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Software Execs Trade Barbs in Senate Hearings

Microsoft and Dell square off against Netscape and Sun.

By Brian McWilliams, PCWorld   

During questioning from Committee members, Chief Executive Officer Scott McNealy of Sun Microsystems said Microsoft has no real competition in operating systems, and he predicted no company would be able to supplant Microsoft%squots alleged monopoly. That comment sparked an exchange between Microsoft%squots Bill Gates and McNealy.

Gates: %dquotAt least outside of this room, Mr. McNealy has a plan to replace PCs. He talks about how nobody should buy fat clients, and thin clients will totally replace PCs. ...%dquot

McNealy: %dquotI%squotve never said totally.%dquot

Gates: %dquotOK, not totally--there%squotll still be a few old ones in a closet somewhere. He%squots promoting a vision of computing that is a perfectly valid thing. This is a very competitive business, and I don%squott think it%squots fair to ... say [Sun%squots] Java OS has no chance of displacing Windows. That%squots simply not true.%dquot

McNealy: %dquotJava OS has a chance, but [not] if Microsoft is allowed to leverage its Windows monopoly and prevent us from taking a good shot at the market with a better and a newer paradigm. Innovation must be allowed to happen. ... If thin-client Java computing fails on its own merits, that%squots fine. But if it fails because of illegal predatory and exclusionary tactics from a monopoly position, that%squots a loss to all consumers.%dquot

Committee Chair Orrin Hatch (R-Utah) in particular tried to explore whether Microsoft is abusing its power on the PC desktop. He queried Gates repeatedly about Microsoft%squots cross-promotion deals with Internet service providers. Hatch tried to ferret out whether Microsoft%squots deals with ISPs such as EarthLink Network specifically prohibit ISPs from also promoting Netscape%squots Navigator.

Gates didn%squott confess to such a practice, but he did say the company has recently modified its ISP deals as a result of the scrutiny. James Barksdale, chief executive officer of Netscape, also weighed in.

Gates: %dquotWe have agreed that we%squotre going to drop anything that people find objectionable in terms of how we do these ISP agreements. But it%squots only 3 percent of the sign-ups, so I am surprised it became the focus of so much attention.%dquot

Barksdale: %dquotWe%squotve never used [exclusive licenses] because we%squotre much more subject to market forces. Microsoft, because of its position in [other parts of its] business, is able to force some people to do things that are not necessarily in their best interests. If [exclusive licenses] were not a problem for Netscape, Microsoft would not have changed 40 licenses the day before this hearing.%dquot

Both Hatch and Senator Mike DeWine (R-Ohio) jumped on Michael Dell, founder and chair of Dell Computer, about why his company doesn%squott offer Netscape Navigator to PC buyers.

DeWine: %dquotCan you help us understand exactly what your relationship is with Microsoft?%dquot

Dell: %dquotSenator, first of all we do offer Netscape Navigator to our large customers who demand it. ...%dquot

DeWine: %dquotLarge customers.%dquot

Dell: %dquotLarge customers who demand it.%dquot

DeWine: %dquotDemand it. [pause] OK, I get it--I just want to make sure. Large, demand.%dquot

Dell: %dquotWe negotiate vigorously with all of our vendors to obtain the best possible terms that we can for our own company and our customers and our shareholders. And based on the terms that we have negotiated ... the incentives that have been put in place for us to sell one product or another are going to dictate our actions.%dquot

As the hearings wrapped up, Senator Herbert Kohl (D-Wisconsin) asked Netscape%squots Barksdale for his input on what the government ought to do next.

Barksdale: %dquotI think the most important thing that this Committee can do and the members of Congress can do is to encourage the Department of Justice, which I think right now needs a little encouragement because there%squots quite a bit of lobbying against some of these efforts; to continue to pursue the facts in the case; to take the case further than is currently contemplated, which is simply ... a slap on the wrist based on a consent decree that didn%squott have a lot of teeth in it two years ago. Take it on to the next level, which would be to file an antitrust claim on the ground of the violation of the abuse of monopoly powers in this industry.%dquot

Hatch closed the gathering without saying whether there would be additional hearings on the topic.