Microsoft Threatened Intel to Stifle Internet Competition, Executive Testifies

Strategic Insights -

Microsoft repeatedly threatened its ally Intel in the late 1990s as it sought to maintain its control over the burgeoning Internet market. Intel executives testified in court that Microsoft threatened to withhold support for new Intel microprocessors unless it abandoned its own software efforts and favored Microsoft over Internet rivals. The tense relationship between the two tech giants highlights the fierce competition that emerged in the 1990s as the Internet began to disrupt traditional software industries.

Key Takeaways:

  • Steven McGeady, Intel vice president, testified that Microsoft threatened to pull back support for new Intel microprocessors unless Intel shelved its own software efforts and favored Microsoft over Internet rivals.
  • McGeady stated that Microsoft was concerned that Intel's efforts to develop internet software would get "out of its control."
  • The Justice Department presented internal E-mail from Intel and Microsoft that showed Microsoft executives expressing concern over Intel's efforts to develop internet software.
  • Microsoft Chairman William H. Gates denied any knowledge of Intel's internet software efforts, but witness testimony and E-mail contradicted his claims.
  • Intel and Microsoft had tensions over the development of Intel's "native signal processing" (N.S.P.) software, which Microsoft opposed due to concerns it would compete with its operating system.
  • Gates wrote to Intel Chairman Andrew S. Grove in July 1995 stating that the main problem between them was N.S.P. and that Intel should not ship it.

Statistics:

  • Intel's new microprocessors represented a huge investment, with each new generation requiring Microsoft to refine its Windows operating system.
  • 20 hours of videotaped questioning of William H. Gates were played in court, with each instance showing contradictions between his testimony and E-mail or witness testimony.
  • Intel's N.S.P. software was initially well-received by PC makers, but Microsoft's opposition led to the project's cancellation.
  • PC makers hp and Hewlett-Packard were among those that reportedly followed Microsoft's guidance on software development.

Sources:

  • "The New York Times" - August 19, 1998
  • "The Los Angeles Times" - August 18, 1998
  • Testimony of Steven McGeady, vice president of Intel
  • Internal E-mail from Intel and Microsoft executives
  • Videotaped deposition of William H. Gates, Microsoft Chairman