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. Last Updated: 07/27/2016

Microsoft Witness Asked Gates for Help

WASHINGTON -- Microsoft Corp.'s first witness against antitrust sanctions sought by nine states admitted in court on Tuesday that he asked for a favor when Microsoft chairman Bill Gates called seeking his testimony.

Jerry Sanders, chief executive of computer chip-maker Advanced Micro Devices Inc., also conceded he had not read the states' proposed sanctions, but that Gates had told him they were "crazy'' and would fragment the Windows operating system.

Howard Gutman, an attorney for the states, told U.S. District Judge Colleen Kollar-Kotelly that Sanders asked for Microsoft to announce support for its chip technology, code-named Hammer, ahead of a competing product being developed at rival Intel Corp. "Mr. Gates said he would talk to his people about that,'' Gutman said of the Feb. 8 call by Gates to Sanders.

"Yes,'' agreed Sanders. "I asked Mr. Gates to hold Intel to the same standard he held us to."

Sanders' testimony was Microsoft's opening response to a month of witnesses testifying for the states, who are seeking stiffer sanctions against Microsoft for illegally maintaining its Windows monopoly.

The exchange was reminiscent of efforts by Microsoft lawyers to discredit industry executives testifying on behalf of the nine states that have rejected a proposed settlement of the case negotiated by the U.S. Justice Department.

"You've never checked to this day whether what Mr. Gates told you ... was true in the remedies," Gutman challenged. Sanders agreed he had not read the states' proposals.

AMD is the second-largest producer of microprocessors, which form the brains of personal computers, after Intel.

Sanders said in written testimony that computer standards that have formed around Microsoft's operating systems have greatly benefited consumers. Fragmenting the Windows operating system would set the computer industry back almost 20 years.

A key demand of the states is for Microsoft to produce a stripped-down version of Windows that can be customized by computer manufacturers and competing software designers.

Microsoft's second witness, University of Chicago economist Kevin Murphy, said the states' demands were unjustified, over-regulatory and would help Microsoft's competitors rather than consumers.

Murphy supported a provision in the settlement that allows computer makers to remove "end-user access'' to features in Windows. Removing the features altogether, as the states propose, would be of little benefit to consumers, he said.

"The potential costs of requiring the removal of [computer code] are far greater in terms of the costs it will impose on design and testing and the reliability problems it is likely to impose on users," Murphy said.

Sanders also criticized the customized Windows idea, saying multiple versions of Windows would diminish competition as designers of software and devices that work with computers focused on just one of the versions.

"Any relief that would fragment the Microsoft Windows platform, and thereby impair the large compatibility benefits provided by that platform, would set the computer industry back almost 20 years, all at tremendous cost to consumers and to the national economy,'' Sanders said.

Twenty years ago, hardware and software vendors had to choose whether to develop for incompatible desktop computers from Apple Computer Inc., Commodore, Tandy and others, he said.

A federal appeals court last year upheld lower court findings that Microsoft used illegal tactics to maintain its Windows monopoly against potential competitors such as the Netscape Navigator Internet browser and Sun Microsystems Inc.'s Java programming language.

But Murphy said there was no basis for the states' strict remedy because there is no proof Microsoft's tactics harmed Netscape Navigator and Java.

Murphy's testimony was aimed at rebutting that of rival economist Carl Shapiro, a former Justice Department official who testified for the states in favor of strong sanctions to restore competition and level the playing field in emerging computer technologies.

A parade of witnesses for the states have testified over past weeks that Microsoft's operating systems dominance allows it to hold tremendous sway over the computer industry.

Some of Sanders' testimony supported this impression. He said AMD depends on Microsoft operating system support for its chips and licensing of the Windows logo for marketing purposes.

"If we fail to retain the support and certifications of Microsoft, our ability to market our processors could be materially adversely affected," Sanders said, quoting from AMD's annual report.

The remedy hearings are expected to run through May at their current pace.

Microsoft's list of 30 possible witnesses includes Gates and chief executive Steve Ballmer, but it is not clear when those executives might be called.