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Microsoft's Paul Maritz on Linux and open-source software

Jan 31, 1999, 01:19 (0 Talkback[s])

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Edited excerpts from the Transcript of Proceedings January 28, 1999, before the U.S. District Court, District of Columbia.

In the United States District Court for the District of Columbia,

United States of America, Plaintiff, vs. Microsoft Corporation, et al. Defendants.

Proceedings before the Honorable Thomas P. Jackson.

For the United States: David Boies, Esq., U. S. Dept. of Justice Antitrust Division, San Francisco, CA.

For the Defendant: John Warden, Esq., Sullivan & Cromwell, 125 Broad Street, New York, New York.

Witness Paul Maritz.

Defense counsel John Warden questions witness Paul Maritz.

By Mr. Warden:

Q. Mr. Maritz, when we broke yesterday, we were talking about the open-source movement, and I was about to place before you a document, which I will now do.

Mr. Warden: I place before the witness and offer into evidence what has previously been premarked for identification as Defendant's exhibit 2317, a September 28, 1998 article from the New York Times entitled "For Sale: Free Operating System."

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2317 is admitted. (Whereupon, Defendant's Exhibit Number 2317 was received in evidence.)

Mr. Warden: Thank you, Your Honor.

Your Honor will recall your question about hobbyists yesterday, and while this article doesn't use the term "hobbyists," it does say in its first sentence that it's going to talk about an experiment that's half business model and half populist movement.

By Mr. Warden:

Q. Mr. Maritz, if you'll turn to the second page of the article, there is a statement attributed to Mr. O'Reilly there, of O'Reilly and Associates, which reads, "Open Source has already radically changed the computer industry. In the first round, Open Source software will not beat Microsoft at its own game. What it is doing is changing the nature of the game."

Now, is that statement consistent with points you've made in your testimony?

A. It is, Mr. Warden. As I pointed out, this is one of the key changes that we've seen in the software industry over the last year or so. And it really is a major factor that we all have to take into account, that there is this source of fairly sophisticated, high-quality software that is being developed by the open-source movement.

And it further puts pressure on ourselves and other manufacturers of software or developers of software to continue to innovate and make sure that we're offering our customers value for money.

Q. Does the Open Source movement have any effect on the ability of others to clone Microsoft's products?

A. Well, what it does is provide a base of software that can be used to build alternatives to our products. And that's exactly what we see going on.

As I testified yesterday, one of the characteristics of the platform business, in particular, is if you become successful, you become bound by that success, and that means that it makes it easier for other people to develop equivalents to your product.

Q. What do you mean by "bound by that success"?

A. Well, as I testified yesterday, you have a lot of other software that's now dependent upon the interfaces in your software, and you're no longer able to change those interfaces. You've got to continue to add to them or provide new functionality. So those existing interfaces constitute a stable target that a group like the open software movement can now focus on and deliver either identical or equivalent functions.

Q. Has any new software that is directly competitive with any other Microsoft product been developed through the open-source movement?

A. Well, the Open Source movement has developed a number of products. It's something that is certainly gaining momentum. We've seen the Linux operating system developed, which obviously is an alternative to our operating systems. You've seen the Apache or web-server software, which is, in fact, the web-server software that's in use on over half of all the Web servers in the world. So we see a very important piece of software coming out of the open-software movement there in widespread use.

The "send mail" program. And now, as I testified yesterday, we're starting to see the open-software movement move into developing traditional applications, like word processors and spreadsheets as well.

Mr. Warden: Your Honor, I now would like to place before the witness and offer what has been marked for identification as Defendant's Exhibit 2318. This is a description of a product called "KOffice" from KOffice's Web site, printed on the 20th of this month. And it is accompanied by screen shots of the various components, also printed from that Web site.

Mr. Boies: Your Honor, may I inquire of The Court whether this witness is going to testify about how these screen shots were taken?

Mr. Warden: No. I will ask him a couple of questions.

By Mr. Warden:

Q. have you visited this Web site?

A. I have, Mr. Warden.

Q. And did you find this material on the Web site?

A. I did, Mr. Warden.

Q. Okay.

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2318 is admitted. (whereupon, Defendant's Exhibit Number 2318 was received in evidence.)

By Mr. Warden:

Q. Will you tell The Court what is in 2318, Mr. Maritz?

A. What the exhibit describes is the efforts of a group that goes by the name "KOffice." This is an open-source movement effort to develop an integrated suite of office productivity applications, including a word processor, a presentation package, a spreadsheet package, a drawing package, and several other components.

Q. Okay. Rather than going through each of these, can we just turn to the first screen shot, please. And can you tell The Court what that screen shot is?

A. This is a screen shot of their spreadsheet program demonstrating the various capabilities of this spreadsheet program, and what they are pointing out here is that, in addition to the traditional functions like being able to enter formulas into the spreadsheet and do additions of rows and columns and things like that, they also have more advanced functions, like being able to automatically generate charts. So this is quite a sophisticated spreadsheet.

The Court: What is this run on?

The Witness: This runs on the Linux operating system, Your Honor.

By Mr. Warden:

Q. Is this KOffice unique?

A. No, Mr. Warden. To my knowledge, this is one of a couple of efforts to develop office-productivity applications for the Linux environment.

I am aware of another effort called "Abi Source." and they are attempting to do much the same thing. They've started developing, in particular, a very high-quality word processor for the Linux environment.

Q. And is the open-source movement limited to office productivity suites?

A. No. As I said, they have the -- they are interested and are developing other software as well. As I mentioned earlier, there is the Apache web-server software, the Send-mail software, which is a popular electronic mail package. So they are not exclusively focused in this area.

Q. Now, what effect, if any, does this open-source movement have on what we referred to yesterday as the applications barrier to entry?

A. Well, this is an example of, in addition to the other sources of applications available for the Linux operating system, which, as we discussed yesterday, were Web pages themselves forming a body of applications and existing software developers, such as Corel and StarOffice, targeting their products at the Linux environment -- this constitutes now a third body of application software that is being developed for the Linux environment.

Q. And you mentioned yesterday a project known as "Wine" during cross-examination. Do you recall that?

A. I do, sir.

Q. What is Wine?

A. Wine is yet another effort in the open-software space. And a group of people are cooperating there to develop software that will enable our existing Windows applications to run on Linux. In other words, they want to allow people to take their source code that runs -- for applications that run on the Windows environment, and with either no or very little modification, be able to have them run on Linux -- the Linux operating system.

Q. What effect do these developments that we've just been talking about in terms of the open-source movement, and the Wine product, and so forth have on you, Microsoft?

A. Well, they cause us to really have to, you know, insure that we continue to innovate and offer value to our customers. They constitute direct competition to Windows, and unless we respond to it, we run the risk of seeing our operating system become a commodity.

Q. You also referred during cross-examination several times to Web pages as applications. In what sense can Web pages be applications?

A. Well, they can -- they offer a set of interesting information to users and, over time, Web pages have become interactive. They actually have intelligence built into the page that allow you to do -- not just passively view information, but actually interact with that information, much as you would interact with an application.

And, as I mentioned earlier, there's some interesting examples of that. For instance, Intuit is now offering a Web site that embodies the functions of TurboTax, which used to be a classical application, so that if you want to go and prepare your taxes, which is a popular thing that consumers do on personal computers, you can do that by connecting to their Web site. And so long as you have a sufficiently capable browser, either on Linux or any other operating system, you can now access that application.

Q. So you're saying, if I understand you correctly, that the user can go to the web site for TurboTax and find there exactly what he would find if he had put a disk in and installed TurboTax on his computer?

A. I'm not sure if I'd characterize it as exactly what he would find, but he would find something equivalent. And he could certainly accomplish what he wanted to do before, which is preparing a tax return, by interacting with those -- that Web site and the Web pages that it presents.

Q. Are there other examples, besides TurboTax, of Web sites that provide applications?

A. Well, I am aware of actually Web sites starting to move in the direction of providing personal product -- the functions that have been traditionally provided by personal productivity applications, such as Microsoft Office and the products that have just been looked at. And so there are specific companies that have sprung up, such as Virtual Office and Hot Office, to try and present the functions of doing -- managing your calendar, writing documents, managing documents, and sharing documents with other people, as a collection of Web pages or Web applications, if you would like. And I think we also see that trend happening on some of the more popular Web sites, such as Yahoo and Excite.

Q. And did I understand you to say that one need not use Windows on his personal computer in order to access these Web sites?

A. That's correct.

Mr. Warden: I now place before the witness and offer into evidence, Your Honor, what has been premarked for identification as Defendant's Exhibit 2328, which is a January 20, 1999 article from CNET that is entitled "Portals: The New Desktop?"

Mr. Boies: no objection, Your Honor.

The Court: Defendant's 2328 is admitted. (Whereupon, Defendant's Exhibit Number 2328 was received in evidence.)

By Mr. Warden:

Q. Mr. Maritz, this article is said in the first paragraph to be the network -- about the network computer. I believe you testified a bit about that on cross and it's in your direct. Can you explain to The Court what a Network Computer is?

A. The sense in which I use it in my testimony is it's basically a computer that has been developed to operate in conjunction with a server. So it has local intelligence -- abilities to run programs locally, but the idea is a lot of the software will come down to a network computer from the server and be executed there, and the network computer will be an easy-to-manage, inexpensive system that can operate in conjunction with their server software.

This article is actually taking a -- pointing out that a lot of the advantages of a Network Computer, which are the user doesn't have to be explicitly aware, one way or the other, of installing traditional software, might, in fact, be delivered by something that they refer to here as portal sites.

Q. And what are "portal sites"?

A. "Portal sites" is a term that gets applied to those sites on the Internet that try and be the places where a user can find most of the information or services that they would expect from the Internet. So they try and aggregate into one place things like common information, search. They even try and personalize the information according to the preferences of the particular user.

I think good examples would be the ones that they cite there, such as Yahoo, Excite and Lycos.

Q. Now, the first sentence of the second paragraph that is highlighted on the screen says "portal sites are rapidly emerging as a computing alternative to the traditional Windows, and even Mac, desktop."

What does that mean, "a computing alternative to the desktop"?

A. I believe what it means is that a lot of the functions that a user might have gone to a traditional application running on an operating system, like Windows or the Macintosh, can now be provided by a set of Web pages being served up by the portal site and run on the browser that the user has locally.

So the point here is that we now have a collection of functions that could have been provided by or would have been provided by applications in the past -- traditional applications -- now being provided by these Web sites that project their functionality down to a browser, and such are available to people running systems other than Windows or the Macintosh.

Q. The next sentence makes a reference to free e-mail as the first service provided by portal sites that mimic the standard P.C. application.

Was there a point when e-mail was not free?

A. Well, e-mail has been both -- people have both charged for e-mail packages, as well as provided basic e-mail packages in the operating system.

The point here that I think they're trying to point out is that the way that these sites provide their e-mail is as a set of Web pages. And you don't need to have an e-mail application, per se, installed on your system.

Q. And then they give examples in the next sentence of other portal-site applications; is that correct?

A. Correct. They point out that these sites are now extending beyond electronic mail into the examples that they give. There are scheduling software, address databases and other productivity applications. So this is one of the key trends that we see in the industry.

Q. Are Yahoo, Excite and Lycos well-known Web sites?

A. Yes, Mr. Warden, they are.

Q. Are you aware of any other Web sites that provide personal productivity applications?

A. As I have mentioned, there are some Web sites that are trying to provide this as their primary reason for attracting users, and I am, in particular, aware of a site, such as one called "Virtual Office," and another one called "Hot Office" and, as their name implies, they are focused squarely on the type of productivity that you might have got out of a traditional application -- a traditional office application in the past.

Q. Now, at the bottom of the page, Mr. Enderle is quoted as saying "The portals are pointing the way to the desktop of the future. This is going to happen fairly soon or fairly quickly."

Do you agree with that statement?

A. I do. Mr. Enderle is a fairly well-known analyst in the industry. And I think it's likely that this trend will continue, and happen fairly quickly.

Q. How does this development bear on the issue of an applications barrier to entry in the operating-system business?

A. Well, what I point out is you have a body of services that can now provide similar functions to people -- the functions that people would have got out of traditional applications. And by the way that these services are being engineered, they can be accessed from operating systems other than Windows. And, as such, they provide an applications base for other operating systems that compete with Windows.

The Court: Who makes money from these, and how do they make it?

The Witness: Your Honor, I believe that their strategy is to potentially pursue two -- at least two ways of making money in these areas. One is by charging advertising when people go to their sites. The second is to actually charge a subscription so that you have to pay a monthly fee or a yearly fee to continue to use their sites.

So they will actually authenticate you. You have to enter a password and you have to pay money for that. Those are at least two business models that I think will be pursued. And I think we will probably see both or combinations of them pursued.

By Mr. Warden:

Q. Okay. I want to go to another subject, and that is the channels for the distribution of software. There has been considerable discussion in the case on that subject, particularly the OEM channel. Are you aware of that testimony?

A. I am, Sir.

Q. And Mr. Boies questioned you on Tuesday about whether Microsoft had sought to restrict Netscape's ability to distribute its software. Do you recall that?

A. I do, Sir.

Q. Are there any current developments of which you are aware that bear on the ability of companies to distribute software?

A. I think there's one very important development, in particular, that bears on this. And this is the fact that we're going to see in the near future, particularly in the United States, large numbers of users gain much higher-speed access to the Internet, an order of magnitude of higher speed than what they have today, ten times or more faster.

And when that happens, the ability to download software simply becomes a nonissue. a good example of this, if you go to any college campus in the United States today, any the million or so students that are in universities and colleges in the United States today, most of them have high-speed access from their dorm rooms. In other words, the university has seen fit to basically invest in providing them fast access to the Internet, and for them, downloading software is simply a nonissue.

So, in addition to that, what we see is that phenomenon now extending out to people in their homes. And, in particular, what we see is two technologies -- one in the cable industry. As the cable industry -- cable T.V. industry I'm talking about now, that reaches tens of million of homes in the United States -- I think it's something like 60 million homes in the United States -- as they move to handling their T.V. broadcasts over the cable in digital form, they are also providing high-speed Internet access, because it turns out that you can do the same -- use the same infrastructure to do both.

And as you've seen very recently, TCI, in particular, has announced that they are going to -- now that they've been acquired by AT&T, they are going to build out high-speed Internet access to all of their customers over the next year or two. This means that in your home, you will now be able to be download software at a very high rate.

There's also another technology that is in the process of being rolled out by the telephone companies -- traditional telephone companies. And that's called DSL or Digital Subscriber Line. And the key trick here is they're able to send a digital signal into your home over your existing telephone line without disturbing your existing telephone service. The two can co-exist at the same time. So you can continue to use your telephone to take calls, but all the time, you can have a permanent, 24-hour-a-day, high-speed connection to the Internet.

So these two technologies, leveraging the two key wires into the home, the cable T.V. wire and the telephone wire, in the next year or two are going to revolutionize access to the Internet. This means high-speed capacity and the ability to download software very rapidly. And this could literally change the nature of our industry.

The whole importance, for instance, of the OEM channel might become eclipsed. It could very well be in the future that when you buy a personal computer, you'll take delivery of it. It won't really have a lot of software on it at all. It will just have enough software to basically pull down the latest and most up-to-date software when you take it home and plug it in, either to your cable T.V. outlet or to your phone outlet.

So I think these are going to have a very profound impact on the whole industry in a relatively short order.

Q. Does this development concern Microsoft?

A. Yes, Sir, it does. Clearly we are very concerned about what could happen here. It puts the people who are providing you with that access to the network -- the high speed network -- in a relatively strong position to have quite a strong influence over what software you choose to download onto your computer.

So we believe that the cable network providers and other companies, like AOL, who have provided Internet access to large numbers of users could have a much greater say over the software that people run in the future.

Q. And how do you meet that new situation in terms of continuing to sell Windows?

A. Well, we're trying to understand that at the moment. What we are trying to do is to make sure that, at a minimum, we make it very easy for people to update their software over the Internet. So we're investing a lot in terms of making it so that we can deliver the latest software to customers using these new high-speed connections. But, frankly, it's one of the challenges that we face and which we're really trying to come to grips with it at the current times.

Q. Now, Mr. Boies suggested on cross-examination that Windows faces no current effective competition and pointed to its high share of what the plaintiffs call the P.C. operating-system market. Do you recall that?

A. I do, Sir.

Q. In your direct testimony, you mention several places what you call an "inflection point." can you tell the court what you mean by an "inflection point," please?

A. Yes, I can try to. The point here is that software requires other technologies to run and is influenced by other technologies, typically, the underlying microprocessor, the memory and the connectivity, such as the speed of the Internet. And in this industry when changes in one of those dimensions reaches a certain point, new things become possible and new uses become possible and new technologies become possible.

And when that happens, it can have a fairly dramatic effect on the whole industry. Initially, an example would be the graphical-user interface itself. In early 1980's, personal computers and the microprocessors that they had at that point were relatively puny and they couldn't run the additional software very effectively to provide a graphical-user interface.

When we got to the point where microprocessors reached a certain threshold in terms of their power and capabilities, then it became possible to develop a graphical-user interface. And that had a fairly important impact on the whole industry.

Perhaps the biggest -- or a very good example of this kind of an inflection point is the Internet itself, which is having a lot of major effects on our industry. We've spoken about this whole effect of Web pages as applications. We've spoken about how the Internet has made it much more easy to distribute software, and that's going to become even more pronounced in the future.

So these new technological developments can upset what's been possible in the industry before and lead to very rapid changes. And the high-technology industry in particular is susceptible to these points called inflection points. And it's a term popularized by Dr. Grove of Intel. And he wrote a whole book on it. His point was that a key thing that managers in the high-technology space need to really pay attention to is these inflection points, because that's when things change very rapidly. And you can be rendered obsolete very rapidly if you're not careful.

Mr. Warden: I now place before the witness what has been marked as Defendant's Exhibit 2335 and offer it. this is an e-mail authored by the witness.

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2335 is admitted. (Whereupon, Defendant's Exhibit Number 2335 was received in evidence.)

By Mr. Warden:

Q. I take it you've seen this document before, Mr. Maritz?

A. I have, Mr. Warden.

Q. In September 1995, what were Mr. Silverberg and Mr. Allchin's responsibilities at Microsoft?

A. At that point in time, they were members of my management team. Mr. Silverberg was focused on Windows 95 and its related products. and Mr. Allchin was focused on Windows NT and its related products.

Q. I want to direct your attention to the section under the heading "Priorities For The Platforms Group," and particularly to the highlighted portions. The first one says here in September 1995, "We have a huge challenge and a huge opportunity."

Is that the subject of this e-mail -- that challenge and opportunity?

A. Yes, Sir.

Q. And then we have the heading "the Internet" where you write, "The challenge is that we are in the midst of the `third' digital computer revolution."

Is there any equivalence between what you call a digital computer revolution in this e-mail and what Dr. Grove, and now you in your testimony, have referred to as inflection points?

A. Yes. As I said, all three of those are good examples of technological developments that change the nature of an industry.

Q. Can you tell the court how, if at all, to the extent you've not already discussed it, the Internet and the challenge it posed relates to competition for Windows?

A. Well, this is a good example of how a change in technology can give birth and support to a competitor. And, in this case, we had Netscape that clearly had been born on the Internet and was leveraging that as both a reason for customers to buy their product and to distribute their products.

And it also really illustrates a good point about the software industry, in particular, which is that because you don't have to build expensive factories or have expensive channels of distribution, and because there's a lot of people out there who can write software and the tools of the trade -- personal computers are relatively inexpensive -- that if you can get access to, you know, a relatively modest supply of capital, you can enter into this industry very rapidly and, by skillfully exploiting one of these inflection points, pose a very serious challenge to existing firms.

Q. Now, in the second paragraph under the Internet heading, in the last sentence, you ask the question, "Who Will Provide The `DOS' For This Platform?"

What was DOS?

A. I believe I was referring there to the MS-DOS or DOS operating system, which was the original operating system that became popular on the back of the microprocessor revolution. And what I am pointing out here is the second of those inflection points gave rise to Microsoft itself, and one of our products, in particular, that became very popular in that timeframe.

And what I am doing is challenging our people to really understand that we were in the midst of a -- and still are in the midst of a third key inflection point, and that the consequences were going to be very important, and if we didn't really concentrate and innovate and execute, then we stood the very real possibility of being eclipsed.

Q. Now, in that sentence you used the term "platform," and in the next paragraph, you refer to Netscape as emerging as the owners of a new platform. Do you see that?

A. I see that.

Q. What is the platform to which you're referring?

A. Well, it refers to Netscape's client and server software. Earlier in my testimony, we went through this in a fair amount of detail, that clearly we saw the Netscape client and server software as a competitive challenge to Windows, in particular.

Q. You also make the comment there that Netscape is dangerous to Microsoft, "even though they are only a $16 million company and we are a $2 billion-plus company."

Do you see that?

A. I see that.

Q. How, if at all, does that comment relate to the testimony you've given here?

A. Well, it relates to what I've said earlier. Because of the nature of the software industry, it's possible for a new entrant to come and challenge an existing company. And I drew the analogy there to the way in which Microsoft was initially a much smaller company than IBM, yet we, over time, became significant competition to them. so that's what I was pointing out here.

Q. Are there other examples, of which you're aware, of small companies, besides Microsoft and Netscape, having become important competitive factors in the software business?

A. Yes. A good example would be the Lotus Notes program, which was initially developed by a small company by the name of Iris Associates. In the region of 30 -- 20, 30 or 40 people developed that program initially. And that's a program that IBM later paid essentially $3 billion for.

So, again, a small people of people leveraging some new need, taking advantage of the fact that it's relatively inexpensive to develop software, compared to other industries, and were able to have a profound effect on the marketplace.

Q. Now, at the time you wrote this memorandum or e-mail in September '95, was there complete confidence at Microsoft or in the industry at large that Microsoft would survive and thrive in this new inflection point?

A. No, not at all. There was significant concern, both within Microsoft and without Microsoft, particularly at this point in time, in the second half of 1995. It was quite common for members of the analyst community and the press to really point out that there was a distinct possibility that Microsoft could be eclipsed in this change, and certainly started then and actually has not ceased. There are still people who point this out.

Q. Now, aside from the Internet developments that you've discussed in terms of high-speed access, and applications on the Web, and so forth, is there any other inflection point imminent in your business today?

A. We are certainly concerned about a related development, which is the emergence of so-called computing appliances or information appliances. And this is a broad term that covers a large range of computing devices that don't look like a personal computer, or a minicomputer, or a mainframe.

They would include such things as set-top boxes, which are the computer intelligence that people are adding to T.V.'s to allow them to process digital signals and do more advanced things. They would include such things as hand-held devices that may or may not even have a keyboard on them. They would include such things as computers that are put into the dashboard of a car. And they would include things such as games consoles, which today are devices -- very cheap devices for playing computer games, attached to a television, but are becoming very sophisticated computing devices.

Q. Do you think devices, for example, like the Palm Pilot, actually are or could be a source of competition to Windows?

A. I think they have the potential to become so, much in the same way as the personal computer back in the 1980's did not directly compete with a mainframe, but, over time, by virtue of the semiconductor business progressing and microprocessors become cheaper and more powerful, personal computers were able to take on many of the same functions, database processing and other software that was done on a mainframe.

And the one thing we do know in this industry is that the semiconductor revolution isn't finished. That it continues. And we can look forward to ever more powerful, cheaper, faster microprocessors and memories.

So by virtue of that, there will be the opportunity for purveyors of these devices, like the Palm Pilot, to add more functionality. and I think that there is the possibility that they could do more things, both in terms of offering more sophisticated web browsers, more sophisticated software to process electronic mail, write documents, et cetera. So I am concerned about them in terms of competition -- potential competition to Windows.

Q. Does the Palm Pilot use a Microsoft operating system?

A. No, it doesn't. It uses its own operating system.

Mr. Warden: Your Honor, I now place before the witness and offer what has been marked as Defendant's Exhibit 2280, a January 14, 1999 article from CNET, entitled "IBM says the P.C. is on its last legs."

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2280 is admitted. (Whereupon, Defendant's Exhibit Number 2280 was received in evidence.)

By Mr. Warden:

Q. Mr. Maritz, this article refers to an interview with IBM researcher, Paul Horn. Do you know who Mr. Horn is?

A. I don't know him personally. I do know basically who he is. He's an IBM senior vice-president and a senior member of their research staff.

Q. The second paragraph reads, "The personal computer is about to be shoved aside to make room for new portable and embedded devices, according to Mr. Horn."

It goes on and says in the following paragraph, "The era of the P.C. as king is over. We are entering an era of `pervasive computing' in which we will see a dramatic increase in the use of the application-specific hand-held and [other specialized] devices to conduct e-business and simplify our lives."

And, finally, on the next page, Mr. Horn says, "After more than 15 years as the center of the computing universe, the P.C. is about to give way to this new breed of hand-held and embedded devices."

Do you see those comments?

A. I do.

Q. Do you agree with Mr. horn?

A. I believe that this -- there will be a trend towards much greater use of devices -- these information appliance devices that don't look or function in exactly the same way as a traditional personal computer. So I believe that this is an inevitable trend. It is occasioned by the fact that microprocessors continue to get cheaper. You can build these types of devices, do fairly sophisticated things in them, and you have this ubiquitous connectivity that's coming from the Internet to complement that.

The Court: What's an embedded device?

The Witness: Typically -- it's a broad term, but, typically, it means a device that is embedded within some broader system. So an example would be here if you have a computer in the dashboard of your car, in that sense, it's embedded in some larger system.

The Court: All right.

By Mr. Warden:

Q. Is the P.C. about to go the way of the dinosaur as a result of the trends that Mr. Horn discusses?

A. I certainly hope not. We're working very hard to try and make sure that the P.C. remains very relevant to people and that they have a good reason to want to continue to buy them.

That being said, there is no stopping the emergence of these new types of devices. Now, you can't carry a P.C. in your pocket; you can't put a P.C. into the dashboard of your car. So there are going to be a category of these other devices. And the critical thing that is important for us here is that each of those is potentially the breeding ground of competition, in the same way as the P.C., which initially focused on a specific application, word processing and spreadsheet, competed with the mainframe. So we take this very seriously.

Mr. Warden: I now place before the witness and offer what has been marked as Defendant's Exhibit 2320, a January 15, 1999 article from cnet, entitled "Ellison: The Net Will Break Microsoft."

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2320 is admitted. (whereupon, Defendant's Exhibit Number 2320 was received in evidence.)

By Mr. Warden:

Q. Who is Ellison, by the way, Mr. Maritz?

A. I think everybody in the world probably knows who Mr. Ellison is, but I will explain. He is the Chairman and C.E.O. of Oracle Corporation, the large software company.

Q. What are Oracle's particular products?

A. They have been particularly strong and have the leading database product that gets sold on computer servers and minicomputers and mainframes. So the Oracle database is the database that's used by many businesses to run their business.

Q. In the second paragraph -- well, of perhaps topical interest, though I'm not going to question you about it, the article begins, "`The Internet, not the Department of Justice, is the force that will break Microsoft's monopoly,' Oracle chief executive Larry Ellison said today."

But moving on, "Right now, the center of gravity is the personal computer. the Internet is shoving the computer out of the center. My prediction is that the P.C. will become a peripheral product."

Do you see that?

A. I see that, Mr. Warden.

Q. What, if any, bearing does that comment have on your testimony?

A. Well, it's consistent with what I've testified earlier, which is that there are very strong companies that have a belief that, in the future, many computing needs, if not most computing needs, can be met by having a strong set of server products that project functionality down to the end user as a set of web pages.

And I know, in particular, Oracle and Sun Microsystems are strong believers in that model. And, as such, they believe that that's going to greatly undermine the value of the personal -- of the Windows-based personal computer in the future.

Q. Does Microsoft provide operating systems for hand-held and embedded devices?

A. Yes, Mr. Warden. We recognized a couple of years ago that that was an inevitable trend in this industry and, as a result, we've had to develop a different operating system that uses completely different technology from Windows 95 or 98. And we call that Windows CE. the "CE" stands for Consumer Electronics.

And that product has been developed and is being developed for these information appliance devices, set-top boxes, hand-held devices, car computers, et cetera.

Q. Are there competitors -- direct competitors to that product?

A. Yes, there are many competing systems in that space. In particular, there are products like the Palm OS, which is used in the Palm Pilot. There are other operating systems from consumer electronics companies, such as the Aperios (phonetics) system from Sony Corporation.

There is a whole host of operating systems that come out of the traditional industrial control space, sometimes also referred to as the embedded market, Wind River, and many other systems.

And, in particular, this is a space that is being targeted by Sun Microsystems with their personal Java product. And they have several offerings that they are being very aggressive in promoting as a solution for these types of devices.

Q. Now, going back to the desktop itself, which, if any, non-Mircosoft operating systems currently compete --

A. Are we done with this document?

Q. Yes.

A. Thank you.

Q. -- with windows on the desktop? I know you've mentioned this during the earlier questioning by Mr. Boies. I would just like to get a complete list at this point.

A. There are a number of competitors that compete with Windows on the desktop, and there are some that are common to both the business and the home or academic environments. there are some that are more pronounced in one versus the other.

In general, the Macintosh operating system competes with Windows in the sense that every time a consumer wants to buy a computing system, he has a choice between a Windows system or a Macintosh-based system.

There is competition from the BE OS that we spoke about yesterday. There's competition in the business space from IBM's OS/2. There is competition in both spaces from the Linux operating system. There's competition in the business space from UNIX systems, particularly UNIX workstation systems.

In the business space, we also have competition from people using minicomputers and mainframes and servers as the locus for computing and then projecting the information out to the user, either in a traditional terminal attached to a mini computer or a mainframe, or in terms of a network computer cooperating with a server system. And then -- so those are some of the competitors that Windows faces in the business and consumer spaces.

Q. Now, we've talked about, over the last few days, the BE OS and Linux. OS/2 -- I think you said that's in the business segment; is that correct?

A. That's primarily in the business segment, given that it's an IBM architecture and IBM promotes it there.

Q. And the Macintosh has certainly been referred to in these proceedings a number of times. Is that currently an effective competitor on the desktop?

A. Yes. In fact, since Steve Jobs took over Apple in the middle of 1997, we've seen actually somewhat of a renaissance in Apple's fortunes. In particular, they introduced the iMac Apple computer approximately -- I think it was in may of last year, and have seen strong sales on that.

I believe Mr. Jobs has said that since the introduction of the iMac computer, that we've seen a large number of new applications actually come over to the Apple Macintosh platform.

Q. Now, going to UNIX -- which I think you said was in the business segment; is that correct?

A. It's in both. It depends how you want to define UNIX, because, as I said, I consider Linux to be a form of UNIX, and it's in both spaces.

Q. Well, leaving Linux aside, and looking at UNIX -- unbranded UNIX, if there is such a thing -- how does UNIX compete with Windows in the business segment?

A. Well, it competes in two ways. one is it can be used as a traditional desktop operating system. And, typically, client machines running UNIX are referred to as work stations. And the line between those two is -- between P.C.'s and work station has become increasingly blurred over the years.

It also competes in the sense that a lot of the network computers and terminals run against UNIX servers. So that has been put forward as an alternative way to meet people's computing needs, particularly in the business environment.

Q. Now, as to -- let's go on to Linux itself. Professor Fisher testified, when he was here, that the notion that Microsoft would think it's in danger of losing sales to Linux is a joke. And I quote the word "joke."

Do you agree with Professor Fisher?

A. No, I don't. As I said, Linux is a very complete and sophisticated operating system. And there is a lot of work being done to improve it in of itself, particularly to make it easier to use and easier for people to set up on their personal computers.

And, in particular, there is this issue that there is and will be large numbers of applications available for it. This is really something that has become very pronounced in the last several months. And as I said yesterday, you can hardly look at a computer journal or even a popular newspaper these days without seeing an article about Linux and the open-software movement.

Q. Mr. Boies showed you a document yesterday, Government Exhibit 1568. I don't know if those are still up there. Here's a new copy.

A. I think I do have a copy, but it will take me a little while to find it.

Q. And he suggested, based on a statement at the top of the second page of this article, that Linux competes only with Microsoft's Windows NT operating system with servers. Is that correct?

A. No. I don't believe it is correct. The reason is one way to illustrate that is if you -- for instance, this particular company, Red Hat, did a survey last year where they estimated that there were about 7.5 million users of the Linux operating system. And you can't get to that number of users just on servers.

The total number of servers sold in the world of any flavor, be it based upon personal computers, or minicomputers, or specialized server hardware, is about 3 million units a year.

So even if you're extremely generous to Linux and say, you know, they have a third of that market -- which is absurd; they don't -- there are still 5-plus million users that must be using it on their desktops.

So I think that the fact is that Linux is -- while it certainly is being used on servers, it is also, in the majority of cases, being used on client machines. And I believe that on the Red Hat Web site, there is, in fact, an indication, or at least I read an article recently that they have a new study coming up where they are going to project that Linux usage has now reached 12 to 15 million users. And that just further makes the point that you can't do this purely based upon servers. The vast majority of the usage must be on client machines.

Mr. Warden: thank you.

I now place before the witness and offer what has been marked as Defendant's Exhibit 2338, an article from yesterday's Wall Street Journal about the Linux operating system, entitled "Linux operating system gets big boost from support of Hewlett Packard, Silicon Graphics."

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2338 is admitted. (Whereupon, Defendant's Exhibit Number 2338 was received in evidence.)

By Mr. Warden:

Q. The first three paragraphs of this article talk about, as the headline did, the operating system getting another big boost as two major computer makers announce support for it. and then the second paragraph: "Hewlett Packard and Silicon Graphics said they will be begin providing Linux as an option on some of their computers build with chips form Intel corp."

And that is the x86 architecture that we're talking about here?

A. Yes, it is. Although, you will see in the next sentence they also refer to Intel's upcoming chip that is code-named "Merced."

So both the x86 architecture and then Hewlett Packard saying it's going to assist with the creation of a version of Linux for Intel's next-generation Merced chip.

Q. And the next paragraph lists other major companies that have endorsed Linux. Do you see that?

A. I see that.

Q. Are you familiar with all of those developments in your industry?

A. In general, yes. I may not have all the specifics of them.

Q. The final paragraph of the article, which refers to Hewlett Packard and not the other companies, says "that for the time being, Hewlett Packard has no plans to provide Linux for desktop computers, since the operating system is still somewhat taxing for nontechnical users, but that may change in coming months, because Linux programmers are working on friendlier versions of the language that have a Windows-like interface and a large roster of consumer-oriented software."

Do you expect that Hewlett Packard's Linux will, indeed, appear on desktop computers in coming months?

A. I don't know for a fact whether it will or will not. I think what the article is referring to here is that there is work under way in the open-software community and other companies working in and around the Linux operating system to make it friendlier to users and, particularly, to make it friendlier to users of Windows and to provide the roster of consumer-oriented software that is referred to here. And that's what we were speaking about before the break.

Q. Do you know of a product called "StarOffice"?

A. I do.

Q. What is it?

A. StarOffice is a set of personal productivity applications developed by a company called Star Division of Germany. And, in particular, they have developed these applications in such a way that they would be familiar and easy to use for somebody who was familiar with the Microsoft Office Suite of applications that we offer on the Windows and Macintosh platform.

Mr. Warden: Your Honor, I place before the witness and offer what has been marked for identification as Defendant's Exhibit 2323, a document from Star Division's Web site, dated December 3, 1998, entitled "Free Office Suite on the Web, StarOffice, 5.0 Personal Edition.

Mr. Boies: No objection, Your Honor.

The Court: Defendant's 2323 is admitted. (Whereupon, Defendant's Exhibit Number 2323 was received in evidence.)

By Mr. Warden:

Q. And I draw your attention, Mr. Maritz, to the second paragraph highlighted on the screen. "StarOffice 5.0 is a premium office productivity suite which runs native on all major operating environments, including Windows, Solaris, Linux, OS/2 and Java. It has a fully integrated set of powerful applications which provide word processing, spreadsheet, graphic design, presentations, database front-end, HTML editor, mail/news reader, event/task schedular, charting and formula editor."

What does it mean when it says it runs native on all major operating environments?

A. I believe what it means is that Star Division has done the work to make sure that it uses -- directly uses the API's or interfaces of those operating systems and, in doing so, provides good performance on those platforms.

Q. One of the operating systems it runs native on is Linux. Do you know of any organization that has started, to use the terminology of your industry, to standardize on Linux and StarOffice?

A. I believe that StarOffice is popular in the academic world -- in the university world, in particular. and I believe, actually, there was a recent announcement about the alma mater of my colleague, Jim Allchin, Georgia Tech standardizing on StarOffice as their standard productivity suite for their use in the computer science department there.

Q. Are there any other suites of business productivity applications available for Linux today?

A. Yes, sir, there are. As I testified earlier, in particular, the Corel Corporation is offering its WordPerfect suite of productivity applications. WordPerfect is one of the most popular word processors that has been developed over the years. That is now available for the Linux environment.

And, of course, there were the open-source movement efforts that we talked about before the break, and then those Web applications that are targeting the productivity space will also be available.

Q. Now, during his cross-examination of Dean Schmalensee, Mr. Boies suggested that Red Hat Linux had a 300-page installation manual. And, in that connection, I want to ask you is any suggestion or implication that Red Hat Linux is difficult to install consistent with your experience?

A. First of all, it's my understanding that the 300-page manual that comes in Red Hat's box does not all pertain to installation. It covers other aspects of the system as well.

But there are other ways of installing the Red Hat software, using the Internet connectivity -- downloading it from the Internet. And, in fact, over Christmas of this year, I had occasion to see my son -- he is a college freshman -- install Red Hat Linux on our personal computer in my home.

I have to admit that there is probably an element of him doing it just to annoy me, but what he did do is, first of all, download a very small program from the Internet that then ascertained the particular P.C. configuration he had and then pulled down the rest of the Red Hat Linux system and installed it, and he had it up and running in about thirty minutes. And he was able to do that, in part, because we do have a high-speed Internet connection.

Q. Did he have to read a 300-page manual before he did that?

A. No, he did not, sir. He didn't have access to the manual at all.

Q. I now place before the witness Defendant's Exhibit 1871, which is already in evidence.

And I call your attention, Mr. Maritz, to the second page of the document, the fourth paragraph there, where it states "Caldera also offers the KDE graphical user interface with OpenLinux, believed to be one of the two more advanced interfaces still under development for the operating system."

I'm quoting. It says, "KDE has gotten so rich in functionality, it's very much like Windows 95 or 98."

I take it that this graphical user interface for OpenLinux is for the desktop, not for a server, is that correct?

A. Correct. It wouldn't make sense to do this work purely for the server environment.

Q. And is that any indication that OpenLinux is going to become competitive on the desktop with Windows?

A. Yes. It's consistent with what I said earlier, which is that there is significant work going on and has been done to make sure that the Linux operating system can be used as a desktop operating system by relatively unsophisticated people.

Complete transcript.