits real or illusory? Those are the questions that have dominated Boies' cross-examinations.

And we're seeing one other thing. We're seeing Microsoft's defense go down in flames. For the three months the government was putting on its case, Microsoft cautioned the press to wait for the company's defense. Now, that defense is under way, and the company's first two executives have staggered away from the witness stand with serious questions raised about their credibility. If Microsoft loses this trial--and make no mistake, that's where we're headed if things don't change quickly--the events of the past two weeks will be a lot of the reason why. For Microsoft, this trial is no longer Alice in Wonderland. It's Dante's Inferno.