:
MICROSOFT CORPORATION, ET AL. :
6 DEFENDANTS :
_______________________________________ :
7 STATE OF NEW YORK, ET AL. :
PLAINTIFFS :
8 :
VS. : C. A. NO. 98-1233
9 :
MICROSOFT CORPORATION, ET AL. :
10 DEFENDANTS :
_______________________________________
11 WASHINGTON, D. C.
OCTOBER 21, 1998
(A. M. SESSION)
13 TRANSCRIPT OF PROCEEDINGS
BEFORE THE HONORABLE THOMAS P. JACKSON
COURT REPORTER: PHYLLIS MERANA
20 6816 U. S. COURTHOUSE
3RD & CONSTITUTION AVE., N.W.
21 WASHINGTON, D. C.
281-6648
2 - [add a note]
1
FOR THE UNITED STATES: PHILLIP MALONE, ESQ.
2 DAVID BOIES, ESQ.
U. S. DEPT. OF JUSTICE
3 ANTITRUST DIVISION
SAN FRANCISCO, CA.
4
FOR THE DEFENDANT: JOHN WARDEN, ESQ.
5 RICHARD J. UROWSKY, ESQ.
STEVEN L. HOLLEY, ESQ.
6 RICHARD PEPPERMAN, ESQ.
SULLIVAN & CROMWELL
7 125 BROAD STREET
NEW YORK, NEW YORK
8
FOR THE STATE OF NEW YORK: STEPHEN HOUCK, ESQ.
9 ALAN KUSINITZ, ESQ.
N. Y. STATE DEPT. OF LAW
10 120 BROADWAY, SUITE 2601
NEW YORK, NEW YORK
3 - [add a note]
1 I N D E X
2 WITNESS CROSS
3 JAMES BARKSDALE (CONTINUED)
4 BY MR. WARDEN 11
5
6 E-X-H-I-B-I-T-S
7 DEFENDANT'S IN EVIDENCE
8 3 18
9 4 21
10 5 23
11 6 29
4 - [add a note]
1 P-R-O-C-E-E-D-I-N-G-S
2 THE DEPUTY CLERK: CIVIL ACTION 98-1232, UNITED
3 STATES VERSUS MICROSOFT, AND 98-1233, STATE OF NEW YORK,
4 ET AL. VERSUS MICROSOFT.
5 PHILLIP MALONE, STEVEN HOUCK AND DAVID BOIES FOR
6 THE PLAINTIFF.
7 JOHN WARDEN, STEVEN HOLLEY, RICHARD UROWSKY AND
8 WILLIAM NEUKOM FOR THE DEFENDANT.
9 THE COURT: COUNSEL, I THINK THERE ARE SOME
10 PRELIMINARY MATTERS THAT WE OUGHT TO ADDRESS, SOME SIMPLER
11 TO RESOLVE THAN OTHERS. UPON THE ASSUMPTION THAT A FAIR
12 NUMBER OF YOU WILL VOTE IN JURISDICTIONS OTHER THAN THE
13 DISTRICT OF COLUMBIA OR ITS IMMEDIATE ENVIRONS, I PROPOSE,
14 UNLESS THERE IS OBJECTION, THAT THIS COURT BE IN RECESS ON
15 ELECTION DAY.
16 MR. WARDEN: THAT'S AN EXCELLENT IDEA.
17 THE COURT: HEARING NO DISSENT FROM ANY SIDE, WE
18 WILL BE IN RECESS ELECTION DAY.
19 MR. BOIES: NO OBJECTION.
20 THE COURT: SO ALSO WITH THE WEDNESDAY PRIOR TO
21 THANKSGIVING.
22 NOW, THE NEXT MATTER IS PROBABLY NOT NEARLY SO
23 LIKELY TO PRODUCE UNANIMITY. AND THAT HAS TO DO WITH THE
24 PLAINTIFFS' DISCOVERY REQUEST. ARE YOU THE POINTMAN FOR
25 THIS, MR. MALONE?
5 - [add a note]
1 MR. MALONE: I GUESS I WILL BE THIS MORNING, YOUR
2 HONOR.
3 THE COURT: ALL RIGHT.
4 MR. MALONE: I REALLY DON'T HAVE MUCH TO ADD
5 BEYOND WHAT WE SAY IN OUR RESPONSE TO MICROSOFT'S MOTION FOR
6 A PROTECTIVE ORDER, OTHER THAN TO STRESS THAT THE TEAM IS
7 STILL THERE IN SEATTLE IN PLACE AND WOULD LIKE TO DO THE
8 DISCOVERY. WE BELIEVE IT COULD BE DONE VERY QUICKLY AND
9 WITH VERY LITTLE BURDEN, BASED ON EVERYTHING THEY'VE LEARNED
10 SO FAR. AND WE TAILORED THE REQUEST, AFTER THE DISCUSSION
11 MONDAY, VERY NARROWLY TO LIMIT IT JUST TO --
12 THE COURT: WELL, IT DOESN'T LOOK TO ME LIKE IT'S
13 VERY NARROW. IT LOOKS TO ME LIKE A VERY EXPANSIVE REQUEST.
14 WITHOUT ANY DIRECT KNOWLEDGE OF IT OR WHAT IT ENTAILS, IT
15 CERTAINLY READS EXPANSIVELY. AND IT ALSO IS EGREGIOUSLY
16 UNTIMELY.
17 MR. MALONE: IF I COULD ADDRESS THE SCOPE FIRST.
18 WHAT WE TRIED TO DO, YOUR HONOR, WAS LIMIT IT JUST TO THE
19 FEW PRODUCTS THAT REALLY ARE AT ISSUE IN THIS CASE -- THE
20 HANDFUL OF WINDOWS OPERATING SYSTEM PRODUCTS AND INTERNET
21 EXPLORER -- AND EXCLUDE WHAT MR. HOLLEY HAS DESCRIBED AS THE
22 HUNDREDS OF OTHER PRODUCTS THAT MAY EXIST IN THE DATABASE.
23 SO THE REQUEST IS JUST WINDOWS OPERATING SYSTEM
24 PRODUCTS AND INTERNET EXPLORER, AND IT'S JUST DATA ABOUT
25 THOSE PRODUCTS THAT ARE CONTAINED WITHIN THESE TWO SPECIFIC
6 - [add a note]
1 DATABASES. SO IT NO LONGER ASKS FOR OTHER DATABASES THAT
2 MAY OR MAY NOT EXIST. AND IT CERTAINLY DOESN'T ASK FOR
3 PRODUCTS BEYOND JUST THESE FEW THAT ARE AT THE CORE OF THE
4 CASE HERE.
5 IN TERMS OF TIMELINESS, YOUR HONOR, WHAT I SAID ON
6 MONDAY IS STILL CERTAINLY WHERE WE ARE ON THIS. WE SOUGHT
7 THE DATABASES AND, AT LEAST IN OUR VIEW, THE CONTENTS OF
8 THOSE DATABASES IN AUGUST, AUGUST 14TH. HAD WE BEEN ABLE TO
9 GET PRODUCTION IN A TIMELY FASHION THEN AND UNDERSTAND WHAT
10 MATERIAL WAS IN THE DATABASE AND UNDERSTAND MICROSOFT'S
11 POSITION THAT THEY WERE GOING TO TAKE A NARROW READING OF IT
12 AND LIMIT IT JUST TO THE OEM CHANNEL, WE CERTAINLY WOULD
13 HAVE FILED A NEW DISCOVERY REQUEST MUCH, MUCH SOONER, AND
14 PERHAPS BEEN BACK TO THE COURT WITH A FOLLOW-UP MOTION TO
15 COMPEL FAR SOONER. BUT BECAUSE WE HAD TO GO THROUGH TWO
16 MOTIONS TO COMPEL AND A FAIR PROCESS JUST TO SEE THE
17 DATABASES LAST WEEK, WE REALLY DIDN'T HAVE ANY SUFFICIENT
18 KNOWLEDGE OR UNDERSTANDING OF WHAT WAS THERE AND WHAT
19 POSITION MICROSOFT WOULD TAKE ABOUT THE NON-OEM DATA TO MAKE
20 THE REQUEST.
21 AS SOON AS IT BECAME CLEAR THAT THEY WERE LIMITING
22 THE PRODUCTION JUST TO THE OEM DATABASE, AND ONCE YOUR HONOR
23 ADVISED THAT YOUR READING OF THE ORIGINAL REQUEST WAS THAT
24 IT WAS JUST FOR THE OEM DATABASE, THEN WE IMMEDIATELY SERVED
25 THE NEW REQUEST. BUT THAT'S THE ONLY REASON THAT WE DID IT
7 - [add a note]
1 WHEN WE DID AND WAITED THAT LONG.
2 THE COURT: AND WHY DO YOU NEED IT FOR EIGHT
3 YEARS? I UNDERSTAND THAT'S THE TIME SPAN THAT YOU --
4 MR. MALONE: THAT IS. IT'S FROM 1990 FORWARD,
5 YOUR HONOR. AND IN TERMS OF -- IT'S JUST TRYING TO PIECE
6 TOGETHER A HISTORICAL PICTURE AND UNDERSTAND WHAT THE TIMING
7 HAS BEEN FOR -- PART OF WHAT WE HAVE TO SHOW IS MICROSOFT'S
8 MARKET POWER AND MICROSOFT'S MONOPOLY POWER. AND SO THE
9 PRICING OF THEIR OPERATING SYSTEM PRODUCTS OVER TIME -- OVER
10 A SPAN OF TIME, WE THINK, IS VERY RELEVANT TO DO THAT SO WE
11 CAN LOOK HISTORICALLY AND SEE THE CHANGES.
12 IN TERMS OF THE BURDEN OF EIGHT YEARS VERSUS FIVE,
13 IT'S MY UNDERSTANDING FROM WHAT THE PEOPLE WHO HAVE BEEN
14 WORKING WITH THE DATABASE SAY, THAT THE TIME PERIOD DOESN'T
15 CHANGE THINGS THAT MUCH. IT'S A MATTER OF ARRANGING FIELDS
16 IN THE DATABASE AND THEN TELLING THE COMPUTER TO SORT THE
17 INFORMATION THAT WAY AND SEARCH FOR IT. AND THE COMPUTER
18 CAN DO THAT EQUALLY WELL, WHETHER THE TIME PERIOD IS FOUR
19 YEARS OR FIVE YEARS OR EIGHT YEARS.
20 THE COURT: WHAT WOULD YOU ESTIMATE WOULD BE THE
21 LENGTH OF TIME NECESSARY, GIVEN ASSISTANCE OF MICROSOFT'S
22 PERSONNEL, TO ACCOMPLISH THIS?
23 MR. MALONE: MY UNDERSTANDING -- I SHOULD SAY THAT
24 THE MICROSOFT PEOPLE ON SITE HAVE BEEN TERRIFIC AND THEY
25 HAVE BEEN VERY COOPERATIVE AND PROVIDED GREAT ASSISTANCE.
8 - [add a note]
1 GIVEN THAT LEVEL OF COOPERATION, MY UNDERSTANDING FROM OUR
2 PEOPLE ON THE GROUND IS THAT IT REALLY IS A MATTER OF A DAY
3 OR TWO'S WORK JUST TO PUSH THE RIGHT BUTTONS, DO THE RIGHT
4 SORTS, AND GENERATE THIS DATA.
5 NOW, THEY HAVEN'T ACTUALLY SEEN THESE FIELDS
6 BECAUSE WE HAVE BEEN DENIED ACCESS TO THEM, SO THEY CAN'T BE
7 A HUNDRED PERCENT SURE. BUT BASED ON EVERYTHING THAT HAS
8 HAPPENED SO FAR AND HOW EASILY THE DATA THAT WE HAVE
9 OBTAINED UP TO NOW HAS BEEN SORTED AND OBTAINED, THEIR
10 EXPECTATION IS IT SHOULD BE VERY STRAIGHTFORWARD, SHOULD NOT
11 TAKE VERY LONG, AND SHOULD NOT BE BURDENSOME AT ALL ON THE
12 MICROSOFT PERSONNEL.
13 THE COURT: ALL RIGHT. MR. HOLLEY?
14 MR. HOLLEY: YOUR HONOR, I WISH I COULD AGREE WITH
15 MR. MALONE THAT THIS WAS A VERY SIMPLE MATTER, BUT IT IS
16 NOT. IF YOU GO BACK TO 1990, WE'RE TALKING ABOUT
17 MS-DOS 3.3, MS-DOS 4.01, MS-DOS 5, MS-DOS 6, MS-DOS 6.22,
18 WINDOWS 3.1, WINDOWS 3.11, WINDOWS FOR WORKGROUPS,
19 WINDOWS 95, WINDOWS 98, WINDOWS NT WORKSTATION, WINDOWS NT
20 SERVER, AND PERHAPS WINDOWS CE.
21 THE COURT: DOES THIS INCLUDE WINDOWS NT?
22 MR. HOLLEY: OKAY. WELL, I'LL TAKE THAT BACK.
23 WINDOWS NT IS OUT. WINDOWS CE -- I DON'T KNOW IF THEY ARE
24 EVEN TALKING ABOUT WINDOWS CE. THEIR REQUEST IS AMBIGUOUS.
25 AND WE HAVE HAD FIVE PEOPLE FROM THE FINANCE DEPARTMENT WHO
9 - [add a note]
1 HAVE JOBS TO DO, PLUS LAWYERS, WORKING AROUND THE CLOCK
2 TRYING TO SUPPORT THESE PEOPLE. THEY HAVE NO INDICATION
3 THAT THEY ARE LEAVING REDMOND ANYTIME SOON. I AM GLAD TO
4 HEAR THAT THEY ARE GOING TO LEAVE IN A DAY. IT IS HUGELY
5 BURDENSOME, YOUR HONOR. AND IT IS EXTREMELY LATE IN THE
6 PROCESS FOR THEM TO BE ASKING ABOUT THIS.
7 THEY ASKED QUESTIONS AS LONG AS A YEAR AGO
8 REFLECTING THAT THEY UNDERSTOOD THE DIFFERENCE BETWEEN THE
9 OEM CHANNEL, WHICH IS WHAT THEIR REQUEST SOUGHT INFORMATION
10 ABOUT, AND THE RETAIL CHANNEL. AND NOW THEY ARE ASKING,
11 AFTER THE TRIAL BEGINS, FOR INFORMATION ABOUT THE RETAIL
12 CHANNEL. I THINK, YOUR HONOR, THAT WE HAVE BENT OVER
13 BACKWARDS TO PROVIDE THEM WITH ALL THE INFORMATION THEY ARE
14 ENTITLED TO GET. AND THIS IS JUST -- IT'S TOO LATE IN THE
15 PROCESS. WE HAVE OTHER THINGS WE NEED TO FOCUS ON DOING,
16 LIKE GETTING READY FOR THE TRIAL.
17 THE COURT: WELL, CONCEDING THE MERIT OF A LOT OF
18 THE ARGUMENTS THAT YOU'RE MAKING, IT, NEVERTHELESS, SEEMS TO
19 ME, ON THE OTHER HAND, I HAVE TO CONSIDER THE FACT THAT THIS
20 MAY BE INFORMATION THAT I AM GOING TO NEED.
21 MR. HOLLEY: WELL, OBVIOUSLY, YOUR HONOR, WE DON'T
22 WANT TO --
23 THE COURT: IN THE CIRCUMSTANCES, MY INCLINATION
24 AT THIS POINT IS TO REQUIRE THE PRODUCTION OF THIS DATA,
25 PROVIDED THAT IT TAKE NO MORE THAN TWO DAYS, AND PROVIDED
10 - [add a note]
1 FURTHER THAT THE PLAINTIFFS PAY ALL COSTS ASSOCIATED WITH
2 IT, INCLUDING THE TIME INVESTED BY MICROSOFT PERSONNEL IN
3 AFFORDING ASSISTANCE.
4 MR. HOLLEY: YOUR HONOR, JUST FOR CLARITY, DOES
5 THIS MEAN THAT WE CAN EXPECT THE GOVERNMENT LAWYERS AND
6 ECONOMISTS TO LEAVE REDMOND TWO DAYS FROM NOW?
7 THE COURT: WELL, I CAN'T TELL THEM TO LEAVE
8 REDMOND.
9 MR. HOLLEY: CAN WE GET THEM OUT OF OUR BUILDINGS,
10 YOUR HONOR?
11 THE COURT: THEY MAY, INDEED, LIKE REDMOND.
12 MR. HOLLEY: AND THERE IS ALREADY SOME NOTION
13 BEING FLOATED WITH MY CLIENT THAT THE GOVERNMENT LAWYERS
14 INTEND TO SEND REQUESTS TO REDMOND AFTER THEY GET BACK HERE
15 TO WASHINGTON. I AM ASSUMING THAT WHEN YOUR HONOR SAYS TWO
16 DAYS, YOU MEAN TWO MORE DAYS OF THIS IMPOSITION AND NOT
17 LONG-DISTANCE REQUESTS COMING FROM WASHINGTON, D.C.
18 THE COURT: I AGREE. THE PROCESS ENDS IN TWO
19 DAYS.
20 MR. HOLLEY: YES, YOUR HONOR. THANK YOU.
21 THE COURT: ARE YOU PREPARED TO ACCEDE TO THOSE
22 CONDITIONS, MR. MALONE?
23 MR. MALONE: THAT'S FINE, YOUR HONOR, AS LONG AS
24 IT'S TWO DAYS FROM WHENEVER THEY GET NOTICE AND KIND OF GET
25 IN PLACE AND GET STARTED.
11 - [add a note]
1 THE COURT: I AM GOING TO TAKE A FIVE-MINUTE
2 RECESS SO YOU CAN GIVE THEM NOTICE.
3 MR. MALONE: THANK YOU, YOUR HONOR. I APPRECIATE
4 THAT.
5 THE COURT: AND YOU ACCEDE TO THE CONDITIONS?
6 MR. MALONE: WE DO, YES.
7 THE COURT: ALL RIGHT. WE'RE IN RECESS FOR FIVE
8 MINUTES.
9 (RECESS WAS TAKEN.)
10 (AFTER RECESS.)
11 THE COURT: ARE YOU READY TO PROCEED, MR. WARDEN?
12 MR. WARDEN: YES, YOUR HONOR, AND THERE'S
13 MR. BARKSDALE.
14 THE COURT: MR. BARKSDALE, YOU MAY RESUME THE
15 STAND. GOOD MORNING TO YOU, SIR.
16 THE WITNESS: GOOD MORNING.
17 THE COURT: LET ME REMIND YOU THAT YOU'RE STILL
18 UNDER OATH.
19 THE WITNESS: YES, SIR.
20 (JAMES BARKSDALE, PLAINTIFFS' WITNESS, PREVIOUSLY
21 SWORN.)
22 CROSS-EXAMINATION (CONTINUED.)
23 BY MR. WARDEN:
24 Q. HAVE YOU DISCUSSED YOUR TESTIMONY WITH ANYONE BETWEEN
25 THE ADJOURNMENT OF COURT YESTERDAY AND YOUR REAPPEARANCE ON
12 - [add a note]
1 THE STAND THIS MORNING?
2 A. I HAVE.
3 Q. AND WITH WHOM?
4 A. MY ATTORNEY.
5 Q. WHICH ATTORNEY?
6 A. WELL, OUR IN-HOUSE COUNSEL, AS WELL AS OUR GENERAL
7 COUNSEL, AS WELL AS ALAN SNYDER, OUR OUTSIDE COUNSEL.
8 Q. AND WAS IT JUST THE THREE OF YOU?
9 A. BASICALLY. THERE WERE OTHER PEOPLE IN THE ROOM, BUT
10 THOSE WERE THE PEOPLE WE DISCUSSED IT WITH.
11 Q. AND WHO ELSE WAS IN THE ROOM?
12 A. MY WIFE WAS IN THE ROOM.
13 Q. ANYONE ELSE?
14 A. ONE OF OUR PUBLIC AFFAIRS PEOPLE FROM NETSCAPE.
15 Q. AND WAS YOUR WIFE IN A POSITION TO OVERHEAR THIS
16 CONVERSATION?
17 A. I DON'T BELIEVE SHE WAS, NO, SIR.
18 Q. DID YOU DISCUSS IT WITH ANY OF THE COUNSEL FOR THE
19 PLAINTIFFS IN THIS CASE?
20 A. YOUR TEAM?
21 Q. NO. WE'RE THE DEFENDANT, UNFORTUNATELY.
22 A. WHO WOULD THAT BE?
23 Q. THAT'S THE GOVERNMENT LAWYERS FOR THE STATES OR THE
24 UNITED STATES.
25 A. NO, SIR, I DID NOT.
13 - [add a note]
1 Q. HOW LONG WAS THIS DISCUSSION WITH YOUR COUNSEL?
2 A. IT WAS JUST A COUPLE OF MINUTES. A FEW MINUTES.
3 Q. 10 OR 15?
4 A. MORE LIKE 4 OR 5.
5 Q. 4 OR 5.
6 WHEN WE BROKE LAST NIGHT, I BELIEVE WE WERE ON
7 PARAGRAPH 20 OF YOUR DIRECT ON PAGE 14, THE TOP OF PAGE 14.
8 NOW, IN 1995, WHAT WAS YOUR PER COPY CHARGE TO ISP'S FOR
9 NAVIGATOR?
10 A. I DON'T REMEMBER EXACTLY, BUT AGAIN, IT WAS A RANGE,
11 DEPENDING ON THE VOLUME THAT THE ISP WOULD DISTRIBUTE.
12 Q. AND WHAT WAS THAT RANGE, IF YOU CAN RECALL?
13 A. FROM A VERY LOW AMOUNT THAT -- IT SEEMS TO ME THE LOWEST
14 I CAN REMEMBER WOULD BE AROUND 50 CENTS PER COPY --
15 SOMEWHERE IN THAT NEIGHBORHOOD -- UP TO SEVERAL DOLLARS,
16 MAYBE AS MUCH AS 10 IN SOME CASES, DEPENDING ON THE VOLUME
17 THAT THEY WOULD DISTRIBUTE.
18 Q. AND DID THE ISP'S DISTRIBUTE THE COPIES FREE TO THEIR
19 CUSTOMERS?
20 A. SOME DID AND SOME DIDN'T. THAT'S MY UNDERSTANDING.
21 Q. AND DO YOU RECALL ANY PARTICULAR ONE THAT DID NOT?
22 A. I DON'T REMEMBER SPECIFIC ONES. I REMEMBER THAT SOME
23 CHARGED A FEE -- A SIGN-UP FEE FOR THEIR SERVICE, AND THEY
24 WOULD INCLUDE THE PRODUCT IN IT, AND IT WOULD BE PART OF
25 THAT PRICE, I THINK, AS BEST I CAN REMEMBER.
14 - [add a note]
1 Q. IN THE LAST SENTENCE -- I AM SORRY -- THE LAST TWO
2 SENTENCES OF THIS PARAGRAPH, YOU DISCUSS FREE DISTRIBUTION
3 TO THE EDUCATION AND NONPROFIT MARKET AND THE REASON FOR
4 THAT. DO YOU SEE THAT?
5 A. YES, SIR.
6 Q. AND YOU STATE IN THE LAST LINE THAT THIS PRACTICE WAS
7 UNDERTAKEN BECAUSE IT WAS, QUOTE, "CERTAIN TO HAVE POSITIVE
8 ECONOMIC EFFECTS IN THE FUTURE." DO YOU SEE THAT?
9 A. YES, I DO.
10 Q. ISN'T IT TRUE, MR. BARKSDALE, THAT FREE DISTRIBUTION TO
11 ALL USERS WAS CERTAIN TO HAVE POSITIVE ECONOMIC EFFECTS IN
12 THE FUTURE?
13 A. NOT NECESSARILY, NO.
14 Q. WHY NOT?
15 A. WELL, IF WE DISTRIBUTED IT, FOR INSTANCE, FREE TO ALL
16 CORPORATE USERS, THEY MIGHT NEVER PAY US IN THE FUTURE.
17 THIS WAS TO STUDENTS WHO DIDN'T HAVE, YOU KNOW, INCOMES AND,
18 THEREFORE, WE ASSUMED THAT WHEN THEY GOT OUT AND WENT TO
19 WORK, THEY MIGHT BE AN INDIVIDUAL CUSTOMER. BUT I COULD SEE
20 IF WE GAVE AWAY OUR PRODUCTS TO ENTERPRISES OR TO A LOT OF
21 THE MARKET VERSUS SELLING IT, THAT IF WE EVER CHOSE TO
22 CHARGE FOR IT AS A CHANGE IN PRACTICE, IT WOULD BE VERY
23 LIKELY TO BACKFIRE AND NOT NECESSARILY GIVE US POSITIVE
24 ECONOMIC EFFECTS.
25 Q. SO IT'S YOUR TESTIMONY THAT, OUTSIDE THE NONPROFIT
15 - [add a note]
1 CHANNEL, THERE WOULD BE NO POSITIVE ECONOMIC EFFECTS FROM
2 FREE DISTRIBUTION?
3 A. NO, SIR. THAT'S NOT WHAT I SAID.
4 Q. WELL, WHAT DID YOU SAY?
5 A. I SAID IT'S POSSIBLE THAT IN SOME SITUATIONS IT COULD,
6 AND IN OTHERS IT COULDN'T. SO IT MIGHT HAVE SOME ECONOMIC
7 EFFECT IN SOME MARKETS.
8 Q. WELL, CAN YOU BE MORE SPECIFIC? WHICH CHANNELS WOULD IT
9 HAVE POSITIVE ECONOMIC EFFECTS IN?
10 A. WELL, IF ONE WERE TO GIVE AWAY THE PRODUCT RANDOMLY,
11 SOME CHANNELS MIGHT RESPOND IF YOU THEN BEGAN CHARGING FOR
12 IT -- WHICH IS WHAT I PRESUME WHAT YOU'RE ASKING -- AND SOME
13 MIGHT NOT. IN A COMPETITIVE MARKET, THEY MIGHT NOT CHOOSE
14 TO DO THAT. OR IT MIGHT AGGRAVATE THEM OR IT MIGHT IRRITATE
15 THEM.
16 Q. ASSUME, IF YOU WILL, THAT YOU GAVE IT AWAY FREE IN ALL
17 CHANNELS OF DISTRIBUTION IN PERPETUITY. WOULDN'T THAT HAVE
18 POSITIVE ECONOMIC EFFECTS?
19 A. YOU COULD GO FLAT BROKE DOING THAT. THAT WOULD NOT BE A
20 POSITIVE ECONOMIC EFFECT.
21 Q. YOU GIVE IT AWAY NOW, DON'T YOU?
22 A. YES, SIR.
23 Q. AND DOESN'T IT HAVE POSITIVE ECONOMIC EFFECTS?
24 A. IT WOULD BE HARD TO PROVE THAT IT'S PAYING FOR ITSELF
25 RIGHT NOW.
16 - [add a note]
1 Q. AND YOU HAVEN'T GONE FLAT BROKE, HAVE YOU?
2 A. I WOULD SAY THAT WE ARE HAVING DIFFICULTY SHOWING A
3 PROFIT.
4 Q. AND YOU HAD REVENUES LAST YEAR OF OVER HALF A BILLION
5 DOLLARS?
6 A. WE WERE NOT GIVING IT AWAY FREE LAST YEAR. HALF OF MY
7 REVENUE LAST YEAR CAME FROM THE BROWSER. THAT'S MY WHOLE
8 POINT.
9 Q. HALF OF YOUR REVENUE FOR YOUR FISCAL YEAR --
10 A. IN SOME QUARTERS LAST YEAR -- I BELIEVE I AM CORRECT --
11 THAT APPROXIMATELY HALF OF OUR REVENUE -- I AM TALKING NOW
12 ABOUT '97, RIGHT? I THINK THE BEGINNING QUARTER OF THAT
13 YEAR WAS APPROXIMATELY HALF OF OUR REVENUE.
14 Q. AND HOW ABOUT THE ENDING QUARTER?
15 A. IT WAS WAY DOWN --
16 Q. OKAY. WHAT IS THE --
17 A. -- BECAUSE OF THE EFFECTS THAT WE'RE TALKING ABOUT HERE.
18 Q. EXCUSE ME. WHAT IS THE DEFAULT HOME PAGE FOR NAVIGATOR?
19 A. YOU MEAN THE URL? OR THE -- WHAT DO YOU MEAN? WHAT IS
20 IT?
21 Q. YES.
22 A. IT'S -- OUR WEB SITE, NETSCAPE.COM, IS THE HOME PAGE --
23 WAS. NOW WE CALL IT -- IT'S MORE EXPANSIVE -- NET CENTER IS
24 THE HOME PAGE. IT'S A PLACE WHERE PEOPLE GO TO GET
25 INFORMATION ABOUT OUR COMPANY AND WHERE PEOPLE GO TO GET
17 - [add a note]
1 OTHER INFORMATION, NEWS AND SO FORTH.
2 Q. AND THIS IS NOW CALLED NET CENTER; IS THAT CORRECT?
3 A. YES, SIR.
4 Q. AND NAVIGATOR HAS ALWAYS POINTED USERS TO A NETSCAPE WEB
5 SITE EVEN BEFORE IT WAS CALLED NET CENTER; ISN'T THAT
6 CORRECT?
7 A. NO, SIR.
8 Q. NO? WHEN DID YOU START?
9 A. WELL, MANY PEOPLE, LIKE ISP'S -- AS I MENTIONED
10 YESTERDAY, THEY WOULD GET THE NAVIGATOR AND THEY WOULD POINT
11 IT TO THEIR HOME PAGE. 12 Q. IS THAT STILL THE CASE TODAY?
13 A. IN MANY, MANY CASES. NOT ALL. IT'S ALSO TRUE IN
14 CORPORATE ENVIRONMENTS. THEY DON'T, IN MANY CORPORATE
15 ACCOUNTS, POINT TO THE NETSCAPE HOME PAGE; THEY WILL POINT
16 TO THEIR OWN CORPORATE HOME PAGE.
17 Q. BUT AS YOU DISTRIBUTE IT, IT POINTS THE USER TO
18 NET CENTER; IS THAT CORRECT?
19 A. NOT LITERALLY, NO, SIR. MOST PEOPLE, WHEN WE DISTRIBUTE
20 IT LIKE TO A CORPORATE ACCOUNT, THEY CAN INSERT ANY HOME
21 PAGE THEY WANT.
22 Q. NO, BUT IN THE FORM YOU SEND IT OUT, IT POINTS PEOPLE TO
23 NET CENTER; IS THAT CORRECT?
24 A. NO, SIR. WE ALSO DISTRIBUTE THE PRODUCT'S SOURCE CODE
25 FOR FREE. AND, THEREFORE, YOU COULD ARGUE THAT THAT DIDN'T
18
1 POINT TO ANY HOME PAGE BECAUSE YOU CAN CHANGE IT TO ANY HOME
2 PAGE YOU WANT. BUT I WOULD SAY THE MAJORITY OF THE PRODUCT
3 THAT WE DELIVER, IT DOES INITIALLY POINT THEM TO NET CENTER.
4 Q. AND IT WILL DO THAT UNLESS IT'S CHANGED; IS THAT
5 CORRECT?
6 A. NO. IF YOU HAVE BEEN POINTING TO ANOTHER PAGE AND YOU
7 GET THE LATEST RELEASE OF MY PRODUCT, IT POINTS TO THE PAGE
8 YOU'VE BEEN POINTING TO. SO IF THOSE PEOPLE WHO HAVE BEEN
9 USING IT GET A NEW COPY, IT POINTS TO -- IF THEY WANTED IT
10 POINTED TO MICROSOFT.COM, IT WOULD POINT RIGHT TO
11 MICROSOFT.COM WITHOUT THE USER DOING ANYTHING.
12 MR. WARDEN: OKAY. I WOULD LIKE TO HAVE MARKED AS
13 DEFENDANT'S EXHIBIT 3 NETSCAPE'S FORM 10-Q AS FILED WITH THE
14 SECURITIES AND EXCHANGE COMMISSION FOR THE THREE MONTHS
15 ENDED JULY 31, 1998.
16 I OFFER THIS EXHIBIT, YOUR HONOR.
17 MR. BOIES: NO OBJECTION, YOUR HONOR.
18 MR. HOUCK: NO OBJECTION.
19 THE COURT: DEFENDANT'S 3 IS ADMITTED.
20 (WHEREUPON, DEFENDANT'S
21 EXHIBIT NUMBER 3 WAS
22 RECEIVED IN EVIDENCE.)
23 BY MR. WARDEN:
24 Q. BEFORE WE GO TO THE DOCUMENT, CAN YOU TELL ME,
25 MR. BARKSDALE, HOW MUCH REVENUE IS DERIVED FROM ADVERTISING
19 - [add a note]
1 AND PAYMENTS FROM CONTENT PROVIDERS ON NET CENTER?
2 THE COURT: ASK THAT QUESTION AGAIN, PLEASE.
3 MR. WARDEN: I HAVE ASKED HIM TO TELL ME HOW MUCH
4 REVENUE HIS COMPANY RECEIVES FROM ADVERTISING AND PAYMENT
5 FROM CONTENT PROVIDERS ON ITS WEB SITE, NET CENTER.
6 THE COURT: ALL RIGHT.
7 THE WITNESS: IN THE LATEST REPORTED QUARTER,
8 WHICH WOULD BE THE ONE WE'RE TALKING ABOUT HERE -- YOU MEAN
9 YOU WANT ME TO LOOK?
10 BY MR. WARDEN:
11 Q. NO, I WOULD LIKE YOUR RECOLLECTION; THEN WE'LL TAKE A
12 LOOK AT THE DOCUMENT.
13 A. NOW, ONE OF THE THINGS MY ATTORNEY DID TELL ME LAST
14 NIGHT WAS WHEN I GET READY TO SAY, "I GUESS," I SHOULD SHUT
15 UP.
16 Q. I DON'T WANT GUESSES, BUT IF YOU HAVE -- IF YOU HAVE THE
17 KIND OF RECOLLECTION THAT YOU WOULD USE IN THE COURSE OF
18 YOUR BUSINESS, I WOULD LIKE TO HAVE THE QUESTION ANSWERED.
19 A. YES. IF THAT'S WHAT YOU WANT, IN THAT REPORTED QUARTER
20 IT SEEMS TO ME IT WAS IN THE NEIGHBORHOOD OF -- YOU'RE
21 TALKING ABOUT ALL REVENUES FOR NET CENTER OR JUST
22 ADVERTISING? THAT'S THE -- I WOULD SAY IT'S ROUGHLY 37, 38,
23 OR $39 MILLION.
24 Q. OKAY.
25 A. WHAT WAS IT?
20 - [add a note]
1 Q. WELL, YOU'RE PRETTY CLOSE. SEE, YOU HAVE A GOOD
2 RECOLLECTION. IT WASN'T A GUESS AT ALL. TURN TO PAGE 20 OF
3 THE DOCUMENT, PLEASE. AND I DIRECT YOUR ATTENTION TO THE
4 TOP PARAGRAPH ON THE PAGE WHICH SHOWS YOU WERE ALMOST ON THE
5 MONEY. NET CENTER REVENUES FOR THE QUARTER ENDED
6 JULY 31, '98 WERE $38.7 MILLION. AND THE PREVIOUS QUARTER,
7 THEY HAD BEEN $31.1 MILLION. DO YOU SEE THAT?
8 A. YES, SIR.
9 Q. BY MY CALCULATION, THAT'S A QUARTER-TO-QUARTER INCREASE
10 OF 24 PERCENT. DOES THAT SEEM APPROXIMATELY CORRECT TO YOU?
11 A. APPROXIMATELY.
12 Q. OKAY. AND AT THE $38.7 MILLION, THAT'S AN ANNUALIZED
13 RATE OF OVER 150 MILLION; IS IT NOT?
14 A. APPROXIMATELY, YES, SIR.
15 MR. WARDEN: I ASK TO HAVE MARKED AS DEFENDANT'S
16 EXHIBIT 4, NETSCAPE'S FORM 10-K, FILED WITH THE SECURITIES
17 AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
18 DECEMBER 31, 1997.
19 BY MR. WARDEN:
20 Q. BY THE WAY, DID YOU CHANGE -- THIS YEAR CHANGE YOUR
21 FISCAL YEAR TO THE END OF OCTOBER?
22 A. YES, SIR, WE DID.
23 Q. OKAY. THANKS.
24 MR. WARDEN: I OFFER DEFENDANT'S EXHIBIT 4.
25 MR. BOIES: NO OBJECTION, YOUR HONOR.
21
1 MR. HOUCK: NO OBJECTION.
2 THE COURT: DEFENDANTS 4 IS ADMITTED.
3 (WHEREUPON, DEFENDANT'S
4 EXHIBIT NUMBER 4 WAS
5 RECEIVED IN EVIDENCE.)
6 BY MR. WARDEN:
7 Q. AND I DIRECT YOUR ATTENTION TO PARAGRAPH -- I AM
8 SORRY -- TO PAGE 43, THE THIRD PARAGRAPH CAPTIONED "WEB SITE
9 REVENUES."
10 BEFORE GOING ANY FURTHER, AFTER YOU HAVE FOUND
11 THAT PARAGRAPH, WHAT IS SET FORTH HERE IN THE 10-K AS WEB
12 SITE REVENUES IS THE COROLLARY OF WHAT WE LOOKED AT IN THE
13 10-Q FOR NET CENTER REVENUES; IS THAT CORRECT?
14 A. YES, IT IS.
15 Q. THANK YOU.
16 WOULD YOU READ THE FIRST SENTENCE OF THAT
17 PARAGRAPH ALOUD, PLEASE, MR. BARKSDALE?
18 A. THE FIRST SENTENCE?
19 Q. YES.
20 A. WEB SITE REVENUES FOR 1997, 1996 AND 1995 WERE 95.1
21 MILLION, 23.0 MILLION, AND 1.8 MILLION OR 17.8 PERCENT, 6.7
22 PERCENT AND 2.1 PERCENT OF TOTAL REVENUES, RESPECTIVELY.
23 Q. AND IF ONE JUST FOCUSES ON THE CHANGE FROM THE YEAR 1996
24 OF 23 MILLION TO THE YEAR 1997 OF 95 MILLION, THAT IS AN
25 INCREASE OF ABOUT 300 PERCENT IN ANNUAL REVENUES FROM THAT
22 - [add a note]
1 SOURCE; IS IT NOT?
2 A. I WILL ACCEPT YOUR MATH. ARE YOU TALKING ABOUT FROM THE
3 2 MILLION TO THE 17 MILLION?
4 Q. NO, NO. I AM TALKING ABOUT FROM THE 23 MILLION TO THE
5 95 MILLION.
6 A. THAT WOULD BE OVER 300 PERCENT.
7 Q. DO YOU EXPECT REVENUE FROM NET CENTER TO CONTINUE TO
8 INCREASE?
9 A. WE WOULD HOPE THAT IT WOULD, YES. WE DON'T MAKE
10 FORWARD-LOOKING PROJECTIONS.
11 Q. DIDN'T MIKE HOMER SAY PUBLICLY THIS YEAR, QUOTE, SINCE
12 THE LAUNCH OF THE ENHANCED AND REDESIGNED NET CENTER SITE ON
13 JULY 1, WE HAVE SEEN NET CENTER MOMENTUM INCREASE WITH EACH
14 CONSECUTIVE MONTH?
15 A. HE MAY HAVE.
16 Q. ISN'T IT TRUE THAT HE HAS ALSO SAID THAT NET CENTER'S,
17 QUOTE, GROWTH RATES IN THE FIRST THREE MONTHS SINCE THE SITE
18 EXPANSION WAS INTRODUCED HAS ESTABLISHED US AS THE
19 FASTEST-GROWING PORTAL SITE ON THE INTERNET?
20 A. IT SOUNDS LIKE SOMETHING HE WOULD SAY.
21 Q. AND WHAT IS PROJECT TURBO?
22 A. PROJECT TURBO IS A SET OF ENHANCEMENTS THAT THE COMPANY
23 PLANS TO MAKE TO NET CENTER OVER THE -- DURING THE FALL OF
24 THIS YEAR, I THINK, BEGINNING SEPTEMBER THROUGH -- OH, I
25 BELIEVE OCTOBER OR NOVEMBER.
23
1 Q. ISN'T IT TRUE THAT MORE THAN 850,000 NEW MEMBERS
2 REGISTERED WITH NET CENTER IN SEPTEMBER 1998?
3 A. 800,000 IN SEPTEMBER?
4 Q. YES.
5 A. I THINK THAT'S APPROXIMATELY CORRECT.
6 Q. AND THAT REPRESENTED A 112 PERCENT INCREASE IN THE
7 MONTHLY REGISTRATION PROCESS SINCE THE END OF JUNE; IS THAT
8 CORRECT?
9 A. APPROXIMATELY.
10 MR. WARDEN: I ASK TO HAVE MARKED AS DEFENDANT'S
11 EXHIBIT 5, A NETSCAPE PRESS RELEASE BEARING THE DATELINE
12 "MOUNTAIN VIEW, CALIFORNIA, OCTOBER 5, 1998." AND I OFFER
13 IT.
14 MR. BOIES: NO OBJECTION, YOUR HONOR.
15 MR. HOUCK: NO OBJECTION.
16 THE COURT: DEFENDANT'S 5 IS ADMITTED.
17 (WHEREUPON, DEFENDANT'S
18 EXHIBIT NUMBER 5 WAS
19 RECEIVED IN EVIDENCE.)
20 BY MR. WARDEN:
21 Q. HAVE YOU HAD A CHANCE TO LOOK AT DEFENDANT'S 5?
22 A. I HAVE GLANCED AT IT, YES, SIR.
23 Q. AND IT DOES STATE, DOES IT NOT, THAT NET CENTER
24 REGISTRATIONS ARE RISING RAPIDLY?
25 A. YES. I BELIEVE IT DOES.
24 - [add a note]
1 Q. AT LEAST 850,000 NEW MEMBERS IN SEPTEMBER?
2 A. CORRECT.
3 Q. IT GOES ON: TRAFFIC ON NET CENTER INCREASED STEADILY
4 WITH A 46 PERCENT INCREASE IN DAILY PAGE VIEWS DURING THE
5 LAST THREE MONTHS.
6 A. CORRECT.
7 Q. AND IT CONTINUES ON DOWN IN THE THIRD PARAGRAPH: TO THE
8 EFFECT THAT WE HAVE SEEN NET CENTER MOMENTUM INCREASE WITH
9 EACH CONSECUTIVE MONTH SINCE JULY AND OUR GROWTH RATES IN
10 THE FIRST THREE MONTHS SINCE THE SITE EXPANSION WAS
11 INTRODUCED HAVE ESTABLISHED US AS THE FASTEST GROWING PORTAL
12 SITE ON THE INTERNET.
13 A. I APOLOGIZE. WHICH PARAGRAPH ARE YOU READING FROM?
14 Q. THE THIRD PARAGRAPH.
15 A. YES. ALL RIGHT. IN THE MIDDLE THERE?
16 Q. YES.
17 A. I GOT YOU.
18 Q. ARE THE STATEMENTS IN THIS PRESS RELEASE TRUTHFUL?
19 A. TO THE BEST OF MY KNOWLEDGE, YES, SIR.
20 Q. THANK YOU.
21 DID MARC ANDREESEN SPEAK AT THE TELESCOM --
22 TELECOSM, I GUESS IT IS -- CONFERENCE SPONSORED BY GEORGE
23 GILDER IN FORBES MAGAZINE IN SQUAW VALLEY LAST MONTH?
24 A. I THINK HE DID, YES, SIR. HE TOLD ME HE DID.
25 Q. DID HE SAY THERE THAT NETSCAPE MADE A STRATEGIC CHOICE
25 - [add a note]
1 TO MAKE ITS BROWSING SOFTWARE FREE AND FOCUS ON BUILDING
2 NET CENTER BECAUSE, IN DOING SO, NETSCAPE SWAPPED INTO A
3 HIGHER GROWTH BUSINESS?
4 A. I DON'T KNOW IF HE SAID THAT OR NOT. I WASN'T THERE,
5 NOR DID I READ AN ACCOUNT OF THE MEETING. BUT I WOULDN'T
6 SAY -- HE MAY HAVE SAID THAT.
7 Q. HE DIDN'T REPORT TO YOU ON THE MEETING?
8 A. I REMEMBER HIM GOING TO THE MEETING. AND I DON'T
9 REMEMBER DISCUSSING IT AT ALL WITH HIM WHAT HE SAID.
10 Q. HAS HE MADE A STATEMENT TO THE EFFECT THAT YOU MADE A
11 STRATEGIC CHOICE TO MAKE YOUR BROWSING SOFTWARE FREE AND
12 FOCUS ON BUILDING NET CENTER BECAUSE THAT WAS A SWAP INTO A
13 HIGHER GROWTH BUSINESS? HAS HE MADE THAT STATEMENT, IN
14 WORDS OR SUBSTANCE, ON ANY OCCASION?
15 A. HE MAY HAVE. I DON'T KNOW.
16 Q. DO YOU AGREE WITH THE STATEMENT?
17 A. I AGREE WITH PART OF THE STATEMENT. I DON'T AGREE THAT
18 IT NECESSARILY FOLLOWS THAT IT IS FASTER GROWING. THAT'S A
19 PHENOMENON OF THREE MONTHS OF STOCK MARKET ACTIVITY THAT, IF
20 YOU LOOKED AT IT TODAY, MIGHT BE CHALLENGED.
21 BUT I UNDERSTAND THE INTENT OF THE STATEMENT AND
22 THE SUBSTANCE OF WHAT HE IS SAYING, AND I WOULD GENERALLY
23 AGREE WITH THAT POINT OF VIEW.
24 Q. OKAY. LET'S GO TO PAGE 15, PARAGRAPH 22 OF YOUR DIRECT.
25 AND I DIRECT YOUR ATTENTION TO THE SECOND SENTENCE ON THAT
26 - [add a note]
1 PAGE, WHICH READS: "ONE OF THE FIRST STEPS MICROSOFT TOOK
2 IN RESPONSE TO ITS GROWING APPRECIATION OF THE SIGNIFICANCE
3 OF THE INTERNET WAS IN DECEMBER 1994, WHEN IT OBTAINED A
4 LICENSE TO USE AND REDISTRIBUTE THE MOSAIC BROWSER CODE
5 ORIGINALLY DEVELOPED BY MARC ANDREESEN AND HIS TEAM OF
6 FELLOW STUDENTS."
7 WHAT IS THE BASIS FOR YOUR STATEMENT THAT THAT IS
8 ONE OF THE FIRST STEPS MICROSOFT TOOK IN RESPONSE TO ITS
9 GROWING APPRECIATION OF THE SIGNIFICANCE OF THE INTERNET?
10 A. OH, SEVERAL THINGS. STATEMENTS TO THE EFFECT THAT THAT
11 WAS THE FIRST BROWSER THAT MICROSOFT HAD AND THAT THEY HAD
12 NOT DEVELOPED ONE PRIOR TO THAT. AND SO, WHEN THEY LICENSED
13 THAT, THAT WOULD HAVE BEEN ONE OF THEIR FIRST STEPS. THE
14 FACT THAT, IN MR. GATES' BOOK, THE ROAD AHEAD, THE FIRST
15 EDITION OF IT, WHICH WAS PUBLISHED, I BELIEVE, IN THE FALL
16 OF '95, WELL AFTER NETSCAPE'S IPO, GAVE VERY SHORT SHRIFT TO
17 THE INTERNET. THERE IS A NEWSWEEK ARTICLE THAT SAID IN THE
18 BEGINNING OF '95, MICROSOFT ONLY HAD FOUR PEOPLE WORKING ON
19 INTERNET BROWSERS. THE MICROSOFT WINDOWS 95 MANUAL THAT WAS
20 PRODUCED WHEN WINDOWS 95 WAS RELEASED, I THINK, ONLY HAD TWO
21 PARAGRAPHS ABOUT INTERNET CONNECTIVITY IN IT. SUCH THINGS
22 AS THAT.
23 Q. OKAY. YOU SAID MICROSOFT ONLY HAD FOUR PEOPLE WORKING
24 ON BROWSING AT THE BEGINNING OF '94? DID YOU JUST NOW SAY
25 THAT?
27 - [add a note]
1 A. THE BEGINNING OF '95.
2 Q. I BELIEVE YOU SAID THE BEGINNING OF '94.
3 A. I APOLOGIZE. I THINK IT WAS '95.
4 Q. AND THE SOURCE OF THAT INFORMATION IS?
5 A. IT WAS A NEWSWEEK ARTICLE.
6 Q. OKAY. YOU DON'T, IN FACT, HAVE ANY KNOWLEDGE AT ALL OF
7 WHAT THE FIRST STEPS MICROSOFT TOOK WITH RESPECT TO BROWSING
8 ARE, DO YOU?
9 A. NOR DO I SAY THAT. I SAID ONE OF THE FIRST STEPS.
10 CERTAINLY THERE PROBABLY ARE OTHER FIRST STEPS. I JUST SAID
11 THIS WAS ONE OF THE FIRST STEPS. THEY HAD NEGOTIATED WITH
12 NETSCAPE TO BUY OUR PRODUCT AT A PRICE THAT WE DID NOT THINK
13 WAS CORRECT OR APPROPRIATE. THEY THEN DID THIS PRODUCT.
14 AND, THEREFORE, I WOULD SAY THAT WAS ONE OF THE FIRST STEPS,
15 ELSE, WHY WOULD THEY DO IT?
16 IT SEEMS LOGICAL TO ME. I DON'T SAY IT'S THE ONLY
17 STEP THEY TOOK. IT WAS ONE OF THE FIRST.
18 Q. SO FAR AS YOU KNOW, THEY MAY HAVE BEEN TAKING STEPS IN
19 1992, 1993, 1994 THAT YOU'RE NOT AWARE OF; ISN'T THAT
20 CORRECT?
21 A. NOR WOULD THAT NEGATE THIS STATEMENT.
22 Q. HOW MANY FIRST STEPS CAN YOU HAVE?
23 A. OH, I DON'T KNOW. TWO OR THREE.
24 Q. NOW, YOU REFERRED TO NEGOTIATION TO LICENSE YOUR BROWSER
25 CODE, IS THAT CORRECT, WITH MICROSOFT?
28 - [add a note]
1 A. YES, IN '94.
2 Q. IN '94. AND THEY CHOSE MOSAIC INSTEAD; IS THAT CORRECT?
3 A. THEY CHOSE THE SPYGLASS IMPLEMENTATION OF MOSAIC BECAUSE
4 WE WOULD NOT SELL THEM OURS AT OUR PRICE, AND SPYGLASS
5 OFFERED IT AT THEIR PRICE, YES.
6 Q. OKAY. AND YOU WANTED TO SELL THIS SOFTWARE TO
7 MICROSOFT, DIDN'T YOU --NETSCAPE DID?
8 A. NOT AT THE PRICE THEY OFFERED. THEY OFFERED A FLAT FEE
9 OF A COUPLE OF MILLION DOLLARS TO TAKE US OUT OF THE GAME.
10 AND THAT WOULD HAVE KILLED OUR PRODUCT IN THEIR SPACE.
11 Q. WHEN WAS THAT OFFER MADE?
12 A. I THINK IT WAS LIKE NOVEMBER OF '94. IT WAS AN OFFER TO
13 BUY A ONE-TIME PAID-UP LICENSE FEE AND WITH NO ROYALTIES.
14 AND THAT WAS -- WE JUST DIDN'T LIKE THE DEAL. BUT I MEAN,
15 THEY DID MAKE THE OFFER AND IT WAS A STRAIGHT-UP OFFER.
16 Q. OKAY. AND AT THAT TIME YOU WERE A DIRECTOR; IS THAT
17 RIGHT?
18 A. YES, SIR.
19 Q. AND WHEN DID YOU BECOME C.E.O.?
20 A. EARLY JANUARY OF '95.
21 Q. EARLY JANUARY. CAN YOU PLACE IT ANY MORE EXACTLY THAN
22 THAT?
23 A. I THINK IT WAS THE 3RD OR 4TH OR THE 5TH. SOMEWHERE IN
24 THERE.
25 Q. OKAY. AND WHO WAS THE C.E.O. PRIOR TO YOUR BECOMING
29
1 C.E.O.?
2 A. JIM CLARK.
3 Q. AND HE WAS ALSO THE CHAIRMAN AND REMAINS THE CHAIRMAN?
4 A. YES, SIR.
5 Q. THANK YOU.
6 MR. WARDEN: I WOULD LIKE TO HAVE MARKED AS
7 DEFENDANT'S EXHIBIT 6 AN E-MAIL MESSAGE FROM JIM CLARK TO
8 DAN ROSEN AT MICROSOFT, DATED DECEMBER 29, 1994.
9 AND I OFFER DEFENDANT'S EXHIBIT 6.
10 MR. BOIES: NO OBJECTION, YOUR HONOR.
11 MR. HOUCK: NO OBJECTION.
12 THE COURT: DEFENDANT'S 6 IS ADMITTED.
13 (WHEREUPON, DEFENDANT'S
14 EXHIBIT NUMBER 6 WAS
15 RECEIVED IN EVIDENCE.)
16 BY MR. WARDEN:
17 Q. PLEASE TAKE A MOMENT TO READ THIS, MR. BARKSDALE.
18 HAVE YOU SEEN THIS BEFORE, MR. BARKSDALE? NOT
19 NECESSARILY IN THIS FORM, BUT IN ANY FORM.
20 A. NO, SIR. I HAVE NOT SEEN THIS BEFORE.
21 Q. AND I DIRECT YOUR ATTENTION TO THE FIRST SENTENCE WHICH
22 SAYS: I WOULD LIKE TO CONVINCE YOU TO RECONSIDER USING OUR
23 NETSCAPE CLIENT. DO YOU SEE THAT?
24 A. I DO.
25 Q. DOES THAT REFER TO THE BROWSER THAT WAS KNOWN AS
30 - [add a note]
1 NAVIGATOR 1?
2 A. IT DOES.
3 Q. AND THEN IF YOU GO ON TO THE SECOND PARAGRAPH, SECOND
4 SENTENCE, IT SAYS: I UNDERSTAND YOUR WORRY ABOUT SCHEDULE
5 DELAYS, BUT BY THE TIME YOU FIX THE BUGS IN THE ORIGINAL
6 MOSAIC AND TUNE IT FOR PERFORMANCE, YOU WILL WASTE AS MUCH
7 TIME AS YOU FEAR LOSING.
8 DO YOU SEE THAT?
9 A. I DO.
10 Q. AND THIS IS AFTER YOU SAY NETSCAPE REJECTED MICROSOFT'S
11 PROPOSAL TO ACQUIRE THE NETSCAPE BROWSER?
12 A. I AM JUST SAYING WE DIDN'T ACCEPT THE MONEY -- THE PRICE
13 OF THE PRODUCT AND, THEREFORE, THE DEAL DIDN'T GET EXECUTED.
14 Q. WELL, THIS DOESN'T SAY ANYTHING ABOUT PRICE IN THIS
15 E-MAIL COMMUNICATION FROM THE CHAIRMAN AND CHIEF EXECUTIVE
16 OFFICER OF NETSCAPE, DOES IT?
17 A. I DON'T BELIEVE IT DOES, BUT THAT IS NOT WHAT THIS
18 PARAGRAPH SAYS, I THINK.
19 Q. WELL, IT SAYS THAT MR. CLARK WANTS TO CONVINCE BRAD
20 SILVERBERG TO RECONSIDER USING THE NETSCAPE BROWSER.
21 A. AND PRESUMABLY PAYING MORE MONEY FOR IT.
22 Q. DOES IT SAY THAT?
23 A. IT SAYS MAKE AN INVESTMENT WHICH WOULD, IN EFFECT,
24 CREATE BEING PAID FOR IT OR SOMETHING TO THAT EFFECT AT THIS
25 TIME.
31 - [add a note]
1 Q. WE'LL COME BACK TO THE INVESTMENT POINT LATER,
2 MR. BARKSDALE. DOES IT SAY ANYTHING ABOUT MAKING A HIGHER
3 ROYALTY PAYMENT FOR THE BROWSER?
4 A. WELL, IF THEY WERE TO MAKE A PAYMENT IN TERMS OF EQUITY
5 IN THE COMPANY, THAT MIGHT BE A HIGHER PAYMENT.
6 Q. YOU MEAN THAT WHEN THEY BUY STOCK, WHAT THEY ARE REALLY
7 DOING IS PAYING FOR A BROWSER, AND YOU WOULD SO ACCOUNT FOR
8 IT ON THE BOOKS OF ACCOUNT OF YOUR COMPANY, THE BASIS FOR
9 YOUR TAX RETURNS AND YOUR FILINGS WITH THE SECURITIES AND
10 EXCHANGE COMMISSION?
11 A. I THINK YOU'RE GETTING CARRIED AWAY THERE. THAT IS NOT
12 AT ALL WHAT I SAID.
13 Q. WHAT DO YOU MEAN?
14 A. IF THEY MADE AN INVESTMENT AND THEN THEY MADE SOME OTHER
15 PAYMENT FOR THE PRODUCT, IT IS QUITE CONCEIVABLE WE WOULD
16 NOT HAVE RAISED THE RETAIL PRICE OF THE PRODUCT. AND AT
17 THIS PARTICULAR TIME, DECEMBER OF '94, NETSCAPE WAS, YOU
18 KNOW, BURNING THROUGH CASH AND NOT MAKING ANY MONEY. AND I
19 THINK MR. CLARK MAY HAVE BEEN TRYING TO GET AN INVESTMENT
20 OUT OF THIS COMPANY AND WOULD WORK HARD. BUT HE DOESN'T SAY
21 WHAT HE WOULD SELL THE PRODUCT FOR. THAT'S NOT THE WAY A
22 SALESMAN GOES INTO A NEGOTIATION.
23 Q. YES, BUT WHAT HE DOES ADDRESS IN THE SECOND PARAGRAPH AS
24 THE APPARENT REASON FOR NO DEAL YET IS, "I UNDERSTAND YOUR
25 WORRY ABOUT SCHEDULE DELAYS." AND THEN HE SAYS, "BY THE
32 - [add a note]
1 TIME YOU FIX UP MOSAIC, YOU WILL WASTE AS MUCH TIME AS YOU
2 FEAR LOSING."
3 DO YOU HAVE -- DO YOU HAVE ANY KNOWLEDGE OF THE
4 DISCUSSIONS THAT HAD GONE ON BETWEEN MR. CLARK WITH
5 RESPECT -- AND MICROSOFT WITH RESPECT TO THAT TOPIC,
6 SCHEDULE DELAYS, TUNING MOSAIC, AND THE FEAR OF LOSING TIME?
7 A. NOW YOU UNDERSTAND, OR AT LEAST THE WAY I READ THIS,
8 THEY ARE TALKING ABOUT TUNING MOSAIC, WHICH WAS THE SPYGLASS
9 PRODUCT.
10 Q. I UNDERSTAND THAT. I ASKED IF YOU HAD ANY KNOWLEDGE OF
11 THE DISCUSSIONS THAT MR. CLARK HAD WITH MICROSOFT ABOUT THE
12 TOPICS OF THAT SENTENCE, AND I WOULD APPRECIATE A YES OR NO
13 ANSWER.
14 A. I WAS NOT PRIVY TO A CONVERSATION WITH MR. CLARK ABOUT
15 THAT SENTENCE, NO.
16 Q. ABOUT THE TOPICS IN THAT SENTENCE?
17 A. NO.
18 Q. LET'S GO TO PAGE 16, PARAGRAPH 25.
19 AND WE'RE GOING TO COME BACK TO THE JUNE 21
20 MEETING, BUT AM I CORRECT THAT BY THE TIME OF THE JUNE 21,
21 1995 MEETING, NETSCAPE KNEW THAT MICROSOFT WAS INCLUDING
22 BROWSING FUNCTIONALITY IN THE FORM OF INTERNET EXPLORER IN
23 WINDOWS 95?
24 A. BROWSING FUNCTIONALITY OR BROWSER?
25 Q. YOU MAY USE WHICHEVER TERM YOU PREFER.
33 - [add a note]
1 A. WELL, THERE IS A BIG DISTINCTION.
2 Q. EXPLAIN THE DISTINCTION TO ME, PLEASE.
3 A. WELL, I MEAN, A BROWSER IS A STAND-ALONE, SEPARABLE
4 PRODUCT. BROWSING FUNCTIONALITY MIGHT INCLUDE MANY THINGS,
5 SUCH AS A CONNECTION TO INTERNET WITHOUT HAVING THE COMPLETE
6 BROWSER. THAT'S ALL I'M SAYING
7 Q. ALL RIGHT. COMPLETE BROWSING FUNCTIONALITY NOW IS THE
8 TERM I'M GOING TO USE.
9 A. NO, SIR. A COMPLETE BROWSER IS A THING, A STAND-ALONE
10 THING. IT WALKS LIKE A DUCK; IT QUACKS LIKE A DUCK. IT'S A
11 DUCK.
12 Q. IT IS?
13 A. YES, IT IS.
14 Q. SHOW ME ONE. WHERE IS THIS DUCK?
15 A. IT'S RIGHT THERE ON -- PROBABLY ON HER COMPUTER SCREEN,
16 IF SHE WILL PULL IT UP.
17 Q. I SEE.
18 ACCEPTING YOUR USE OF THE TERM "BROWSER," DID YOU
19 KNOW BY JUNE 21, 1995 THAT MICROSOFT INTENDED TO INCLUDE, IN
20 WINDOWS 95, CODE THAT WOULD DO EVERYTHING A BROWSER DOES?
21 A. FIRST OF ALL, IT'S NOT MY DEFINITION. IT'S THE
22 INDUSTRY'S DEFINITION OF WHAT A BROWSER -- I WILL USE THE
23 INDUSTRY'S DEFINITION OF BROWSER, AND I WILL SAY STILL, THAT
24 WAS NOT OUR UNDERSTANDING. OUR UNDERSTANDING, WHICH MAY
25 HAVE BEEN INCORRECT BY THE WAY, WAS THAT THEY WERE GOING TO
34 - [add a note]
1 INCLUDE A BROWSER WITH WINDOWS 95 SHIPPED WITH THE PRODUCT,
2 BUT NOT INCLUDED IN.
3 Q. DID YOU KNOW THAT THEY HAD THE ULTIMATE INTENTION TO
4 INCLUDE THAT CODE IN WINDOWS 95?
5 A. I BELIEVE THAT -- YOU'RE SAYING AS OF JUNE --
6 Q. AS OF JUNE 1, 1995.
7 A. AS OF JUNE 1 OR JUNE THE 21ST?
8 Q. THE 21ST.
9 A. WHICH DO YOU WANT? YOU SAID JUNE 1. THERE WAS A
10 SIGNIFICANT MEETING IN THE EARLY PART OF JUNE.
11 Q. I AM SORRY, MR. BARKSDALE. I THOUGHT I SAID JUNE 21.
12 IF I DID NOT, I APOLOGIZE. MY QUESTION IS, AS OF -- BEFORE
13 YOU STARTED THE MEETING ON JUNE 21, DID YOU KNOW THAT
14 MICROSOFT INTENDED TO INCLUDE CODE -- WHETHER IN THE INITIAL
15 RELEASE OR NOT, CODE IN WINDOWS 95 THAT WOULD DO EVERYTHING
16 THAT A BROWSER DOES?
17 A. AGAIN, I JUST -- THE WAY YOU ASK THE QUESTION, I CAN'T
18 GIVE YOU A YES OR NO ANSWER, BUT YOU KEEP SAYING INCLUDING
19 CODE IN WINDOWS 95. THAT WAS NOT MY UNDERSTANDING. I DID
20 UNDERSTAND, PRIOR TO THIS MEETING, THAT THEY INTENDED TO
21 INCLUDE A BROWSER WITH WINDOWS 95 BECAUSE I HAD BEEN TOLD
22 THAT IN AN EARLY JUNE MEETING BY SOME MICROSOFT EXECUTIVES.
23 Q. OKAY. WHAT DO YOU MEAN BY "WITH"?
24 A. SHIPPED WITH THE PRODUCT, ALONG WITH A LOT OF OTHER
25 THINGS THAT THEY SHIP WITH THESE PRODUCTS.
35 - [add a note]
1 Q. ON A SEPARATE DISK; IS THAT WHAT YOU'RE SAYING?
2 A. SOMETIMES THEY ARE SEPARATE; SOMETIMES THEY ARE NOT. I
3 DON'T KNOW THAT I KNEW OR WOULD MAKE A DISTINCTION. JUST
4 BECAUSE IT'S ON THE SAME DISK DOESN'T MEAN IT'S THE SAME
5 PROGRAM.
6 Q. OKAY. A SECOND PROGRAM OR A THIRD OR WHATEVER ON THE
7 SAME DISK?
8 A. RIGHT.
9 Q. DID YOU KNOW ONE WAY OR THE OTHER, PRIOR TO THE JUNE
10 21ST MEETING, WHETHER MICROSOFT ULTIMATELY INTENDED TO
11 INCLUDE THE CODE THAT PERFORMS ALL THE FUNCTIONS OF A
12 BROWSER IN THE OPERATING SYSTEM?
13 A. NOT IN THE OPERATING SYSTEM, NO, SIR.
14 Q. WHEN DID YOU FIRST LEARN THAT?
15 A. THE FIRST I EVER -- THAT I REMEMBER HEARING IT -- AND I
16 COULD BE WRONG ABOUT THIS -- IT SEEMS TO ME WAS -- IN IT'S
17 CLEAREST SENSE IN MR. GATES' DECEMBER 7TH ANNOUNCEMENT, OR
18 SPEECH, OR WHATEVER IN '95 ABOUT THEM TAKING THIS INTERNET
19 SERIOUSLY NOW AND THEY WERE GOING TO DO A LOT OF THINGS,
20 INCLUDING INTEGRATING THE BROWSER INTO THE OPERATING SYSTEM.
21 BUT, AGAIN, I COULD BE WRONG ABOUT THAT. I DON'T
22 KNOW THAT I HAD AN UNDERSTANDING OF EXACTLY WHEN THOSE
23 STATEMENTS WERE MADE. I DO REMEMBER DECEMBER 7TH. I THINK
24 IT WAS MADE FAIRLY CLEAR.
25 IT WAS ALSO MADE CLEAR IN THAT TIMEFRAME, THE
36 - [add a note]
1 DECEMBER TIMEFRAME, THEY PLANNED TO BUILD BROWSERS FOR OTHER
2 OPERATING SYSTEMS, WHICH OBVIOUSLY THEY WEREN'T GOING TO BE
3 INTEGRATED INTO, LIKE MACINTOSH, UNIX, AND ALL THOSE OTHER
4 OPERATING SYSTEMS, THAT THEY COULDN'T HAVE INTEGRATED IT
5 INTO THAT WOULD MAKE IT A SEPARATE, DEFINED, DISTINCT,
6 INDEPENDENT BROWSER.
7 Q. THE BROWSERS FOR THE OTHER OPERATING SYSTEMS?
8 A. YES. AND THAT THEY WERE GOING TO MAKE IT FREE, WHICH
9 AMAZED ME.
10 Q. NOW DID YOU -- WAS THAT THE FIRST TIME YOU HAD ANY IDEA
11 THEY WERE GOING TO, QUOTE, MAKE IT FREE, CLOSE QUOTE?
12 A. FOR OTHER OPERATING SYSTEMS, YES, SIR.
13 Q. HOW ABOUT FOR WINDOWS?
14 A. THEY HAD TOLD US IN THIS JUNE TIMEFRAME THAT THEY
15 INTENDED TO INCLUDE A BROWSER WITH WINDOWS 95 THAT WOULD BE
16 FREE.
17 Q. AND WAS THAT THE FIRST TIME YOU KNEW THAT?
18 A. I BELIEVE IT -- ABOUT THAT TIME WAS WHEN IT BECAME CLEAR
19 TO ME.
20 Q. OKAY. DID YOU -- HAVE YOU READ MR. CLARK'S DEPOSITION
21 IN THIS ACTION?
22 A. NO, SIR, I HAVE NOT. I DIDN'T THINK I COULD. I DON'T
23 KNOW.
24 Q. MR. CLARK TESTIFIED -- AND I AM AT PAGE 35 LINE 17 OF
25 HIS DEPOSITION -- DO WE HAVE A COPY FOR HIM? I WILL READ IT
37 - [add a note]
1 IN TOTO:
2 QUESTION: OKAY. EARLY IN THE LIFE OF NETSCAPE AS
3 A COMPANY, YOU DECIDED TO GIVE AWAY WEB BROWSING SOFTWARE
4 FOR FREE IN ORDER TO ESTABLISH A MARKET PRESENCE; IS THAT
5 CORRECT?
6 ANSWER BY MR. CLARK: NOT REALLY. I DECIDED TO
7 GIVE IT AWAY FREE BECAUSE BILL GATES HAD TOLD ME HE WAS
8 GOING TO GIVE IT AWAY FREE BEFORE WE RELEASED OUR FIRST
9 BETA. BILL GATES SPECIFICALLY TOLD ME HE WAS GOING TO GIVE
10 AWAY THE WEB BROWSER IN THE OPERATING SYSTEM, AND THIS WAS
11 BEFORE WE RELEASED OUR FIRST BETA. AND I FELT LIKE WE WOULD
12 HAVE TO IN ORDER TO SURVIVE AGAINST MICROSOFT.
13 HAVE YOU EVER HEARD THAT FROM MR. CLARK?
14 A. NO, SIR.
15 Q. QUESTION: WHEN DID MR. GATES TELL YOU THAT?
16 ANSWER: AT A CONFERENCE IN WASHINGTON, D.C.,
17 ROUGHLY OCTOBER, BEGINNING OF OCTOBER OF 1994 -- END OF
18 SEPTEMBER, BEGINNING OF OCTOBER -- CALLED THE NETWORK
19 ECONOMY CONFERENCE. HE TOLD ME AND A GROUP -- THE WHOLE
20 GROUP -- THE WHOLE AUDIENCE THAT HE INTENDED TO DO THAT.
21 NO ONE EVER APPRISED YOU OF MR. GATES' STATEMENTS
22 AS RELATED BY MR. CLARK AT THAT CONFERENCE?
23 A. I DON'T BELIEVE SO, NO, SIR.
24 Q. DO YOU HAVE ANY BASIS FOR DISPUTING MR. CLARK'S
25 TESTIMONY?
38 - [add a note]
1 A. AS TO WHETHER OR NOT BILL GATES TOLD HIM THAT OR JUST
2 THE TOTAL THING YOU READ? I AM NOT SURE.
3 Q. NO, NO. I MEAN, I ASSURE YOU THAT I READ THE QUESTIONS
4 AND ANSWERS CORRECTLY TO THE BEST OF MY ABILITY.
5 A. WELL, DO I DISPUTE IT?
6 Q. DO YOU DISPUTE THE FACTS STATED BY MR. CLARK? DO YOU
7 HAVE ANY BASIS FOR DOING SO?
8 A. I DON'T HAVE ANY BASIS FOR THAT, NO, SIR.
9 Q. TURN TO THE TOP OF PAGE 17, AND TAKE A MOMENT TO READ
10 THE FIRST -- THE PART OF THE PARAGRAPH THAT'S ON THAT PAGE,
11 IF YOU WOULD LIKE, MR. BARKSDALE.
12 A. WHERE ARE YOU NOW? PAGE 17?
13 Q. PAGE 17 AT THE TOP OF THE PAGE.
14 A. MEETING INCLUDING TECHNICAL SPECS?
15 Q. YES. THIS PARAGRAPH REFERS TO THE JUNE 21 MEETING.
16 A. I AM READING IT. WHERE DO YOU WANT ME TO GO?
17 Q. ALL RIGHT. I JUST WANTED YOU TO HAVE IT IN MIND AND
18 THEN I AM GOING TO ASK YOU A QUESTION. MY FIRST QUESTION
19 IS, WERE TECHNICAL SPECIFICATIONS, AS REFERRED TO IN THE
20 FIRST LINE, SUPPORT FOR MICROSOFT TECHNOLOGIES, AND NETSCAPE
21 TECHNOLOGIES DISCUSSED FURTHER DOWN -- HAD THOSE TOPICS BEEN
22 DISCUSSED BETWEEN THE TWO COMPANIES PRIOR TO JUNE 21?
23 A. YES.
24 Q. AND WHAT TECHNICAL SPECIFICATIONS SPECIFICALLY ARE YOU
25 REFERRING TO IN THIS PARAGRAPH OF YOUR TESTIMONY?
39 - [add a note]
1 A. THE PRINCIPAL ONE WAS THIS REMOTE ACCESS SERVICE OR
2 DIALER THAT WE HAVE TALKED ABOUT BEFORE TO MAKE OUR RETAIL
3 PRODUCT WORK.
4 Q. AND WHICH MICROSOFT TECHNOLOGIES ARE YOU REFERRING TO?
5 A. THAT'S WHAT I AM TALKING ABOUT. THAT WAS A MICROSOFT
6 TECHNOLOGY, THIS DIALER.
7 Q. THAT'S THE ONLY MICROSOFT TECHNOLOGY THAT THERE WAS A,
8 QUOTE, POSSIBILITY THAT NETSCAPE WOULD ADOPT.
9 A. THIS SAYS THAT NETSCAPE NEEDED. WE NEEDED THAT PRODUCT.
10 WE DISCUSSED OTHER PRODUCTS THAT THEY WOULD LIKE FOR US TO
11 INCORPORATE, SOME OF WHICH WE HAD HEARD ABOUT, AND SOME OF
12 WHICH WE HAD NOT HEARD ABOUT UNTIL THAT MEETING. AND THEY
13 ALSO -- THERE WAS ANOTHER ITEM WE WERE INTERESTED IN -- DAN
14 CALLED A SCRIPTING ENGINE THAT WE WOULD LIKE TO HAVE HAD --
15 IT WAS DUE MUCH LATER, BUT I THINK IT WAS IN BETA AT THAT
16 TIME -- BY MICROSOFT.
17 Q. AND THOSE ARE THE CERTAIN MICROSOFT TECHNOLOGIES THAT
18 NETSCAPE MIGHT POSSIBLY ADOPT THAT ARE REFERRED TO ON THE
19 THIRD AND FOURTH LINES?
20 A. NO. THE POSSIBILITY THAT NETSCAPE WOULD ADOPT CERTAIN
21 MICROSOFT TECHNOLOGIES WERE FOR OTHER TECHNOLOGIES, OTHER
22 THAN THOSE TWO.
23 Q. OKAY. WHAT WERE THOSE?
24 A. WELL, AS I HAVE, I BELIEVE, INDICATED, THAT THEY
25 GENERALLY WERE VIEWERS FOR CERTAIN PROPRIETARY MICROSOFT
40 - [add a note]
1 DATABASES -- LIKE ENCARTA WAS ONE THAT THEY PROFFERED,
2 WHICH, AT THAT TIME, WAS THOUGHT TO BE A GOOD THING IF YOU
3 COULD HAVE PUT THAT INTO A BROWSER, BUT IT WAS PROPRIETARY
4 AND IT WAS NOT, THEREFORE, IN OUR OPINION, OPEN. BUT THEY
5 SUGGESTED THAT WE MIGHT BE INTERESTED IN THAT. THAT WOULD
6 HELP MAKE THIS RELATIONSHIP.
7 OTHER TECHNOLOGIES THAT THEY MENTIONED -- THEY HAD
8 A DOCUMENT -- OBJECT, I BELIEVE, CALLED "DOC OBJECT" THAT
9 THEY WERE WANTING US TO LOOK AT. THEY HAD SEVERAL ITEMS
10 LIKE CONNECTION TO MSN, THEIR NETWORK, CONNECTIVITY --
11 PROPRIETARY NETWORK THEY WOULD BUILDING INTO 95. JUST A
12 NUMBER OF THINGS. I MEAN, IF YOU WANT ME TO GO SPECIFICALLY
13 THROUGH THEM, I THINK I HAVE GOT THEM IN ONE OF THE
14 EXHIBITS.
15 Q. BUT THEY WANTED YOU -- THEY WERE SUGGESTING THAT THEY
16 WOULD LIKE TO HAVE THESE THINGS IN YOUR BROWSER; IS THAT
17 RIGHT?
18 A. IN MOST CASES. THERE WERE A COUPLE THAT THEY WERE
19 SUGGESTING WE PUT ON OUR SERVER PRODUCTS.
20 Q. AND WHAT ARE THE NETSCAPE TECHNOLOGIES THAT MICROSOFT
21 MIGHT POSSIBLY ADOPT REFERRED TO?
22 A. ONE OF THEM WAS THAT THEY WOULD DISTRIBUTE OUR -- ONE OF
23 OUR SERVER PRODUCTS -- OUR LOW-END SERVER PRODUCT, WITH
24 THEIR NT SERVER PRODUCTS WAS ONE OF THEM.
25 Q. THAT'S NOT AN ADOPTION OF A TECHNOLOGY, IS IT? IT'S A
41 - [add a note]
1 JOINT DISTRIBUTION PROGRAM?
2 A. THE WAY MICROSOFT REFERS TO THESE THINGS, THAT MIGHT BE.
3 THEY TEND TO PUT A LOT OF OTHER PRODUCTS INTO THEIR PRODUCTS
4 AND ADOPT THEM.
5 Q. WHEN YOU SAY A LOW-END SERVER PRODUCT, ABOUT HOW MUCH
6 PER COPY DID THAT SERVER PRODUCT SELL FOR?
7 A. I DON'T REMEMBER.
8 Q. ORDER OF MAGNITUDE?
9 A. THEY WERE GOING TO PUT IN A TRIAL COPY OF IT, SO IT
10 WOULDN'T HAVE COST ANYTHING AT THAT TIME. BUT IT WAS -- I
11 WANT TO SAY A COUPLE HUNDRED DOLLARS. 150 TO A COUPLE
12 HUNDRED.
13 Q. GOING ON TO THE NEXT LINE NOW, WHAT IS A PREFERRED
14 SOLUTIONS PROVIDER?
15 A. THAT WAS A TERM THAT THEY USED THAT I THINK IS A
16 REFERENCE THEY HAVE TO PEOPLE WHO GET PREFERENCES THAT ARE
17 THE INDEPENDENT SOFTWARE VENDORS, SOLUTIONS PROVIDERS. WE
18 WOULD BE A SOLUTION PROVIDER OR APPLICATION BUILDER.
19 Q. WHAT IS A SOLUTION PROVIDER?
20 A. WELL, LIKE I SAY, IT'S A TERM BARRED IN THE INDUSTRY.
21 IT WOULD INCLUDE INDEPENDENT SOFTWARE VENDORS. IT COULD
22 INCLUDE OTHER TYPES, BUT IN OUR CASE IT WAS -- A SOLUTION
23 PROVIDER IN OUR CASE WOULD BE THAT WE WERE AN INDEPENDENT
24 SOFTWARE VENDOR THAT WOULD BE PREFERRED. MICROSOFT HAS A
25 LOT OF INDEPENDENT SOFTWARE VENDORS THAT THEY DO BUSINESS
42 - [add a note]
1 WITH, AND WE WOULD GET PREFERENCE OVER MANY OF THEM.
2 Q. AND WHAT SOFTWARE WOULD YOU BE PROVIDING?
3 A. THAT'S WHAT WAS NEVER CLEAR TO ME. THEY WERE GOING TO
4 PROVIDE US ALL OF THESE THINGS AND MAKE US A PREFERRED
5 SOLUTIONS PROVIDER IF, IN GENERAL, WE WOULD BACK OFF OF
6 WINDOWS 95. SO IT WASN'T NECESSARILY SOFTWARE. IT WAS JUST
7 THAT WE WOULD STAY OUT OF THAT BUSINESS, BUT WE WOULD
8 PROVIDE SOFTWARE BROWSERS FOR MACINTOSH, FOR WINDOWS 3.1,
9 FOR UNIX. THAT WAS THE BASIC PROPOSAL.
10 I NEVER DID HEAR ANY SOFTWARE THAT WE WERE GOING
11 TO BE PROVIDING, OTHER THAN THIS SERVER PRODUCT THAT I
12 MENTIONED -- THE COMMUNICATIONS SERVER WE CALLED IT AT THAT
13 TIME.
14 Q. AND YOU WOULD BE BE ADDING VALUE ON THE BACK END IN THE
15 FORM OF VERTICAL APPLICATIONS; IS THAT CORRECT?
16 A. THAT WAS THEIR PROPOSAL AS WELL, BUT THAT WAS NEVER --
17 THAT WAS NEVER CLEAR TO ME WHAT THAT WAS, OTHER THAN ON THE
18 SERVER SIDE, AS I MENTIONED.
19 Q. OKAY. I AM GOING TO ASK YOU TO GO BACK TO DEFENDANT'S
20 EXHIBIT 6 AND MY QUESTION --
21 A. JIM CLARK. RIGHT. YES, SIR.
22 Q. WHAT YOU SAY MICROSOFT WAS PROPOSING ON JUNE THE 21ST,
23 '95 -- ISN'T THAT PRETTY MUCH EXACTLY WHAT MR. CLARK WAS
24 PROPOSING TO MICROSOFT IN DECEMBER 1994?
25 A. NO.
43 - [add a note]
1 Q. WELL, I DIRECT YOUR ATTENTION TO THE FOURTH PARAGRAPH
2 WHICH READS: MICROSOFT IS THE DE FACTO STANDARD CLIENT
3 SOFTWARE COMPANY AND WE HAVE NEVER PLANNED TO COMPETE WITH
4 YOU, SO WE HAVE NEVER CONSIDERED A CLIENT AS BEING OUR
5 BUSINESS. OUR BUSINESS IS ADDING VALUE ON THE BACK END IN
6 THE FORM OF VERTICAL APPLICATIONS CURRENTLY USING ORACLE
7 DATABASES.
8 NOW LET'S STOP THERE FORE JUST A MINUTE. HE IS
9 PROPOSING THAT YOU'RE GOING TO HAVE A BUSINESS THAT ADDS
10 VALUE ON THE BACK END IN THE FORM OF VERTICAL APPLICATIONS,
11 ISN'T HE?
12 A. BUT THAT WAS NOT YOUR QUESTION.
13 Q. WELL, WHATEVER MY QUESTION WAS, WE'LL PASS FOR THE
14 MOMENT. HE DID PROPOSE THIS TO MICROSOFT IN DECEMBER 1994?
15 A. AND IT WAS REJECTED. WE, AT THAT TIME, ACCORDING TO
16 MR. CLARK, INTENDED TO DO THAT, IN ADDITION TO OTHER THINGS.
17 I THINK HERE HE IS PROBABLY MAKING A PROPOSAL THAT, IN
18 LOOKING BACK ON IT HERE -- THIS IS THE FIRST I HAVE SEEN
19 THIS -- WAS NOT CONSISTENT WITH WHAT THE COMPANY WAS
20 PLANNING TO DO.
21 MR. WARDEN: I MOVE TO STRIKE. NO QUESTION IT WAS
22 NOT RESPONSIVE.
23 THE COURT: THE MOTION TO STRIKE IS OVERRULED.
24 BY MR. WARDEN:
25 Q. WHAT IS THE "BACK END"?
44 - [add a note]
1 A. IN THIS CASE, I BELIEVE HE WAS REFERRING TO -- BECAUSE
2 HE MENTIONS ORACLE DATABASES -- THESE APPLICATIONS, LIKE I
3 MENTIONED TO YOU, THAT THEY WERE TALKING ABOUT INCLUDING
4 WITH THE SERVER PRODUCT. THIS WOULD HAVE BEEN A WEB SERVER
5 APPLICATION USING ORACLE DATABASES TO SERVE UP WEB PAGES,
6 WHICH WE DID SUBSEQUENTLY BUILD AND THAT IS WHAT WE WERE
7 TALKING ABOUT AT THAT MEETING -- AS FAR AS TECHNOLOGY
8 TRANSFER, IF THAT'S WHAT YOU'RE REFERRING TO.
9 Q. AND WHAT ARE WINDOWS NT -- I TAKE IT IN THE NEXT
10 SENTENCE, NT REFERS TO WINDOWS NT?
11 A. YES, SIR.
12 Q. AND "BACK OFFICE." WHAT ARE THEY?
13 A. THOSE ARE TWO OF MICROSOFT'S PRODUCTS WHERE WE -- THAT
14 ARE -- NT IS A SERVER PRODUCT AND BACK OFFICE INCLUDES A
15 SERVER PRODUCT. AND SO WE WERE, AT THAT TIME, OR AT THE
16 TIME OF THIS MEMO, WE HAD I BELIEVE OUR UNIX SERVER PRODUCTS
17 UP BUT NOT OUR NT SERVER PRODUCTS THAT WERE, I THINK,
18 ROLLING OUT VERY SHORTLY AFTER THAT.
19 Q. AND BY THE WAY, YOU WROTE YOUR BROWSER ORIGINALLY FOR
20 UNIX, DIDN'T YOU?
21 A. I DIDN'T WRITE IT.
22 Q. WELL, YOUR COMPANY, NETSCAPE, OR MOSAIC -- WHICHEVER IT
23 WAS AT THAT TIME.
24 A. I DON'T BELIEVE -- I DON'T BELIEVE WE DID. I THINK WE
25 WROTE IT FOR MANY, MANY PLATFORMS. THE BETA PRODUCT RAN, I
45 - [add a note]
1 KNOW, FOR INSTANCE, ON MACINTOSH, APPLE -- APPLE MACINTOSH
2 PC'S AND UNIX. IF YOU MEAN THE FIRST RELEASE OR THE FIRST
3 PIECE OF CODE WHEN IT WAS AT THE UNIVERSITY THAT ANDREESEN
4 AND THEM WERE WORKING ON --
5 Q. NO, NO, NO. MY QUESTIONS ARE LIMITED TO NETSCAPE'S
6 CREATION OF WHAT BECAME KNOWN AS NAVIGATOR.
7 A. WE WROTE IT FOR WINDOWS 3.1, MACINTOSH, AND SEVERAL
8 FLAVORS OF UNIX.
9 Q. AND WAS IT WRITTEN FOR ONE OF THESE OPERATING SYSTEMS
10 FIRST AND THEN PORTED TO THE OTHERS?
11 A. AT THAT PARTICULAR TIME, IT MAY HAVE BEEN, BUT THAT'S
12 GENERALLY THE WAY YOU WOULD WRITE A CROSS-PLATFORM OPEN
13 SYSTEM. THAT WAS THE UNIQUENESS OR ONE OF THE UNIQUE
14 FEATURES OF THE NAVIGATOR.
15 Q. RIGHT. AND DO YOU KNOW WHICH OS IT WAS WRITTEN FOR
16 FIRST?
17 A. I DO NOT KNOW WHICH IT WAS WRITTEN FOR FIRST.
18 Q. GOING ON DOWN TO THE BOTTOM OF PARAGRAPH 25 OF YOUR
19 TESTIMONY ON PAGE 17, IN ADDITION TO DISCUSSING THIS ALLEGED
20 PROPOSAL TO DIVIDE THE MARKET WHICH --
21 A. EXCUSE ME -- NOW WHERE ARE YOU? ON 26 OR 25?
22 Q. THE BOTTOM OF PARAGRAPH 25 ON PAGE 17.
23 A. RIGHT. I GOT YOU.
24 Q. THERE IS A STATEMENT THAT YOU AND MR. ROSEN TALKED ABOUT
25 MICROSOFT'S TAKING AN EQUITY POSITION IN NETSCAPE. DO YOU
46 - [add a note]
1 SEE THAT?
2 A. YES, I DO.
3 Q. AND IT'S YOUR TESTIMONY THAT THIS IS SOMETHING THAT
4 MICROSOFT PROPOSED AT THE MEETING AND WANTED?
5 A. ACTUALLY, I THINK IT HAD BEEN SUGGESTED AT THE EARLIER
6 MEETING, BUT AT THIS ONE, IT WAS REPROPOSED AND SAID THAT --
7 AND DAN TOLD ME THAT HE HAD TALKED TO BILL AND PAUL ABOUT
8 THIS AND THAT IT WAS HIS PROPOSAL THAT THEY TAKE AN -- IT
9 CERTAINLY WASN'T IN RESPONSE TO MR. CLARK'S MEMO.
10 Q. WELL, ISN'T IT TRUE, HOWEVER, THAT MR. CLARK WAS THE
11 FIRST PERSON TO PROPOSE THIS AND THAT HE DID SO IN DECEMBER
12 1994?
13 A. I DON'T KNOW THAT. THERE MAY HAVE BEEN A PRE-PROPOSAL
14 THAT MICROSOFT HAD GIVEN MR. CLARK. I DON'T KNOW. BUT I
15 KNOW THAT THIS WAS REJECTED AND WAS NOT THE REASON FOR THIS
16 MEETING IN JUNE, NOR WAS I AWARE OF THIS PROPOSAL, NOR WAS
17 IT EVER REFERRED TO IN THE MEETING IN ITS ENTIRETY. THEY
18 NEVER SAID, "BUT JIM CLARK SAID HE WAS INTERESTED." I DON'T
19 KNOW.
20 Q. WELL, YOU DO AGREE, DO YOU NOT, THAT MR. CLARK SAYS IN
21 HIS DECEMBER E-MAIL, DEFENDANT'S EXHIBIT 6: WE WANT TO MAKE
22 THIS COMPANY A SUCCESS, BUT NOT AT MICROSOFT'S EXPENSE.
23 WE'D LIKE TO WORK WITH YOU. WORKING TOGETHER COULD BE IN
24 YOUR SELF-INTEREST AS WELL AS OURS. DEPENDING ON THE
25 INTEREST LEVEL, YOU MIGHT TAKE AN EQUITY POSITION IN
47 - [add a note]
1 NETSCAPE WITH THE ABILITY TO EXPAND THE POSITION LATER.
2 A. IS THAT A QUESTION?
3 Q. YOU AGREE THAT MR. CLARK SAYS THAT, DO YOU NOT?
4 A. I AGREE THAT IT SAYS THAT, YES.
5 Q. DO YOU HAVE ANY BASIS FOR SUGGESTING OR IMPLYING THAT
6 THERE MAY HAVE BEEN AN EARLIER PROPOSAL FROM MICROSOFT TO
7 NETSCAPE THAT MICROSOFT INVEST IN NETSCAPE?
8 A. I HAVE NO BASIS EITHER FOR IT HAVING OCCURRED OR NOT
9 HAVING OCCURRED. I WAS NOT AWARE OF ANY OF THESE
10 DISCUSSIONS.
11 Q. AND THIS STATEMENT DOES NOT SUGGEST FROM ITS CONTEXT AND
12 WORDING THAT THAT IS A TOPIC THAT HAD BEEN EARLIER
13 DISCUSSED, DOES IT?
14 A. IT DOESN'T REFUTE IT, BUT IT DOESN'T SUGGEST IT.
15 Q. DID YOU SPEAK WITH MR. CLARK IN THE COURSE OF PREPARING
16 YOUR DIRECT TESTIMONY THAT IS BEFORE YOU?
17 A. I TALKED TO HIM DURING THE COURSE OF MY DIRECT -- THE
18 PREPARATION OF MY DIRECT TESTIMONY. I AM SURE I SPOKE TO
19 HIM ON MORE THAN ONE OCCASION.
20 Q. ABOUT THE DIRECT TESTIMONY?
21 A. NO. WELL, I SPOKE TO HIM ABOUT THE FACT THAT I WAS
22 GOING TO BE TESTIFYING. AND HE MENTIONED TO ME THE FACT
23 THAT HE HAD, ON HIS OWN, GONE OFF AND SENT A LETTER BACK
24 LAST DECEMBER THAT WAS QUICKLY REJECTED BY SILVERBERG.
25 THAT'S THE ONLY THING I REMEMBER ABOUT THE
48 - [add a note]
1 SUBSTANCE OF THIS DIRECT TESTIMONY THAT I CAN RECOLLECT
2 RIGHT NOW. THAT WAS AFTER HE HAD GIVEN HIS DEPOSITION.
3 Q. LAST DECEMBER? YOU MEAN DECEMBER 1997?
4 A. I AM SORRY. DECEMBER OF '94. I APOLOGIZE.
5 Q. HE TOLD YOU ABOUT THIS E-MAIL IN DECEMBER OF '94; IS
6 THAT CORRECT?
7 A. HE TOLD ME ABOUT IT DURING THE COURSE OF THIS SUMMER IN
8 A CONVERSATION AFTER HE HAD BEEN DEPOSED.
9 Q. AND THERE IS NO MENTION OF IT IN YOUR DIRECT TESTIMONY;
10 IS THAT CORRECT?
11 A. NO, BECAUSE HE SAID IT WAS NOT SIGNIFICANT -- THAT IT
12 WAS TURNED DOWN IMMEDIATELY AND WAS NOT RELEVANT.
13 Q. DID YOU AFFORD MR. CLARK --
14 A. HE DID NOT TELL ME, FOR INSTANCE, ALL OF THE THINGS IN
15 HERE. HE JUST SAID THAT HE HAD MADE AN OFFER TO THEM AND
16 THAT IT HAD TO DO WITH SOME OF THIS, AND THAT THEY HAD
17 REJECTED IT.
18 Q. DID YOU ASK HIM IF IT WERE IN WRITING, OR DID HE TELL
19 YOU IT WAS IN WRITING?
20 A. I DON'T REMEMBER THAT PART, NO, SIR.
21 Q. SO YOU DIDN'T --
22 A. I GOT THE IMPRESSION THAT HE HAD TOLD THE PERSON GIVING
23 THE DEPOSITION ABOUT IT. I WAS NOT AWARE THAT IT WAS
24 WRITING -- WRITTEN OR NOT.
25 Q. BUT HE DID NOT IN THAT CONVERSATION TELL YOU ABOUT BILL
49 - [add a note]
1 GATES' STATEMENT HERE IN WASHINGTON IN SEPTEMBER OR OCTOBER
2 OF 1994?
3 A. NO, SIR, HE DID NOT.
4 Q. DID YOU AFFORD MR. CLARK THE OPPORTUNITY TO REVIEW YOUR
5 DIRECT TESTIMONY BEFORE IT WAS PROFFERED TO THE COURT?
6 A. I DID NOT.
7 Q. AND YOU ARE APPEARING HERE AS NETSCAPE, NOT JUST
8 MR. BARKSDALE, ARE YOU NOT?
9 A. I AM.
10 THE COURT: IS THIS AN APPROPRIATE TIME FOR A
11 MID-MORNING RECESS?
12 MR. WARDEN: YES, YOUR HONOR. THANK YOU.
13 THE COURT: ABOUT TEN MINUTES.
14 (RECESS WAS TAKEN.)
15 (AFTER RECESS.)
16 BY MR. WARDEN:
17 Q. GOING BACK TO THE CONVERSATION THAT YOU AND MR. ROSEN
18 HAD THAT IS DESCRIBED IN THE LAST SENTENCE OF THE PARAGRAPH
19 WE WERE ON, 25 ON PAGE 17 --
20 A. YES.
21 Q. -- WHERE DID THAT CONVERSATION OCCUR?
22 A. THE CONVERSATION IN QUOTES? IS THAT WHAT YOU'RE
23 REFERRING TO? IT CERTAINLY ISN'T INDEPENDENT?
24 Q. "NEAR THE END OF THE DISCUSSIONS, I ASKED DAN ROSEN AND
25 THEN HE SAID" -- THAT CONVERSATION. WHERE DID THAT OCCUR?
50 - [add a note]
1 A. THAT OCCURRED AT OUR OFFICES AT NETSCAPE IN OUR BOARD
2 ROOM.
3 Q. AND WHO WAS PRESENT AT THAT CONVERSATION? JUST YOU AND
4 MR. ROSEN, OR WERE THERE OTHERS?
5 A. NO, THERE WERE -- AS I MENTIONED IN MY TESTIMONY, THERE
6 WERE SEVERAL OTHER MICROSOFT PEOPLE AT THE MEETING. THERE
7 WAS ALSO A SEPARATE CONVERSATION OUT IN THE HALL ABOUT THIS
8 JUST BETWEEN DAN AND ME, BUT IT WAS REITERATED IN THE
9 BIGGER, BROADER MEETING ROOM.
10 Q. WELL, FOCUSING ON THE CONVERSATION OUT IN THE HALL --
11 A. YES.
12 Q. -- WHO SAID WHAT IN THAT CONVERSATION?
13 A. WELL, IT WAS RE THE INVESTMENT, AND HE WAS JUST TRYING
14 TO ASSURE ME THAT HE HAD MR. GATES' APPROVAL TO MAKE SUCH AN
15 OFFER, AND THAT IT WOULD HAVE THE "BILL EFFECT," WHICH
16 WAS -- THAT WAS THE FIRST I HAD HEARD OF THAT -- ON OUR
17 UPCOMING INITIAL PUBLIC OFFERING AND, THEREFORE, MAKE THE
18 STOCK PRICE GREATER BECAUSE PEOPLE WOULD ASSOCIATE
19 MR. GATES' INVESTMENT AS A GOOD THING.
20 THE CONVERSATION ABOUT THE INVESTMENT MAY HAVE
21 BEEN A LITTLE MORE DETAILED IN THE HALL THAN IT WAS IN THE
22 BIGGER MEETING, BUT THE INDEPENDENCE OR LACK OF -- OR
23 DEPENDENCY, RATHER, WAS DISCUSSED IN THE BOARD ROOM AREA AS
24 WELL.
25 Q. DID MR. ROSEN SAY THAT THE TWO COMPANIES SHOULD, QUOTE,
51 - [add a note]
1 DIVIDE THE MARKET, CLOSE QUOTE?
2 A. WHERE DO I SAY THAT?
3 Q. I SEE IN THE VERY SENTENCES THAT WE HAVE BEEN LOOKING
4 AT, YOU TALK ABOUT MICROSOFT'S PROPOSAL TO DIVIDE THE
5 MARKET.
6 A. RIGHT, BUT I DIDN'T SAY HE SPECIFICALLY SAID "DIVIDE THE
7 MARKET."
8 Q. THAT WAS MY QUESTION. DID HE SAY THAT THE TWO COMPANIES
9 SHOULD, QUOTE, DIVIDE THE MARKET, CLOSE QUOTE? DID HE SAY
10 THAT? IT'S A SIMPLE QUESTION.
11 A. I HAVE NEVER SAID THAT HE SAID, QUOTE, DIVIDE THE
12 MARKET, CLOSE QUOTE. I SAID THEY INTIMATED THAT IN EVERY
13 WAY THAT YOU COULD WITH A LINE AROUND THE PRODUCTS WHICH
14 WOULD, QUOTE, DIVIDE THE MARKET.
15 Q. WHAT MARKET?
16 A. THE MARKET FOR P.C. BROWSERS.
17 Q. DID MR. ROSEN SAY," I AM TALKING ABOUT THE MARKET FOR
18 P.C. BROWSERS"?
19 A. NO, BUT THAT'S WHAT WE WERE TALKING ABOUT IN THE
20 MEETING.
21 Q. DID HE USE THE WORD "MARKET" AT ALL?
22 A. I DON'T REMEMBER THE WORD "MARKET" BEING USED. I
23 REMEMBER THE LINE BEING DRAWN AROUND THE PRODUCTS, AND WE
24 WOULD COMPETE IN THE NONWINDOWS AREA AND THEY WOULD COMPETE
25 IN THE -- THE WINDOWS 95 AREA -- EXCUSE ME -- AND THEY WOULD
52 - [add a note]
1 HAVE THE WINDOWS 95 AREA. AND THAT WAS THE CLEAR
2 IMPLICATION OF THE DISCUSSION. WHETHER THE TERM "MARKET"
3 WAS EVER USED IN THAT DISCUSSION, I HONESTLY CAN'T SAY.
4 Q. BUT MR. ROSEN EXPRESSLY SAID TO YOU -- IT'S YOUR
5 TESTIMONY THAT HE EXPRESSLY SAID TO YOU, "WE'RE GOING TO
6 DRAW A LINE AND YOU WILL BE ON THE SIDE OF THE LINE THAT
7 DOES NOT INCLUDE WINDOWS 95 BROWSERS," IN WORDS OR
8 SUBSTANCE?
9 A. ACTUALLY, I DON'T BELIEVE IT WAS SPECIFICALLY MR. ROSEN
10 WHO REFERRED TO THE LINE BEING DRAWN. I THINK IT WAS
11 MR. JONES WHO REFERRED TO THE LINE BEING DRAWN.
12 Q. SO THIS LINE WASN'T DISCUSSED IN THE ONE-ON-ONE HALLWAY
13 CONVERSATION?
14 A. NO. THAT'S WHERE WE TALKED MORE ABOUT THE "BILL EFFECT"
15 AND THAT SORT OF THING. THIS WAS IN AN OPEN MEETING WHEN WE
16 ASKED, "IS IT CONDITIONED ON THESE THINGS"? AND THEY SAID,
17 "IT CERTAINLY ISN'T INDEPENDENT."
18 Q. DID MR. ROSEN IN FACT SAY TO YOU THAT THE LEVEL OF
19 TECHNICAL COOPERATION BETWEEN THE COMPANIES WOULD DEPEND ON
20 THE DEGREE TO WHICH THE COMPANIES ENTERED INTO A BROAD-BASED
21 PARTNERSHIP?
22 A. THE BROAD -- IF BY THE "BROAD-BASED PARTNERSHIP," THE
23 IMPLICATION WAS THAT WAS THIS INVESTMENT, THAT WAS THIS
24 LINE, AND THAT WAS THIS AGREEMENT AND THAT WAS THESE
25 TECHNOLOGIES. THAT WAS THE PARTNERSHIP -- BROAD-BASED
53 - [add a note]
1 PARTNERSHIP BEING DISCUSSED, AND I WOULD SAY THAT THAT WAS
2 THE SUBSTANCE OF HIS REMARKS.
3 Q. AND HE REFERRED TO THE LINE?
4 A. NO. I SAID MR. JONES, I BELIEVE, WAS THE PERSON
5 INDICATED AS REFERRING TO THE LINE. IT WAS A DISCUSSION
6 OVER A PERIOD OF A COUPLE HOURS THAT WENT BACK AND FORTH ON
7 THIS -- ON ALL OF THESE SUBJECTS. EXCUSE ME.
8 Q. OKAY. GOING ON TO PARAGRAPH 26, LOOKING AT THE FIRST
9 SENTENCE, I TAKE IT YOUR TESTIMONY NOW IS THAT THERE WAS NO
10 EXPLICIT PROPOSAL -- ONLY AN IMPLICIT PROPOSAL, IS THAT
11 CORRECT?
12 A. THAT'S NOT CORRECT AT ALL. I HAVE NEVER SAID ANYTHING
13 OTHER THAN THAT. FOR YOU TO CHARACTERIZE IT NOW MY
14 TESTIMONY -- I HAVE ALWAYS HAD THAT AS MY TESTIMONY. THAT
15 THE SUBSTANCE OF WHAT WAS SAID.
16 Q. SO THERE WAS NO EXPLICIT PROPOSAL?
17 A. IT WAS AS EXPLICIT AS YOU CAN GET.
18 Q. ALL RIGHT. NOW GOING BACK --
19 A. THEY DID NOT SAY THE WORDS "DIVIDE THE MARKET," NOR HAVE
20 I EVER SAID THEY SAID THE WORDS "DIVIDE THE MARKET."
21 Q. WHEN DID YOU FORMULATE THE VIEWS STATED IN PARAGRAPH 26?
22 A. I THINK DURING THE COURSE OF THE MEETING AND AFTER THE
23 MEETING IN TRYING TO EVALUATE WHAT THE OPPORTUNITY WAS. IT
24 WAS AT ABOUT THAT TIME, DURING AND AFTER THE MEETING.
25 Q. SO, IN ANY EVENT, IN JUNE, 1995, YOU FORMED THESE VIEWS?
54 - [add a note]
1 A. WELL, IT DEPENDS ON THE WAY THE PARAGRAPH READS. I
2 REMEMBER FEELING ILL AT EASE -- BOTHERED DURING THE COURSE
3 OF THE MEETING, BECAUSE I DIDN'T KNOW HOW TO RESPOND, AND I
4 WASN'T, YOU KNOW, BELIEVING WHAT I WAS HEARING. AND
5 SUBSEQUENT TO THAT, THOUGH, AS I HAVE STATED HERE, IT WAS
6 NEVER CLEAR TO ME WHY THEY WANTED TO DO THIS -- WHY THEY
7 WERE SO ANXIOUS TO DO THIS SINCE I DIDN'T THINK OUR PLATFORM
8 WAS AS COMPETITIVE WITH THEM AS THEY SEEMED TO THINK IT WAS.
9 THAT PROBABLY WAS FORMED OVER A PERIOD OF TIME
10 SUBSEQUENT TO THAT, BECAUSE I HAVE RETHOUGHT ABOUT IT AND I
11 HAVE REREAD THE MINUTES AND IT STILL -- BUT I WOULD SAY, IN
12 GENERAL, IT WAS AROUND THE TIME OF THE MEETING.
13 Q. OKAY. WERE THERE MINUTES TAKEN OF THE MEETING?
14 A. THERE WAS A SET OF NOTES -- AT LEAST ONE SET OF NOTES
15 TAKEN OF THE MEETING.
16 Q. BUT THERE WEREN'T MINUTES, WERE THEY?
17 A. NO, THEY WERE NOTES.
18 Q. AND THESE NOTES WEREN'T FURNISHED TO ALL OF THE
19 PARTICIPANTS IN THE MEETING FOR REVIEW AND APPROVAL AT THE
20 MEETING?
21 A. NO, THEY WERE NOT. THEY WERE FURNISHED TO ME.
22 Q. WHEN DID YOU FIRST EXPRESS THE VIEWS THAT ARE STATED IN
23 PARAGRAPH 26?
24 A. THAT I WAS SURPRISED AT THE MEETING AS TO WHAT WAS
25 DISCUSSED? I PROBABLY FIRST EXPRESSED THAT WHEN WE WERE
55 - [add a note]
1 DISCUSSING WHAT TO DO WITH THIS PROPOSAL WHICH TOOK PLACE
2 AFTER THE MEETING.
3 Q. HAVE THESE VIEWS BEEN EXPRESSED PUBLICLY PRIOR TO THE
4 FILING OF YOUR DIRECT TESTIMONY?
5 A. I DON'T BELIEVE I HAVE DISCUSSED THEM PUBLICLY. THERE
6 MAY BE SOMEONE WHO, YOU KNOW, HAD A DISCUSSION WITH ME WHO
7 PUBLISHED SOMETHING, BUT I DON'T THINK I HAVE. I MAY HAVE,
8 BUT I DON'T BELIEVE I HAVE DISCUSSED THEM PUBLICLY. I MAY
9 HAVE.
10 Q. LOOKING AT THE LAST LINE OF THE PARAGRAPH, WHAT DO YOU
11 MEAN BY "THE GROWTH OF THE INTERNET"?
12 A. WELL, THAT THE INTERNET WAS GOING TO TAKE ON EVOLVING
13 CHARACTERISTICS THAT ARE HARD FOR ANY OF US TO PERCEIVE
14 TODAY SITTING HERE, BUT IT WAS GOING TO GROW AS PROBABLY THE
15 PRINCIPAL MEDIUM OF COMMUNICATIONS FOR MANKIND. IT WAS
16 GOING TO GROW TO THAT.
17 Q. INCREASED USAGE. IS THAT GROWTH?
18 A. THAT WOULD BE ONE CHARACTERISTIC. NEW APPLICATIONS,
19 NEW USES, AND THAT SORT OF THING.
20 Q. LET'S GO TO PAGE 19, PARAGRAPH 28. YOU TESTIFY, QUOTE,
21 THAT AS MICROSOFT WAS WELL AWARE, NETSCAPE'S BUSINESS MODEL
22 DEPENDED ON BROWSER REVENUE, CLOSE QUOTE.
23 WHICH BUSINESS MODEL ARE YOU REFERRING TO HERE?
24 A. THE ONE THAT WE HAD BEEN REPORTING REVENUE ON FROM THE
25 FIRST QUARTER OF THAT YEAR.
56 - [add a note]
1 Q. AND --
2 A. WE HAD ALREADY PRODUCED SOME $12,000,000.00 OF
3 BROWSER REVENUE -- OR TEN OR SO MILLION DOLLARS OF BROWSER
4 REVENUE BY THE TIME THIS MEETING TOOK PLACE.
5 Q. SO JUST TO BE CLEAR, YOU'RE TALKING ABOUT THE REPORT OF
6 RESULTS FOR THE QUARTER, OR ARE YOU TALKING ABOUT A
7 FORWARD-LOOKING PLAN?
8 A. IT WOULD BE SEVERAL THINGS. WE HAD PUBLISHED BY THIS
9 TIME OUR FINANCIAL RESULTS. I HAD ALSO HAD A CONVERSATION
10 WITH THESE GENTLEMEN OR WITH MR. ROSEN AND SOME OTHER
11 MICROSOFT EXECUTIVES IN EARLY JUNE ABOUT THE FACT THAT WE
12 WERE DEPENDENT ON OUR BROWSER REVENUE FOR OUR BUSINESS, BUT
13 I DIDN'T SHOW THEM A MODEL. I JUST TOLD THEM THAT.
14 Q. YOU DIDN'T FURNISH THEM WITH A BUSINESS MODEL?
15 A. I HOPE NOT.
16 Q. WAS THERE A BUSINESS MODEL?
17 A. ABSOLUTELY THERE WAS.
18 Q. WE TALKED ABOUT THIS A LITTLE BIT YESTERDAY. DID YOU
19 HAVE AN OPPORTUNITY TO ASK ANYONE TO SEE IF THEY COULD FIND
20 COPIES OF THIS BUSINESS MODEL?
21 A. I DID NOT ASK THAT, NO. IF YOU WANT ME TO ASK THAT, I
22 WILL ASK THAT. I DO KNOW THAT BY THIS TIME -- NOW, THIS IS
23 A DIFFERENT PERIOD OF TIME THAN WE WERE TALKING ABOUT
24 YESTERDAY. THIS IS THE MIDDLE OF THE YEAR. IF YOU WANT TO
25 KNOW IF WE HAD A FORMAL BUSINESS MODEL, I WOULD REFER YOU TO
57 - [add a note]
1 OUR ROUND B FINANCING STATEMENT THAT YOU PROBABLY COULD GET
2 A HOLD OF THAT WOULD SHOW BROWSER REVENUE.
3 Q. WELL, IF YOU WOULD BE SO KIND AS TO ASK SOMEONE BACK AT
4 CORPORATE HEADQUARTERS TO SEE IF BUSINESS MODELS AND OTHER
5 FORMAL DOCUMENTS, SUCH AS VENTURE CAPITAL SOLICITATION
6 PROSPECTUS OR PRIVATE PLACEMENT MEMORANDUM EXIST THAT MIGHT
7 EMBODY BUSINESS MODELS FROM 1994 AND 1995, UP TO THE TIME OF
8 YOUR PUBLIC OFFERING, I WOULD VERY MUCH APPRECIATE RECEIVING
9 COPIES OF THEM.
10 A. I DON'T KNOW HOW TO RESPOND.
11 Q. WELL, YOU MAY CONSULT WITH YOUR COUNSEL AND SEE IF THAT
12 CAN BE DONE. OTHERWISE, I THINK WE MAY HAVE TO ISSUE A
13 TRIAL SUBPOENA.
14 A. WELL, IF YOU JUST ASK ME FOR IT, I WOULD PRESUME I WOULD
15 JUST GIVE IT TO YOU. I DON'T KNOW HOW A COURT PROCEEDING
16 WORKS. I MEAN DO YOU WANT ME TO GIVE IT TO YOU?
17 Q. WELL, YOUR LAWYER CAN GIVE IT TO US.
18 A. WHEN DO YOU WANT IT? IF YOU'RE SAYING WE DIDN'T HAVE A
19 BUSINESS MODEL ON OUR PLAN B, I DON'T AGREE WITH THAT.
20 Q. MR. BARKSDALE, I AM NOT TESTIFYING TO ANYTHING. I ASK
21 IF YOU WOULD HAVE SOMEONE BACK AT HEADQUARTERS SEE IF THESE
22 DOCUMENTS COULD BE FOUND AND BE FURNISHED TO US.
23 A. I WILL BE HAPPY TO DO THAT.
24 Q. THANK YOU.
25 NOW, IS THIS STATEMENT THAT NETSCAPE'S BUSINESS
58 - [add a note]
1 MODEL DEPENDED ON BROWSER REVENUE CONSISTENT WITH THE
2 WRITTEN STATEMENTS MADE BY MR. CLARK TO MICROSOFT IN
3 DECEMBER, 1994, SIX MONTHS BEFORE?
4 A. FIRST OF ALL, THIS MEMO FROM MR. CLARK -- HE NEVER
5 DISCUSSED IT WITH THE BOARD. HE WROTE IT, OBVIOUSLY, IN --
6 I DON'T KNOW HOW HE WROTE IT. HE WROTE IT THE WEEK BEFORE I
7 WAS DUE TO REPORT TO WORK. HE NEVER TOLD ME ABOUT IT AT THE
8 TIME. I DON'T KNOW WHAT MR. CLARK WAS THINKING ABOUT, BUT
9 BY THE TIME I GOT THERE, IT WAS MOOT, BECAUSE IT HAD BEEN
10 TURNED DOWN, ACCORDING TO WHAT I UNDERSTAND, AND I HAVE
11 NEVER SEEN IT AND THE BOARD OF DIRECTORS HAS NEVER SEEN IT.
12 TO MY KNOWLEDGE, I JUST DON'T KNOW, BUT IF IT WAS IN JIM
13 CLARK'S MIND THAT WE WEREN'T GOING TO SELL THE BROWSER, HE
14 WAS JUST WRONG.
15 Q. WELL, THE PROPOSAL MAY HAVE BEEN TURNED DOWN, BUT THERE
16 ARE STATEMENTS OF FACT IN THIS DOCUMENT?
17 A. THERE ARE STATEMENTS BY MR. CLARK, WHO I WILL
18 ACKNOWLEDGE WAS THE C.E.O., BUT THEY WERE NOT WHAT WE HAD
19 DISCUSSED THE BUSINESS PLANS OF THE COMPANY WERE TO ENTAIL,
20 AND HE IS JUST SELLING. HE IS JUST TALKING TO MICROSOFT,
21 SAYING, "THIS IS WHAT I WOULD LIKE TO DO." AND I THINK HE
22 IS DOING A LITTLE MORE SELLING THAN HE IS STATING FACTS.
23 Q. SO HE SAYS, "WE HAVE NEVER CONSIDERED A CLIENT AS BEING
24 OUR BUSINESS." DO YOU SEE THAT?
25 A. YES.
59 - [add a note]
1 Q. THAT IS AN UNEQUIVOCAL STATEMENT OF FACT, IS IT NOT?
2 A. THAT'S HIS OPINION.
3 Q. THE CHAIRMAN AND C.E.O.'S OPINION?
4 A. THE CHAIRMAN AND C.E.O., WHO A MONTH PRIOR HAD HIRED ME
5 TO COME IN THERE, AROUND THE FIRST OF THE NEXT MONTH, AND I
6 HAD AGREED TO, BASED ON BUSINESS MODELS AND PLANS AND
7 DISCUSSIONS WITH HIM AND OTHER MEMBERS OF THE STAFF THAT
8 CLEARLY INDICATED WE PLANNED TO SELL THE BROWSER.
9 Q. I INCLUDE THOSE BUSINESS MODELS AND PLANS IN MY REQUEST.
10 HE GOES ON, "OUR BUSINESS IS ADDING VALUE ON THE
11 BACK END IN THE FORM OF VERTICAL APPLICATIONS."
12 A. THAT WAS ONE OF THE WAYS THAT WE PLANNED AND TO THIS DAY
13 WE STILL SELL A LOT OF THOSE APPLICATIONS. THAT IS A BIG
14 PART OF OUR BUSINESS.
15 Q. AND THESE ARE APPLICATIONS IN THE SERVER AREA, RIGHT?
16 A. IN GENERAL, THAT WOULD BE TRUE. I THINK THERE ARE SOME
17 CLIENT PRODUCTS THAT AUGMENT THOSE SERVER PRODUCTS.
18 Q. WELL, YOUR BROWSER ITSELF AUGMENTS SERVERS IN THE
19 ENTERPRISE CHANNEL, DOESN'T IT?
20 A. IT DOES.
21 Q. SO YOU JUST PLAN DISAGREE WITH WHAT MR. CLARK TOLD
22 MICROSOFT IN THIS E-MAIL ABOUT THE COMPANY'S INTENTION TO
23 MAKE MONEY IN VARIOUS AREAS?
24 A. I DISAGREE WITH THAT PORTION OF IT. I DON'T NECESSARILY
25 DISAGREE WITH EVERYTHING IN THE MEMO.
60 - [add a note]
1 Q. AND MR. CLARK WAS NOT ONLY THE CHAIRMAN AND CHIEF
2 EXECUTIVE OFFICER, BUT THE CO-FOUNDER OF THE COMPANY, WAS HE
3 NOT?
4 A. THAT'S CORRECT.
5 Q. AND THE OTHER CO-FOUNDER WAS MARC ANDREESEN, AGE 22,
6 WITH NO BUSINESS EXPERIENCE, IS THAT CORRECT?
7 A. THAT'S CORRECT.
8 Q. AND HOW OLD IS MR. CLARK?
9 A. I THINK HE IS FIFTY SOMETHING -- 55.
10 Q. AND MR. CLARK HAS HAD A VERY SUCCESSFUL BUSINESS CAREER,
11 HAS HE NOT?
12 A. YES, HE HAS.
13 Q. AND DOES HE ENJOY A PUBLIC REPUTATION FOR VERACITY?
14 A. I COULDN'T COMMENT ON THAT. I DON'T KNOW.
15 Q. DO YOU REGARD HIM AS A TRUTHFUL MAN?
16 A. I REGARD HIM AS A SALESMAN.
17 Q. I AM NOT GOING TO TOUCH THAT, MR. BARKSDALE.
18 TO YOUR KNOWLEDGE, HAS ANY OTHER OFFICER OR
19 DIRECTOR OF NETSCAPE EVER MADE A SIMILAR STATEMENT, THAT IS
20 SIMILAR TO THE ONE IN DEFENDANT'S EXHIBIT 6 REGARDING
21 NETSCAPE'S BUSINESS MODEL?
22 A. THE ONE ABOUT CLIENTS -- THAT WE WERE NOT GOING TO BE A
23 CLIENT SOFTWARE COMPANY? THAT WE NEVER CONSIDERED A CLIENT
24 AS BEING OUR BUSINESS?
25 Q. YES.
61 - [add a note]
1 A. I AM NOT AWARE OF ANYONE ELSE SAYING THAT. I DON'T
2 KNOW. I DON'T RECOLLECT, BUT SOMEONE MAY HAVE SAID
3 SOMETHING LIKE THAT.
4 Q. AND THAT YOU DON'T MAKE MONEY OUT OF CLIENTS? HAS ANY
5 OFFICER OR DIRECTOR EVER SAID THAT?
6 A. I HAVE SAID SOMETHING TO THAT EFFECT, THAT YOU DON'T
7 MAKE MONEY OUT OF CLIENTS, BECAUSE IT IS NOT AS BIG A
8 BUSINESS AS THE REST OF THESE. WE NEVER CONSIDERED -- AT
9 LEAST DURING THE COURSE OF THIS -- THAT IT WAS GOING TO BE
10 ALWAYS OUR PRIMARY BUSINESS, BUT WE ALWAYS ASSUMED WE WOULD
11 MAKE SOME MONEY AND HAVE SOME REVENUE FROM IT.
12 Q. HAS ANY OTHER OFFICER OR DIRECTOR OF NETSCAPE EVER MADE
13 A GENERAL PUBLIC ANNOUNCEMENT THAT NETSCAPE DOESN'T EXPECT
14 TO MAKE MONEY FROM BROWSERS?
15 A. I DON'T KNOW. THEY MAY HAVE.
16 Q. HAS ANY OFFICER OR DIRECTOR OF NETSCAPE, OTHER THAN
17 MR. CLARK, EVER MADE SUCH A STATEMENT TO MICROSOFT?
18 A. WELL, AGAIN, I SAY I MAY HAVE MADE STATEMENTS LIKE THAT,
19 OR OTHERS MAY HAVE, THAT WE DON'T PLAN TO MAKE A LOT OF
20 MONEY FROM THIS PRODUCT. WE DO PLAN TO BRING REVENUE IN, AS
21 WELL AS THESE OTHER APPLICATIONS THAT JIM IS TALKING ABOUT
22 IN THIS MEMO.
23 Q. OKAY. LET'S GO TO PARAGRAPH 29, THE THIRD SENTENCE
24 WHICH SUGGESTS THAT MICROSOFT ACTED, QUOTE, RECOGNIZING THE
25 IMPORTANCE OF DISTRIBUTION TO NETSCAPE. WHAT IS YOUR BASIS
62 - [add a note]
1 FOR MAKING THAT STATEMENT?
2 A. IN GENERAL, IT WOULD BE THE CONVERSATIONS, TRAFFIC, AND
3 DISCUSSIONS THAT I HAD WITH PEOPLE IN OUR COMPANY AND PEOPLE
4 IN OTHER COMPANIES, SUCH AS GIL AMELIO, THE CHAIRMAN OF
5 APPLE, WHO TOLD ME ABOUT HOW MICROSOFT THREATENED TO CUT OFF
6 THEIR EXPANSION OF OFFICE FOR WINDOWS -- I MEAN FOR
7 MACINTOSH IF THEY DIDN'T, IN FACT, GET RID OF THE BROWSER.
8 AND THAT WAS ACTUALLY THE ONLY CONDITION HE GAVE HIM,
9 ACCORDING TO GIL -- DISCUSSIONS WITH OTHERS IN THE ISP
10 INDUSTRY, AS WELL AS THE VARIOUS AND SUNDRY E-MAILS AND JUST
11 THE FACT THAT IT JUST SEEMED AWFULLY AGGRESSIVE IN THOSE TWO
12 CHANNELS, OEM'S AND ISP'S. AND I DREW THE CONCLUSION FROM
13 THOSE KINDS OF INFORMATION, MANY OF WHICH I HAVE SUBMITTED
14 AS EVIDENCE IN THIS TESTIMONY.
15 Q. WHAT WAS THE YEAR IN WHICH YOU HEARD ABOUT THIS APPLE
16 CONVERSATION YOU JUST TALKED ABOUT?
17 A. WELL, IT WAS PROBABLY A YEAR AND A HALF AGO WHEN
18 MR. AMELIO WAS STILL THERE.
19 Q. THAT WOULD HAVE BEEN IN 1997?
20 A. YES.
21 Q. AT THIS POINT ON DECEMBER 7, 1995, WHAT PERCENTAGE OF
22 YOUR BROWSERS HAD BEEN DISTRIBUTED THROUGH OEM'S?
23 A. AS I TOLD YOU YESTERDAY, I DON'T KNOW THAT ANSWER.
24 Q. HOW ABOUT ISP'S?
25 A. AGAIN, I STAND BY WHAT I SAID YESTERDAY.
63 - [add a note]
1 Q. OKAY. GOING ON TO PARAGRAPH 30 IN YOUR TESTIMONY ABOUT
2 OEM'S, IS THERE ANY REASON, IN YOUR VIEW, THAT AN OEM WOULD
3 PREFER INTERNET EXPLORER TO NAVIGATOR?
4 A. THERE WOULD BE REASONS THEY WOULD PREFER THEIR PRODUCT.
5 THERE WOULD BE REASONS THEY WOULD PREFER OUR PRODUCT.
6 Q. NOW, ONE OF THE REASONS THEY MIGHT HAVE PREFERRED
7 MICROSOFT'S PRODUCT IN 1996 WAS THAT IT WAS FREE, IS THAT
8 RIGHT?
9 A. IN 1996, THAT WOULD HAVE BEEN A CHARACTERISTIC THAT
10 WOULD HAVE BEEN ATTRACTIVE TO THEM, YES.
11 Q. AND DID MICROSOFT PROVIDE THEM -- MICROSOFT'S SOFTWARE
12 PROVIDE THEM WITH LOWER SUPPORT COSTS THAN YOURS?
13 A. IN SOME CASES, PERHAPS. IN OTHER CASES, ALSO IT WAS MY
14 UNDERSTANDING THAT OUR PRODUCT COULD HAVE BEEN A LOWER
15 SUPPORT COST TO SOME OF THESE P.C. OEM'S.
16 Q. DID ANY OEM'S EVER COMPLAIN ABOUT YOUR PRICES?
17 A. I AM SURE IN THE NEGOTIATIONS FOR THESE DEALS THAT THEY
18 WOULD HAVE ASKED US FOR A LOWER PRICE, BUT IT IS NOT
19 CONSIDERED TO BE, I WOULDN'T THINK, UNREASONABLE PRICING.
20 Q. GOING ON TO PAGE 20, THE LAST SENTENCE MAKES SOME
21 REFERENCE TO THE FIRST OR BOOT-UP SCREEN. DO YOU SEE THAT?
22 A. EXCUSE ME. WHERE ARE YOU NOW? ON PAGE 20?
23 Q. PAGE 20, THE LAST SENTENCE OF PARAGRAPH 30.
24 A. YES.
25 Q. DO YOU SEE THE REFERENCE?
64 - [add a note]
1 A. YES.
2 Q. DO YOU THINK MICROSOFT COULD HAVE HAD ANY JUSTIFICATION
3 FOR THE "FIRST SCREEN" PROVISION OTHER THAN THE ONE YOU
4 SUGGEST, WHICH IS, QUOTE, NETSCAPE'S BROWSER WOULD NOT BE
5 ABLE TO TAKE OVER THE DESKTOP, CLOSE QUOTE?
6 A. THERE MAY BE OTHER REASONS, BUT I WAS REFERRING TO THIS
7 PARTICULAR ARTICLE, WHICH ALSO GAVE THAT AS A REASON.
8 Q. WAS THERE ANY RESTRICTION ON "BOOTS" AFTER THE "FIRST
9 BOOT"?
10 A. NOT THAT I AM AWARE OF.
11 Q. WERE THERE ANY TECHNICAL OR ENGINEERING REASONS WHY
12 MICROSOFT WOULD WISH TO HAVE THIS PARTICULAR PROVISION
13 CONTROLLING THE FIRST BOOT-UP IN ITS OEM LICENSE?
14 A. ALL I CAN SAY IS THAT PEOPLE SUCH AS JOHN M. THOMPSON OF
15 IBM, WHO WAS HEAD OF ALL SOFTWARE, WAS SURPRISED AND
16 IRRITATED WHEN THEY CAME IN AND MADE THIS CONDITION TO THE
17 P.C. DIVISION OF IBM. THEY ARE IN THE P.C. BUSINESS. I'M
18 NOT. THE P.C. MANUFACTURERS SEEMED TO BE BOTHERED ABOUT IT.
19 IF THERE ARE SOME TECHNICAL REASONS -- I AM SURE YOU COULD
20 MAKE AN ARGUMENT THAT THERE ARE SOME TECHNICAL REASONS, BUT
21 THERE ARE MANY PROBABLY IN THE P.C. OEM BUSINESS WHO COULD
22 ANSWER THAT QUESTION BETTER THAN ME.
23 Q. ALL RIGHT. LET'S GO ON TO PARAGRAPH 31. I THINK I
24 ASKED YOU YESTERDAY IF YOU WERE AWARE THAT AOL WAS ALREADY
25 ON THE DESKTOP OF OEM P.C.'S PRIOR TO A DEAL WITH MICROSOFT?
65 - [add a note]
1 A. YES.
2 Q. DO YOU HAVE ANY IDEA WHAT THE INCREMENTAL INCREASE IN
3 THE NUMBER OF DESKTOPS THEY WERE ON FROM OEM'S WAS AS A
4 RESULT OF A DEAL WITH MICROSOFT?
5 A. I BELIEVE MR. MILES GILBURNE OF AOL TOLD ME IT WAS
6 SOMEWHERE IN THE NEIGHBORHOOD OF 750,000 TO A MILLION A YEAR
7 INCREMENTAL.
8 Q. INCREMENTAL SUBSCRIBERS TO AOL?
9 A. THAT'S WHAT HE TOLD ME, YES.
10 Q. OKAY. I WAS GOING TO ASK YOU THAT LATER. THAT'S FROM
11 BEING ON THE DESKTOP OR FROM BEING PUT ON THE DESKTOP BY
12 MICROSOFT AS OPPOSED TO THE OEM?
13 A. ACCORDING TO MR. GILBURNE, IT WAS AS A RESULT OF THEM
14 ENTERING INTO THIS CONTRACT WITH MICROSOFT, THEY WERE GIVEN
15 INCREMENTAL CONNECTIONS TO AOL, WHICH I TOOK TO MEAN
16 INCREMENTAL OVER WHAT THEY WERE GETTING OR HE WOULDN'T HAVE
17 USED THE TERM, AND THAT IT WAS A VERY POWERFUL MARKETING
18 OPPORTUNITY FOR HIM.
19 Q. AND THAT WAS A MILLION A YEAR, NOT A MILLION A QUARTER,
20 IS THAT RIGHT?
21 A. I BELIEVE THAT'S CORRECT.
22 Q. DO YOU KNOW HOW MANY SUBSCRIBERS AOL HAS?
23 A. SOMEWHERE IN THE NEIGHBORHOOD OF 13 OR 14 MILLION NOW
24 PROBABLY.
25 Q. NOW, I WILL GO BACK TO MY ORIGINAL QUESTION, WHICH WAS
66 - [add a note]
1 GIVEN THAT AOL WAS ON THE DESKTOP PURSUANT TO AGREEMENTS
2 WITH MANY OEM'S, WHAT ADDITIONAL PERCENTAGE OF DESKTOPS --
3 OF OEM MACHINES DID AOL GET ON AS A RESULT OF THE CONTRACT
4 WITH MICROSOFT?
5 A. I WOULDN'T KNOW THE PERCENTAGE.
6 Q. DID AOL TELL YOU ANYTHING ABOUT THAT?
7 A. AOL FRAMES IT TO ME THAT THEY HAD GOTTEN INCREMENTAL
8 CUSTOMER SIGN-UPS FOR A VARIETY OF REASONS, I GATHER, NOT
9 JUST THE INCREMENTAL PERCENTAGE. MAYBE IT'S PRESENTED
10 BETTER, IN THEIR MIND, OR WORKS BETTER OR WHATEVER.
11 Q. HOW VALUABLE HAS PLACEMENT ON THE DESKTOP BEEN TO
12 MICROSOFT NETWORK?
13 A. SINCE THEY PUT THE AOL ON THERE, I DON'T THINK IT HAS
14 BEEN AS SUCCESSFUL AS THEY WOULD HAVE LIKED, BUT I DON'T
15 KNOW HOW MANY CUSTOMERS OR SUBSCRIBERS THEY HAVE GOTTEN. I
16 HAVE NEVER SEEN IT REPORTED. I WOULDN'T KNOW.
17 Q. THEY DON'T HAVE ANY WORSE PLACEMENT ON THE DESKTOP THAN
18 AOL, DO THEY?
19 A. I DON'T KNOW EXACTLY WHAT YOU MEAN BY THAT. I DON'T
20 THINK THEY DO.
21 Q. AND YOU DON'T KNOW WHAT MICROSOFT NETWORK'S SHARE OF
22 CUSTOMERS OF ONLINE SERVICE PROVIDERS IS?
23 A. SHARE OF ONLINE SERVICE PROVIDERS? YOU MEAN MSN VERSUS
24 THE OTHER ONLINE SERVICE PROVIDERS?
25 Q. YES. THAT'S CORRECT.
67 - [add a note]
1 A. YOU'RE MAKING A DISTINCTION BETWEEN ONLINE SERVICE
2 PROVIDES AND ISP'S?
3 Q. I AM.
4 A. I DON'T KNOW EXACTLY, NO. I KNOW THAT AOL WOULD HAVE
5 THE LARGEST -- IF YOU PUT THEM IN THAT CATEGORY, THEY WOULD
6 HAVE THE LARGEST SHARE.
7 Q. DO YOU KNOW WHAT A "REFERRAL SERVER" IS?
8 A. IN GENERAL, YES, SIR.
9 Q. WHAT IS IT?
10 A. IT'S A SERVER PRODUCT THAT A COMPANY WOULD HAVE THAT
11 REFERS CUSTOMERS TO OTHER SERVICES.
12 Q. DOES NETSCAPE HAVE A REFERRAL SERVER?
13 A. YES, WE DO.
14 Q. DOES IT HAVE A NAME?
15 A. I DON'T REMEMBER THE NAME. IT HAS CHANGED OVER TIME.
16 Q. JUST LOOKING AT THIS YEAR, 1998, HOW MANY ISP SIGN-UPS
17 HAVE BEEN GENERATED BY TRAFFIC FROM THE NETSCAPE REFERRAL
18 SERVER?
19 A. I DON'T KNOW.
20 Q. DO YOU KNOW FOR ANY PRIOR YEAR?
21 A. NO, I DON'T HAVE THOSE NUMBERS.
22 Q. DO YOU KNOW HOW THE FIGURES FROM YOUR REFERRAL SERVER
23 WOULD COMPARE WITH THOSE FROM MICROSOFT'S REFERRAL SERVER?
24 A. I COULD FIND THAT OUT. I DON'T HAVE THAT NUMBER.
25 EXCUSE ME. I DON'T KNOW WHAT MICROSOFT'S NUMBER IS. SO,
68 - [add a note]
1 NO, I WOULDN'T KNOW.
2 Q. LET'S GO TO PARAGRAPH 32.
3 A. ALL RIGHT.
4 ON THE SECOND PAGE OF THIS PARAGRAPH, YOU DISCUSS
5 "DOWNLOADING." YOU DON'T NEED TO TURN TO THAT. I WOULD
6 JUST LIKE TO KNOW HOW DO YOU DOWNLOAD?
7 A. YOU GO TO A SITE THAT HAS THE PRODUCT ON IT, AND YOU
8 REQUEST THAT IT BE DOWNLOADED, AND IT'S DISTRIBUTED OR
9 DOWNLOADED TO YOUR COMPUTER.
10 Q. HOW DO YOU REQUEST?
11 A. WELL, IN THE CASE OF NETSCAPE, YOU WOULD GO TO THE
12 NETSCAPE SITE AND YOU WOULD ENTER THAT SECTION OF OUR SITE
13 THAT DISTRIBUTES SOFTWARE AND YOU'RE ASKED TO SELECT THE
14 PRODUCT YOU WANT AND YOU SELECT THAT ON THE SCREEN AND THEN
15 YOU'RE ASKED TO SELECT A LOCATION FROM WHICH IT IS
16 DOWNLOADED -- EITHER OUR SITES OR WHAT ARE CALLED "MIRROR
17 SITES," WHICH ARE MANY OTHER UNIVERSITIES AND OTHER
18 PLACES. AND THEN YOU REQUEST IT AND IT IS TRANSMITTED TO
19 YOU.
20 Q. AND HOW MANY CLICKS DOES THAT INVOLVE?
21 A. TO DO WHAT I JUST MENTIONED?
22 Q. YES.
23 A. PROBABLY MORE THAN A DOZEN. PROBABLY LESS THAN TWO
24 DOZEN.
25 Q. AND HOW MANY "NETSCAPE NOW" BUTTONS ON THE WORLDWIDE WEB
69 - [add a note]
1 WILL PERMIT YOU TO DOWNLOAD NETSCAPE'S BROWSERS?
2 A. I HAVE SEEN NUMBERS IN THE NEIGHBORHOOD OF
3 TWENTY-TO-THIRTY-THOUSAND SITES. I DON'T KNOW EXACTLY, NOR
4 DO I KNOW THAT WE KNOW EXACTLY.
5 Q. HAS NETSCAPE EVER MADE A STUDY OF WHETHER A
6 LESS-SOPHISTICATED COMPUTER USER WAS MUCH MORE LIKELY TO USE
7 THE BROWSER THAT COMES ON THEIR COMPUTER?
8 A. I DON'T KNOW IF WE, NETSCAPE, HAVE MADE SUCH A SURVEY.
9 I HAVE SEEN ANALYSES FROM OTHER INDEPENDENT COMPANIES
10 TALKING ABOUT NEW USERS VERSUS ONE-YEAR, TWO-YEAR OR
11 FIVE-YEAR USERS. I DON'T KNOW THAT WE HAVE EVER
12 COMMISSIONED SUCH A STUDY.
13 Q. IS THAT HOW YOU CLASSIFY A LESS-SOPHISTICATED USER, BY
14 HOW LONG HE HAS BEEN A USER OR SHE HAS BEEN A USER?
15 A. NOT NECESSARILY, NO. WHERE ARE YOU READING THAT FROM?
16 I DON'T KNOW WHERE WE ARE.
17 Q. THE SECOND SENTENCE OF PARAGRAPH 32.
18 A. RIGHT. WHAT I AM SAYING IS YOU COULD BE A LONG-TERM
19 USER BUT NOT BE A VERY SOPHISTICATED USER, BUT, GENERALLY
20 SPEAKING, THE INTERNET WAS FIRST ADOPTED -- DOWNLOADING OF
21 THESE PRODUCTS WAS THE BIG PRINCIPAL WAY OF GETTING THEM IN
22 THE EARLY DAYS IS ALL I AM TRYING TO SAY. AND, TODAY,
23 PEOPLE WHO ARE LESS SOPHISTICATED OR ARE NEWER USERS AND ARE
24 NOT EARLY ADOPTERS TEND TO USE THAT METHOD LESS BECAUSE IT'S
25 MORE CUMBERSOME AND BECAUSE THEY HAVE OTHER AVENUES OF
70 - [add a note]
1 GETTING THE PRODUCT NOW.
2 Q. DOES THE QUALITY OF BROWSING SOFTWARE MATTER TO THE
3 CONSUMER?
4 A. QUALITY? YOU MEAN RELIABILITY AND THAT SORT OF THING?
5 Q. YES.
6 A. IT DOES. IT'S CERTAINLY A FACTOR.
7 Q. RELIABILITY, SPEED, AND CLARITY?
8 A. RIGHT.
9 Q. DO THE FEATURES OF THE BROWSER MATTER TO THE CONSUMER?
10 A. OH, CERTAINLY.
11 Q. DO ANY CONSUMERS PICK THE BROWSER BASED ON PRODUCT
12 REVIEWS OR PERCEPTIONS AT LARGE OF THE RELATIVE QUALITY OF
13 BROWSING SOFTWARE?
14 A. IN SOME CASES, THEY DO. PROBABLY MOST USERS WOULDN'T
15 KNOW A COMPETITIVE REVIEW ONE WAY OR THE OTHER, BUT
16 CERTAINLY THOSE WHO KNOW THAT, IT WOULD BE A FACTOR IN THEIR
17 DECISION.
18 Q. NOW, YOU'RE CONTRASTING WHAT ONCE WAS WITH WHAT IS TODAY
19 IN THIS PARAGRAPH IN TERMS OF DOWNLOADING, IS THAT CORRECT?
20 A. IT HAS CHANGED OVER TIME, YES.
21 Q. MR. CLARK'S DEPOSITION WAS TAKEN IN THIS ACTION ON JULY
22 22, 1998. YOU DIDN'T SEE THIS DEPOSITION?
23 A. NO.
24 Q. HAS ANYONE DISCUSSED ITS SUBSTANCE WITH YOU?
25 A. NO.
71 - [add a note]
1 Q. I AM GOING TO ASK YOU IF YOU AGREE WITH SOME OF THE
2 TESTIMONY MR. CLARK GAVE.
3 PAGE 41, LINE 12:
4 "QUESTION: DO YOU AGREE, DR. CLARK, THAT THE
5 INTERNET ITSELF IS AN UNPARALLELED DISTRIBUTION CHANNEL FOR
6 SOFTWARE?
7 "ANSWER: SURE.
8 "WHY IS THAT?
9 "BECAUSE IT'S AN ELECTRONIC DISTRIBUTION SYSTEM
10 FOR ALL KINDS OF INFORMATION, AND ONE FORM OF INFORMATION IS
11 THE BITS IN THE SOFTWARE CODE.
12 "QUESTION: WHY DOES THE FACT THAT YOU CAN
13 DISTRIBUTE SOFTWARE BITS ELECTRONICALLY OVER THE INTERNET
14 MATTER TO A COMPANY LIKE NETSCAPE?
15 "ANSWER: WHY DOES IT MATTER TO A COMPANY LIKE
16 NETSCAPE? IT'S A LESS EXPENSIVE DISTRIBUTION SYSTEM.
17 "QUESTION: LESS EXPENSIVE THAN WHAT?
18 "ANSWER: CONVENTIONAL DISTRIBUTION CHANNELS FOR
19 SOFTWARE."
20 I WILL STOP THERE. DO YOU AGREE WITH MR. CLARK'S
21 TESTIMONY UP TO THIS POINT?
22 A. NO.
23 Q. IN WHAT RESPECT DO YOU DISAGREE WITH IT?
24 A. WELL, IF I AM SELLING MY PRODUCT TO A P.C. OEM AND HE IS
25 DISTRIBUTING IT, I HAVE GOT A NET-ADD COST OF DISTRIBUTION
72 - [add a note]
1 IN THAT CASE, WHEREAS IF I AM PERSONALLY DOWNLOADING IT OFF
2 MY SITE, I HAVE GOT TO FUND THE SITE, THE CONNECTIONS TO THE
3 ISP AND THE LINE COST AND ALL OF THAT.
4 SO THE INCREMENTAL COST THERE WOULD PERHAPS NOT BE
5 TERRIBLY LARGE, IF YOU'RE DISTRIBUTING AN AWFUL LOT OF THEM,
6 BUT IT'S NEGATIVE, WHEREAS IN THE OTHER CASE, LIKE AN ISP,
7 IF HE IS PAYING YOU TWO TO THREE DOLLARS APIECE TO GO DOWN,
8 THAT WOULD BE A VERY EFFICIENT DISTRIBUTION CHANNEL FROM THE
9 POINT OF VIEW OF EFFICIENCY AND PROFITABILITY, WHICH IS WHAT
10 I THINK YOU WERE REFERRING TO THERE.
11 I THINK JIM IS RIGHT IN THAT IT IS A NEW-AGE WAY
12 OF DISTRIBUTING, BUT I WOULDN'T NECESSARILY AGREE THAT IT IS
13 THE CHEAPEST FORM OR THE BEST FORM. IT DEPENDS ON WHAT IT
14 IS COMPETING WITH.
15 Q. I AM GOING TO LINE 19 ON PAGE 42. QUESTION -- I AM
16 SORRY. LINE 22.
17 A. ALL RIGHT.
18 Q. ON PAGE 42. THIS IS IN THE DEPOSITION.
19 A. I GOT YOU.
20 Q. "YOU BELIEVE IT TO BE TRUE, AS YOU SIT HERE TODAY, THAT
21 THE INTERNET IS THE LOWEST-COST DISTRIBUTION SYSTEM FOR
22 SOFTWARE IN THE WORLD, IS THAT RIGHT?
23 "ANSWER: THE BEST I KNOW."
24 DO YOU AGREE WITH THAT STATEMENT?
25 A. THAT IT'S THE LOWEST-COST DISTRIBUTION SYSTEM FOR
73 - [add a note]
1 SOFTWARE?
2 Q. THAT'S CORRECT?
3 A. BUT THAT STILL WOULDN'T MAKE IT THE MOST PROFITABLE. IF
4 ANOTHER GUY IS PAYING YOU TO DISTRIBUTE YOUR PRODUCT --
5 YOU'RE COMPARING ONE WHERE YOU HAVE GOT REVENUE AND ANOTHER
6 WHERE YOU HAVE NO REVENUE PERHAPS. SO IT WOULD BE LOW COST.
7 I CAN THINK OF A LOT OF THINGS THAT ARE LOW COST THAT AREN'T
8 NECESSARILY ECONOMICALLY PROFITABLE.
9 Q. ALL RIGHT. NOW, FOR A PRODUCT THAT IS GIVEN AWAY, THAT
10 IS, FREE OR HAS A ZERO PRICE, IS THE INTERNET THE
11 LOWEST-COST DISTRIBUTION SYSTEM IN THE WORLD -- SOFTWARE
12 PRODUCT?
13 A. IF BOTH PRODUCTS ARE GIVEN AWAY FREE, IT WOULD CERTAINLY
14 BE ONE OF THE LOWEST COST. I DON'T KNOW. YOU WOULD HAVE TO
15 GET AN ECONOMIST TO ANSWER THAT QUESTION. IT'S LOW COST.
16 IF YOU'RE DISTRIBUTING A LOT OF THEM PER COPY, IT WOULD BE
17 LOW COST.
18 Q. AND IN THE CASE OF A FREE-OR-ZERO-PRICED PRODUCT --
19 SOFTWARE PRODUCT -- IT IS AN UNPARALLELED DISTRIBUTION
20 CHANNEL?
21 A. IN ITS CATEGORY, IT WOULD BE UNPARALLELED. I WOULD MAKE
22 A DISTINCTION THOUGH THAT THERE ARE OTHER BETTER FORMS OF
23 DISTRIBUTION THAN DOWNLOADING OFF THE INTERNET. SO FROM
24 THAT PERSPECTIVE, IT WOULDN'T BE UNPARALLELED. BUT JUST
25 STRICTLY SPEAKING, AGAINST CERTAIN CHANNELS, IT WOULD BE A
74 - [add a note]
1 VERY GOOD WAY TO DO IT.
2 Q. ISN'T IT TRUE THAT MORE THAN 26 MILLION COPIES OF
3 NETSCAPE'S WEB-BROWSING SOFTWARE WERE DOWNLOADED FROM THE
4 INTERNET FROM JANUARY THROUGH AUGUST, 1998?
5 A. IF YOU'RE READING THAT FROM SOME COMPANY DOCUMENT, I
6 WOULDN'T TAKE ISSUE WITH IT. I DON'T KNOW THAT THAT IS
7 EXACTLY THE NUMBER. IT WOULD BE SEVERAL, SEVERAL MILLION.
8 PROBABLY IN THAT NEIGHBORHOOD. ONE OF THE ISSUES YOU HAVE
9 WITH THAT IS YOU DON'T KNOW HOW MANY CAME FROM THESE MIRROR
10 SITES THAT I MENTIONED AWHILE AGO.
11 Q. SO IT COULD BE MORE?
12 A. IT COULD BE MORE, YES, SIR.
13 Q. MORE THAN 26,000,000?
14 A. I DON'T KNOW IF THAT NUMBER INCLUDES SOME ESTIMATE OF
15 MIRROR SITES OR NOT, BUT I WOULDN'T TAKE ISSUE WITH THE
16 NUMBER. IT HAS BEEN A LARGE NUMBER DOWNLOADED, BUT MOST OF
17 THOSE GO TO REPETITIVE USERS. WE HAVE HAD SIX VARIOUS
18 RELEASES OF THE PRODUCT SINCE JANUARY. SO YOU ARE GETTING A
19 LOT OF REPEATS THERE. THOSE AREN'T UNIQUE USERS, BUT, YES,
20 I WOULD GRANT YOU THAT A LOT OF COPIES WENT DOWN.
21 Q. AND ISN'T IT TRUE THAT DOWNLOADS OF COMMUNICATOR
22 SKYROCKETED FROM ABOUT 2,000,000 IN MAY TO ALMOST 4,000,000
23 IN JUNE OF THIS YEAR?
24 A. YES. WELL, I MEAN, AGAIN, IF YOU'RE READING THAT FROM
25 SOME COMPANY PRONOUNCEMENT, I WOULDN'T TAKE ISSUE. I WOULD
75 - [add a note]
1 AGREE IN GENERAL IT WENT UP --
2 Q. AND BETWEEN --
3 A. -- BECAUSE WE HAD A NEW RELEASE.
4 Q. AND BETWEEN JUNE AND SEPTEMBER, THE NUMBER WAS
5 17,000,000?
6 A. BECAUSE WE HAVE HAD THREE NEW RELEASES. THEY CONTINUE
7 TO GO TO THE SAME PEOPLE THOUGH. IT'S THE SAME FOUR OR FIVE
8 MILLION PEOPLE.
9 Q. ISN'T IT TRUE THAT DOWNLOADS INCREASED BY AT LEAST 66
10 PERCENT FROM THE END OF JUNE TO MID-SEPTEMBER?
11 A. BECAUSE OF THE FACTORS I MENTIONED, MULTIPLE RELEASES,
12 PLUS THE NEW NETCENTER SITE, IT DROVE A LOT OF DOWNLOADS,
13 BUT THEY ARE TO THE SAME PEOPLE.
14 Q. SO YOU'RE IMPROVING THIS PRODUCT AND PUTTING NEW
15 RELEASES OUT OF IT TO THE SAME 5,000,000 PEOPLE, MONTH AFTER
16 MONTH?
17 A. I WOULD SAY OUR ESTIMATES WOULD BE IT'S ROUGHLY
18 4,000,000 REPEAT CUSTOMERS AND ABOUT A MILLION OR SO NEW
19 CUSTOMERS IN ANY GIVEN RELEASE DOWNLOAD FROM OUR SITE.
20 Q. AND HOW MANY RELEASE DOWNLOADS HAVE THERE BEEN IN 1998?
21 A. LIKE I SAID, I THINK IF YOU COUNT BOTH THE PREVIEW
22 COPIES OF OUR NEW 4.5 COMMUNICATOR THAT HAS GONE THROUGH TWO
23 PREVIEWS AND THE PRODUCTION THIS PAST MONDAY, PLUS THE POINT
24 RELEASES, WHICH I THINK IN JANUARY WE WOULD HAVE ABOUT 4.04
25 AND WE'RE NOW UP TO 4.03 TO 4.07, I WOULD ESTIMATE -- I CAN
76 - [add a note]
1 GIVE YOU THE EXACT NUMBER, BUT IT IS SOMEWHERE AROUND SIX OR
2 SEVEN RELEASES.
3 Q. AND IS IT DOCUMENTED THAT YOU HAVE 7,000,000 NEW USERS
4 THIS YEAR? IS THAT DOCUMENTED ANYWHERE?
5 A. NOT THAT I AM AWARE OF.
6 Q. THAT IS YOUR ESTIMATE BASED ON THE ANALYSIS YOU HAVE
7 JUST GIVEN?
8 A. WE DON'T KNOW -- PARTICULARLY WITH THE FREE PRODUCT AND
9 FREE DISTRIBUTION AND PEOPLE DISTRIBUTING THE PRODUCT, WE
10 DON'T KNOW HOW MANY ACTUAL USERS THERE ARE. I AM GIVING
11 ESTIMATES THAT I HAVE BEEN TOLD AND HAD DISCUSSIONS ABOUT.
12 Q. OKAY.
13 THE COURT: I THINK WE'LL TAKE OUR NOONTIME RECESS
14 NOW, MR. WARDEN.
15 MR. WARDEN: THANK YOU, YOUR HONOR.
16 (WHEREUPON, AT 12:27 P.M., THE ABOVE-ENTITLED
17 MATTER WAS RECESSED FOR LUNCH.)