Delving deep into the realm of new and burgeoning technologies, the Microsoft Corp. antitrust remedy hearing today examined the software giants presence in the handheld operating system market and its potential for dominating it in the future.
The nine states and District of Columbia that rejected the Department of Justices November settlement agreement with Microsoft called a wireless witness, PalmSource Inc. Chief Competitive Officer Michael Mace. PalmSource is a wholly-owned subsidiary of Palm Inc., which holds approximately 80 percent of the handheld operating system market in the United States.
Much to Microsofts disappointment, the states are allowed to offer testimony and evidence regarding technologies that are not directly covered in the liability findings that a federal appeals court established last year. Microsoft maintains that the remedy portion of the case cannot include new and emerging technologies, but earlier this week Judge Colleen Kollar-Kotelly ruled that the evidence could be offered to develop a broad factual record. Although the judge is admitting the evidence, she has not yet ruled whether she will consider it when deciding the scope of the remedies.
The enterprise market is a critical target of Palms business strategy as corporations increase their use of handheld computing devices, Mace testified. While Palm is highly successful in the overall handheld market today, Mace said he is concerned that Microsoft could use its leverage in other product sectors in the future to hinder Palms plans for the enterprise if the court does not impose the interoperability remedies spelled out in the states proposal. In particular, Palm is concerned that if it is not able to gain access to the Microsoft Visual Studio development tool, it will have difficulty making inroads in the enterprise market.
Asking whether Palm contributed any financial or developmental resources to Visual Studio, Microsoft attorney Bruce Braun noted that Palm has more applications and more software developers for its operating system than Microsoft has.
"Most of those developers have standardized on Visual Studio," Mace replied. "What we would like is to be able to sell handhelds to corporations that have standardized on Microsoft development tools."
Repeating a tactic employed in the cross-examination of other competitors taking the stand as states witnesses this week, Microsoft attempted to portray Palm as highly successful rather than a victim in the marketplace. Pointing to some of the very materials that Palm recently used to promote its success to potential customers and the investment community, Microsoft tried to undermine Maces claim that it faces a threat from Microsoft. Holding up financial releases, SEC filings and claims made to securities analysts, Braun attempted to show that Palm is telling the investment community and potential customers a story quite different form the one they are telling the court.
Mace said that while Palm currently enjoys a large portion of the market and has a goal of continued success, it is concerned that future actions by Microsoft, if not prevented by the remedies the court imposes, could turn the tables.
Braun also attempted to show that Maces assertions were offered to gain a special advantage in the marketplace and that Palm used the court proceedings to hinder Microsoft. He showed an internal Palm e-mail in which Mace discusses the possibility of Microsoft making .Net available on the Palm product. "If they refuse to follow through, we go back to the Gartner folks (and maybe a certain government agency) and document Microsoft misled IS managers," Mace wrote.
"By appearing in this courtroom today, arent you doing just that," Braun asked.
"No, thats not why Im appearing here today," Mace responded. He said that the government agency noted did not necessarily refer to the Department of Justice but may have referred to the Federal Trade Commission or another agency, and that the e-mail reflected his concern that Microsoft live up to "promises" it makes in public forums to IS managers.
Braun showed documents indicating that Palm had made suggestions in the states remedy proposal regarding definitions of interoperability and middleware, which would include Palm products. Mace responded that the suggestions would not give Palm a special advantage but would promote competition in the entire handheld computing sector.
"I believe what these terms do is prevent us from being discriminated against," Mace said. "If you call the elimination of the opportunity to discriminate against us a benefit, then yes, its a benefit."