USA Today reported Friday that Microsoft is in talks with AT&T to sell the MSN internet service and several money-losing web attractions. According to the report, AT&T CEO Michael Armstrong and President John Zeglis recently attended a dinner at the home of Bill Gates to discuss the possible buyout, similar to what happened with MSN Canada [see NewsSource, Dec. 14 '98]. The deal would involve the telephone company taking control of MSN, the MSN.com portal and Microsoft's Slate magazine. Microsoft would, in exchange, get AT&T to use and promote Windows NT. That would make AT&T WorldNet the 2nd largest internet provider, behind America Online. The deal would also take a money-losing albatross off Microsoft's neck, not to mention ease up the pressure building on it from governments around the world. AT&T officials had no comment on the story, while Microsoft said that talks are "ongoing."

Seeking to enlarge its minimal presence in the game market, Microsoft said on Thursday it is buying Chicago-based Virtual Worlds Entertainment. Virtual World's primary products are games in the 'BattleTech' line, most notably MechWarrior, MechCommander and their sequels - one of the best-selling game series ever created. No details of the acquisition will be released, but we've been told Virtual Worlds will be swallowed up instead of becoming a Microsoft subsidiary like WebTV. Since working inside the Microsoftian colony kills off all creative areas of your brain, say goodbye to anything notable from the BattleTech line after MechWarrior 3 ships in March.

COURT NOTES: On December 29, before trial resumed, the Justice Department submitted written testimony by Intuit CEO William Harris. In his statement, Harris told how he agreed to merge Intuit with Microsoft back in 1994 because the company feared Microsoft would exterminate it otherwise. He also suggested that The Behemoth offered preferential treatment to software vendors in exchange for browser loyalty to Internet Explorer. He closed the testimony with a plea to the Justice Department to enforce a principle he calls "operating system neutrality." Microsoft dismissed his charges, saying they were "speculative" and "hypothetical," then tried to have some 50 paragraphs of the statement removed from the court records.
When court came back into session on January 4, Harris testified in person how Compaq dropped Intuit's Quicken from new PCs because of Microsoft threats to withhold Windows licenses. He then explained that Intuit chose to ship Quicken '98 with only Internet Explorer in order to gain a favorable placement on the Active Channels bar in Windows. Then in cross examination Harris admitted that Netscape's browser wouldn't have worked as well with the software as Microsoft's, but said the decision was based on multiple factors. After the cross examination, government attorneys played another segment of the Gates video in which BillG denied having any recollection of the 1997 deal preventing Intuit from bundling Netscape. Government lawyers then produced evidence showing Gates approved of the deal, and Harris confirmed that Gates was behind it.
Then on Tuesday, Justice released written testimony from MIT economics professor Franklin Fisher. Inside the October deposition, Fischer testified that Microsoft set out to destroy Netscape and "undertook detailed studies of Netscape's sources of revenue and what Netscape required to survive" to see what would most effectively cripple the small software company. Justice also chose to release several subpoenaed e-mail messages from Microsoft, most notably one where senior vice predent Jim Allchin referred to cross-patform software as a "disease inside Microsoft."
While Fischer's written testimony was circulating through the press, Microsoft was fighting to limit what the economist could testify about. They asked Judge Thomas Penfield Jackson to make Fischer give his analysis of their contracts with hardware companies behind closed doors, since his analysis (which was omitted from the released reports) could contain "sensitive, proprietary data" about what the company charges computer manufacturers for Windows.
The economist's testimony went on as planned, with government attorneys asking only a few cursory questions to back up the written testimony. Then Microsoft's Michael Lacovara cross-examined the 12th witness with a barrage of questions, often asking another one before he had time to answer. With Judge Jackson getting obviously irate, Lacovara asked Fischer about the impact of Netscape's proposed merger with American Online. Before he could answer, Judge Jackson produced an interview with AOL's Steve Case, saying "The thrust of the article is that there is no indication that the new consortium is going to compete against Microsoft." He then asked lawyers on both sides if they plan to bring Case up as a witness and submitted the Washington Post article as evidence.
On Thursday, Microsoft took one last shot at Fischer. Michael Lacovara suggested that that many of the quotes he had used were similar to those picked by Frederick Warren-Boulton, an economist who testified earlier in the trial. Lacovara asked whether the two collaborated, "or was it 'great minds think alike?'" "I don't think I would characterize either of us as a great mind, being that I'm under oath," said Fisher, to laughter by the judge and courtroom. But he moved on to explain that it was not hard to pick out quotes that fit. The attorney continued, asking Fischer a series of questions and then suggesting that most computer companies would prefer to have a browser pre-installed with the operating system. Fisher replied that if Microsoft forced one browser on the world "that would make it simple ... but that's not what competition is about... We're going to live in a Microsoft world - It might be a nice world, but it's not competitive and not consumer-driven."
Coming up this week: final testimony from Fischer, followed by Microsoft's first of 12 witnesses, expected to be Richard Schmalensee, a professor and former student of Mr. Fischer. It's also expected that Microsoft will again ask Judge Thomas Penfield Jackson to dismiss the government's case before bringing its witnesses.

On December 21, Santa Clara County California Superior Court Judge Robert Baines granted Blue Mountain Arts a temporary restraining order forcing Microsoft to give information allowing it to design greeting cards so that they get through the filters in Microsoft e-mail programs. Blue Mountain sued Microsoft in early December [see NewsSource, Dec. 14 '98], claiming that it put filters in the Outlook, Outlook Express and WebTV e-mail programs that marked their e-mail greeting cards as spam. Microsoft says that it was just a mistake, but Blue Mountain stands by their charges and points out that the problems only began when The Behemoth set up a competing service on MSN.

During the Consumer Electronics Show last week in Las Vegas, Microsoft launched its solution to defeating Sun's Jini technology: Universal Plug and Play. The new protocol, introduced by senior vice president Crag Mundie, is designed to allow devices like PCs, printers, and even security cameras to connect as peers over a home network and instantly share resources - similar to functionality already present in Jini. Microsoft says that Universal PnP devices will be shipping by Christmas 1999, but most industry analysts question that time frame. The last time we checked Microsoft didn't even have regular PnP working in Windows NT, and now they promise to have an enhanced version of it built into Windows 2000. Stick this story in the vaporware file...

Attorney Stephen Strong says that Microsoft has introduced a new contract preventing temporary workers from collecting anything won in the class-action suit filed against it on their behalf. Strong, who filed one of the lawsuits in November [see NewsSource, Nov. 11 '98], says that the new contract forces temporary employees to give up their jobs or give up their rights to legal compensation in the case. The new agreement, which was introduced less than 6 months ago, says in part: "Even if a court or government agency determines that temporary personnel and Microsoft have had a common law employer-employee relationship at any time, temporary personnel ... will not be entitled to receive ... any different or additional pay, or any benefits, insurance coverage, tax payments or withholding, or compensation of any kind."
The company's temporary workers started getting the reworded contract during the summer of 1998 when their old agreements expired. While Microsoft spokesman Dan Leach says none have refused to sign the rehashed agreements, he admits that anyone that doesn't agree to the new clause will lose their job. Microsoft doesn't give out exact figures on the number of temporary workers, but most estimates say between 5,000 and 6,000 members of the company's 20,000-person workforce in the Seattle area are hired through a temporary agency.

As expected, Microsoft introduced Internet Explorer 4.5 for the Mac last week during the Macworld Expo. The new version has drag and drop installation similar to Office 98, and includes features like Form AutoFill, which lets users automatically complete online forms by clicking a button that transfers stored information such as an address onto a Web form (a feature the Opera browser has had for months). This came only days after issuing a patch for another 'theoretical' security hole in IE for Windows involving web page framing.

According to a study released Friday by the Consumer Federation of America, the Media Access Project and the US Public Interest Research Group, Microsoft has made more than $10 billion dollars over the last three years because it "overcharges" for its operating systems. Microsoft's $35 to $45 profit per copy sold is almost thirty-five percent of the total price, while other software companies only make an average six percent profit. The report also notes that while computer system costs have dropped dramatically in recent years, the prices of Microsoft operating systems have grown by more than 160 percent since 1990. Microsoft published a counter-report, defending itself by showing how other operating systems (specifically Linux and OS/2) have supposedly eaten away at Windows' market share. Microsoft's report also defends the price of Windows because it is "a product that customers are clamoring for."

As part of the company's ongoing "stance against cyber-squatting," Microsoft filed suit last week against two Texas men who registered domains with the word 'Microsoft' in them. The men were charged with infringing on company trademarks and misleading the public by registering the 'microsoftwindows.com' and 'microsoftoffice.com' addresses. Apparently the company decided to sue _after_ learning the gentlemen from Texas wanted over $50,000 for the domains. Microsoft claims that the men are "taking advantage" of trademarks, but conveniently forgot to mention the trademarks - like windows2000 and Internet Explorer - it recently took advantage of itself.

Last Monday Microsoft announced the pricing structure for Office 2000. Company officials said prices will hold steady from the current versions of Office, ranging from $209 for a standard upgrade to $799 for the Premium edition, which includes FrontPage 2000 and a graphics suite. Customers purchasing Office 97 between January 1 1999 and the release of Office2k will be given a free upgrade.
Microsoft and Bristol Technology both claimed victory on the last day on 1998 when Judge Janet Hall rejected a preliminary injunction sought by Bristol to force Microsoft to turn over its source code and refused a request to throw out the lawsuit. The judge also set a trial date of June 1, 1999 to hear Bristol's request. The small software company sued last August because Microsoft refused to renew a contract giving it access to the NT source code needed to continue making Wind/U, a development tool for porting NT software over to Unix.
Last Tuesday, the two men who attacked Bill Gates with a cream pie in Brussels early last year [see NewsSource, Mar. 09 '98] were convicted of using "minor violence" and fined $88 each by a Belgium court. The attack's planner, Noel Godin, was not charged.
While the television channel struggles to survive, MSNBC's internet presence is now the top-rated news website. According to data from Media Metrix, MSNBC had 4.69 million unique visitors in November, compared with some 3.98 million for the second most-visited news site, CNN. No word if the traffic increase is accredited to Microsoft's tighter integration of all MSN web sites, or if it's simply due to the increasing number of web users.

_{Vaporware 1998: Windows NT Wins
Microsoft Mail users surprised by Y2K fix
Microsoft posts fix for IIS 'hang'
Resurgent Novell takes on MS
Standing Up To Microsoft
Microsoft Ends Program That Paid Campus Leaders}