December 05, 2000, 11:59 AM — WASHINGTON -- A government witness from IBM today detailed the troubles the
world's second largest PC manufacturer had negotiating to license Microsoft Corp.'s
Windows 95 operating system after refusing to abandon its own PC operating system and
other rival software products.
At one point, witness Garry Norris, program director of IBM's Network and Hardware
Division, said a top Microsoft vice president, Joachim Kempin, proposed to IBM
officials that they agree not to ship a competing office suite of software
programs "for six months to a year" to settle the negotiations.
IBM refused to delay plans to ship that program, Smart Suite, which it acquired when
it bought Lotus Development Corp. The company also reiterated its intention to continue
support of its own competing PC operating system, OS/2. But IBM offered to pay
Microsoft a lump-sum payment of $10 million and committed in writing to pay interest
and penalties if royalties weren't properly accounted for. IBM officials also wrote
personally to Bill Gates seeking ways to resolve a stalemate in negotiations.
Norris, who was testifying during his first day on the witness stand at Microsoft's
antitrust trial, was the IBM official leading negotiations with Microsoft from 1995 to
1997. Despite IBM's efforts, the company didn't sign a licensing agreement until 15
minutes before Microsoft's Aug. 24 Windows 95 launch event. At that point, IBM was the
only PC manufacturer that hadn't reached a licensing agreement with Microsoft for the
new operating system. That delay caused IBM to miss out on the spike in sales after the
launch, the fall back-to-school season. It was also late on shipments for the Christmas
"There was a lot of pent-up demand for Windows 95," Norris testified. "As a result,
we would miss that initial spurt in sales -- we missed that .... We were impacted
measurably on our business."
Phil Malone, an attorney for the U.S. Department of Justice, asked Norris whether
IBM considered shipping its computers with an alternative operating system. "We did our
own studies," Norris replied. "We would lose 70 to 90 percent of PC volume sales."
Malone then asked whether there was "a commercially viable alternative."
"There was no place to go. Without Windows 95, you couldn't be in the PC business,"