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By Elizabeth Wasserman

WASHINGTON, D.C. – Microsoft made a "credible and fairly terrifying" threat to dissuade Intel from working on Internet-related and other software programs, according to testimony Monday from Steven McGeady, a VP at the chip giant.

Unlike other witnesses called so far during the trial, McGeady's direct testimony was not made public beforehand at the request of Intel. But under questioning in the government's antitrust trial against Microsoft Monday, McGeady, who oversaw Intel's work on development of Internet software and in the Java programming language, backed up the government's claims that Microsoft used its dominance in the operating system market to stop Intel from working on certain software projects.

In court Monday, a portion of Bill Gates' videotaped testimony was shown in which the Microsoft chief repeatedly denied being aware of any work Intel was doing related to Internet software.

But according to McGeady, not only was Microsoft well aware of Intel's software plans, Gates himself was present at one meeting when those plans were discussed.

McGeady saw Gates' reaction to Intel software plans at an Aug. 2, 1995, meeting between Microsoft and Intel executives.

"He [Gates] was very upset that we were making investments in software," according to McGeady. In fact, Gates became "enraged" at one point, that the engineers at Intel Architecture Laboratories (IAL) "in his view were competing with Microsoft," McGeady said.

Also introduced in court Monday was an internal Intel memo from VP Ron Whittier, who reported that Gates said Intel should use its software resources to develop a "super-duper server – this could be tied to (Microsoft's) Tiger program [or we could go climb a mountain]."

When asked in court Monday what this meant, McGeady replied that Gates "basically suggested that we do something useless that would not interfere with Microsoft."

McGeady added that Gates "felt that what we did in software directly competed with Microsoft ... and Bill made it very clear that Microsoft would not support our next processor if we did not get alignment on other issues."

Intel wanted to make sure Windows would work with its MMX multimedia chip technology and the P7 next-generation processing architecture, eventually code-named Merced.

"It was clear to us if those processors didn't run Windows they'd be useless," McGeady said. "The threat was both credible and fairly terrifying."

Microsoft reaction to Intel's work on software and native signal processing (NSP) was made clear at a meeting between executives from the companies during a Windows hardware engineering conference in April 1995, according to testimony Monday.

A memo from Intel senior engineering manager Gerald Holzhammer written to his staff after that meeting, and introduced in court Monday, said Microsoft was "upset with us being in their OS space – no surprise there. Interestingly they have evolved their thinking on what that space needs to be."

A later memo from McGeady, dated Aug. 28, 1995, and entitled "Sympathy for the devil," said that Gates had told Intel CEO Andy Grove earlier that month to shut down IAL. "Gates didn't want IAL's 750 engineers interfering with his plans for domination of the PC industry," McGeady wrote. "Gates made vague threats for support for other platforms and on the same day he announced a major program to support Digital Equipment's Alpha microprocessors, an Intel competitor. Gates was livid about IAL's investment in the Internet and wanted that stopped."

The government also introduced an Oct. 18, 1995, memo from Gates intended to show how Microsoft was using its influence on manufacturers to pressure Intel from staying out of software development – in this case, specifically NSP technology, which speeds media streaming and which Microsoft wanted incorporated into its own software.

"Intel feels we have the OEMs on hold with our NSP chill," Gates' memo reads. "For example, they feel HP is unwilling to do anything relative to MMX exploitation for the new audio software Intel is doing using Windows 95 unless we say it's OK. This is good because it means OEMs are listening to us."

What this all meant, McGeady said in response to questioning, was that "if we kept pissing them [Microsoft] off they were not going to support MMX."

McGeady was also questioned about a meeting with Paul Maritz, Microsoft group vice president of the platforms and applications group, in November 1995, during which Microsoft's plans for the browser market and competing with Netscape Communications Corp. were discussed. At the meeting, McGeady said, Maritz said "it was Microsoft's plan to 'cut off Netscape's air supply' – that one phrase sticks out."

McGeady quoted Maritz as saying Microsoft's plan was to "embrace, extend and extinguish ... we are going to fight with both arms – the OS arm and the applications arm."

One part of the plan was to extend HTML (hypertext markup language) so it was not compatible with Netscape's support of HTML, McGeady said.

Outside the courtroom, Microsoft spokesman Mark Murray said Microsoft and Intel generally were able to negotiate on issues but acknowledged that in this rare instance, on NSP, they were unable to reach a solution. However, Murray downplayed the importance of Intel's NSP development, saying it "would not have advanced the user experience."

McGeady's perspective was not an accurate representation of Microsoft's relationship with Intel, Murray said, adding that the government is misinterpreting the association between the two technology giants. In addition, when Gates in his deposition denied knowing about Intel's Internet software development efforts, he may have been thinking only of browser technology and not other specific technologies, Murray speculated.

Mentioned in this article

PEOPLE
Bill Gates Chairman and CEO, Microsoft
Paul Maritz Group VP, Applications and Platforms, Microsoft

COMPANIES
Microsoft Redmond, WA
Intel Santa Clara, CA
Digital Equipment Maynard, MA
Netscape Communications Mountain View, CA

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