AOL deal doomed Netscape; Microsoft threatened Apple

Late today, the U.S. Department of Justice released a transcript of thedirect testimony of AOL senior vice president David Colburn in anticipationof his appearance in court tomorrow for cross examination by Microsoft. Allof the major witnesses in the antitrust case against the software supergiant were recorded earlier so that the trial could move more swiftly.Colburn is sure to get the same treatment as Netscape CEO Jim Barksdale,who finally completed his grueling questioning today.

In the testimony, Colburn says that Microsoft gave it a mob-like offer itcould not refuse: a prime piece of real estate on the Windows desktop inreturn for licensing Microsoft's Internet Explorer instead of Netscape Navigator. It was a no-brainer, he said, despite the fact that AOL and Microsoft were essentially enemies.

"AOL would not have been willing to negotiate a browser license with Microsoft had Microsoft not indicated a willingness to bundle and to promote the AOL client software in some form with Windows," he said.

In October 1996, AOL and Microsoft entered into an agreement where Microsoft would pay the online service 25 cents for every user it convertedfrom Netscape to IE. The deal also included a provisional agreement thatMicrosoft would give AOL $600,000 if "a substantial portion of [AOL's] installed base converted to Internet Explorer by a certain date."

Microsoft told Colburn that it had "no limitations" on the amount of moneyit could spend to gain marketshare for IE.

In other trial news, Netscape CEO Jim Barksdale said that he was told byApple CFO Fred Anderson that Microsoft threatened to stop making the Macversion of Office unless Apple agreed to use Internet Explorer as its default Web browser. Anderson had called Barksdale personally in August1997 to explain the situation and apologize. The call came just after theannouncement that Microsoft had agreed to invest $150 million in Apple