October 23, 1997 6:25 PM PDT

MS's Netscape envy revealed

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In making its antitrust case against Microsoft (MSFT) a matter of public record, the Justice Department has released internal Microsoft documents that confirm what everyone has known for some time: The software giant quickly and aggressively turned its focus to browser rival Netscape Communications (NSCP) and the budding Java movement in the months after CEO Bill Gates warned his executives that the company was in danger of losing in the Internet game.

Gates's now-famous "Internet tidal wave" memo went out in May 1995. By early 1996, Netscape was squarely in Microsoft's sights, and Redmond was wielding Internet Explorer as its weapon of choice.

In February 1996, Microsoft group vice president Paul Maritz distributed a detailed strategic analysis of the Internet browser space. Slides obtained by the Justice Department show that the company had already drawn a bead on Netscape and frankly assessed the fledging company's strengths and weaknesses.

In Maritz's estimation, Netscape was doing "excellent work" on browsers, but only fair to middling work on its servers. Its aggressiveness, flexibility, and obsession with matching and beating Microsoft--as well as its significant lead in browser market share--were listed as reasons to worry, the documents show.

The assessments also size up key Netscape personnel: "[Jim] Clark, [James] Barksdale, [John] Doer [sic]--know how to work 'system'; [Marc] Andreessen--giving good direction on browser; [Eric] Hahn [Collabra] will drive good workgroup direction; [Richard] Schell, [James] Sha--good technical managers."

The evaluations have proved prescient, especially concerning Hahn, who had just joined Netscape after it bought his company, Collabra Software. Two weeks ago, Hahn was named chief technology officer and has indeed helped the company make major steps in shifting its revenue base to servers and groupware products, as evidenced by its latest earnings report.

In April '96, Brad Chase, now a Microsoft vice president in the application and Internet client group, sent out a fiscal year '97 plan entitled, "Winning the Internet platform battle." Chase outlined the areas of confrontation in establishing browser share; his stated goal by end of the fiscal year was a 35 percent share in the United States.

Included in the battle plan were massive public relations campaigns, developer partnerships for the adoption of ActiveX, and licensing agreements with original equipment makers and Internet service providers. "You should be able to break most of Netscape's licensing deals and return them to our advantage because our browsers are free," Chase wrote.

"Netscape is already entrenched in our markets all over the world," he added. "The situation today is scary. We have not taken the lead over Netscape in any market yet."

U.S. District Judge Thomas Jackson's upcoming decision will largely be based on his interpretation of the consent decree phrase "integrated product," as he decides if Internet Explorer is separate from Windows or a component of it. Jackson will likely inspect the internal Microsoft documents for instances of those key words.

For example, at one point in his "Internet battle" missive, Chase refers to IE as a "no-revenue product," but he also specifically refers to integration plans: "The integration of the browser into the Windows shell makes it very easy for users to use the Net."

Microsoft made some conciliatory public statements about Java during that time period and announced at its December 1995 Internet strategy day that it would license the programming language from Sun Microsystems. But in Maritz's February 1996 document, it's clear that the company immediately saw Java--and Netscape's adoption of it--as a threat to the Windows franchise.

In a slide that lists reasons why browser share is important, Maritz made the following points:

  • "[Web] pages become applications."
  • "Netscape/Java is using the browser to create a 'virtual operating system.'"
  • "Windows will become devalued, eventually replaceable?"

    He went on to assess Microsoft's weaknesses, including the fact that the company had "no control over Java." The first item listed under "product strategy" reads, "Catch Netscape 2.0, neutralize Java." To do so, Maritz proposed using IE 3.0 and its ActiveX component architecture, as well as the Java support and tools the company would produce in the coming months. "Java cannot be an advantage for Netscape," he wrote.

    Netscape at that stage was developing its own version of Java-class libraries because the graphics capability of Sun's version was considered too basic. The two companies averted a Java fragmentation by merging their versions earlier this year into the Java Foundation Classes (JFCs). Microsoft, meanwhile, has pressed ahead with its own version, called Application Foundation Classes (AFCs).

    Sun alleged in its recent lawsuit against Microsoft that Microsoft has altered core Java libraries it had licensed in order to trick developers into creating Windows-only Java programs. The lawsuit, however, has nothing to do with the AFC-JFC split.

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