Within an hour of taking the stand at Microsoft's antitrust trial, Richard Schmalensee said he couldn't identify a company whose operating system might soon supplant Windows in personal computers.
The witness, dean of the Sloan School of Management at Massachusetts Institute of Technology, said, "In the very short run, there are, of course, systems by small [computer makers], as a good deal of testimony indicates."
But "Those are not terrific alternatives," he said under cross-examination by Justice Department lead attorney David Boies. He later added that the "answer may well be different" in a year or two. Microsoft's Windows runs more than 90 percent of the world's PCs.
Schmalensee insisted that Microsoft does not have a monopoly because its operating system dominance is threatened by companies that could produce rival technologies.
Earlier, after the government rested its case, Microsoft asked Judge Thomas Penfield Jackson to dismiss the charges against the company. Jackson denied the request, clearing the way for Microsoft to begin presenting its defense.
Proving that Microsoft faces no competition in the market for PC operating systems is an essential element in the case against the company by the Justice Department and 19 states. Beyond that, antitrust enforcers seek to show that the world's largest software maker illegally used its dominance to snuff out potential competition stemming from the rapid rise of the Internet.
The government contends Microsoft viewed Internet browsers, such as the one created by Netscape Communications, and Sun Microsystems' Java computer language as possible alternatives to its Windows system.
Microsoft is accused of attempting to head off the threat by entering exclusive arrangements with Internet companies, altering its version of Java and coercing other companies to favor its products.
The government's final witness, MIT economist Franklin Fisher, acknowledged earlier in the day that Compaq Computer, the U.S.'s leading computer maker, had installed Netscape's Navigator Web browser. But, Fisher said, that "may not matter any more" because Navigator no longer poses a threat to Windows. "Netscape, in that sense, is no longer a big player," he said.
Boies told reporters that Compaq's decision to ship Navigator "during the midst of the trial really doesn't affect the consequences of the anti-competitive conditions charged" in the government's case. "Things that happen in the midst of the trial carry a certain dubiety, particularly when they are made by the only OEM [computer maker] that is coming in to support Microsoft." A Compaq executive is scheduled to testify as a defense witness for Microsoft.
Microsoft said Compaq's role highlighted a key argument in its defense: Companies such as Netscape are able to distribute their products to consumers in spite of Microsoft's alleged illegal behavior. This, company attorneys contend, proves the company didn't foreclose competition.
While cross-examining Fisher, Microsoft attorney Michael Lacovara showed him a printout of Compaq's Web site, which touts the fact that the company now sells all new computers with both Netscape's Navigator browser and Microsoft's Internet Explorer.
That, Fisher said, doesn't alter his view that "Netscape has been considerably hampered" by Microsoft.
Microsoft contends there is vibrant competition in the computer industry, as demonstrated by the success of its rivals in getting their products into consumers' hands. The government argues that by prohibiting computer makers from removing Microsoft's Internet Explorer from Windows, the software giant makes it financially unfeasible to offer both browsers.
Schmalensee also takes issue with Fisher, his former professor, who claims Microsoft has a monopoly over operating software. Schmalensee maintains there is dynamic competition that constantly threatens Microsoft's industry leadership.
Before resting its case, the government introduced more than 370 documents and depositions, including more of pretrial testimony by Microsoft Chairman Bill Gates.
In a day of see-saw trading, Microsoft shares rose 1.625 to close at 143.8125.
Copyright 1999, Bloomberg L.P. All Rights Reserved.