States Target Microsoft, RealNetworks Battle

WASHINGTON D.C.—Despite Microsoft Corp. claims to the contrary, lawyers for the states on Thursday said the software giant sought to ratchet up its competition with RealNetworks Inc. by tightly integrating the Windows operating system with its Windows Media Player.

During his cross-examination of Will Poole, Microsofts vice president of Windows New Media Platforms Division, John Schmidtlein, representing the states, displayed e-mail documents to illustrate how Microsoft identified RealNetworks as a key competitive threat and then sought to change its strategy to take an approach similar to the one it took against Netscape—by tightly integrating Windows with its media player.

Schmidtlein showed a January 1999 e-mail from a Microsoft executive named Anthony Bay to Chairman and Chief Software Architect Bill Gates, CEO Steve Ballmer and others that the lawyer said backed up that contention.

In one part of the document, Bay wrote: “The view is that we are breathing down RNs [RealNetworks] neck and the talk has turned to comparisons to the Microsoft/Netscape battle.”

However, he added, the “bad news” was that RealNetworks “is still significantly ahead of us and is not slowing down. They have not made any major mistakes.” The document went on to say RealNetworks has been beating Microsoft in reviews and was ahead in key features.

Schmidtlein also showed Poole a February 1999 e-mail from Microsoft Group Vice President Jim Allchin to Gates and Ballmer about Microsofts WebTV unit deciding to license RealNetworks multimedia technology over Microsofts own technology.

“Do you want us to win against Real?” Allchins message said. “I do not understand whats going on. I feel strongly we must win in this area. … This will NOT help us. I strongly suggest a review of this.”

Schmidtlein also presented e-mail from Poole himself to Gates in which he called RealNetworks a “strategic threat” to Microsoft. The September 1999 e-mail included an attachment entitled “RealNetworks…a Strategic Threat” in which he wrote, “Real is resourced and highly skilled at marketing…”

Another e-mail in October 2000 from Microsoft executive Kurt Buecheler to the digital media group—which included Poole—about IBM incorporating RealNetworks software for Unix read that Microsoft needs to “see Real as a major threat and WM [Windows Media Player] as an ice pick into Sun [Microsystems Inc.] companies.”