Originally created 12/31/98

Intuit executive: Microsoft bullied us out of Netscape deal



WASHINGTON -- Mulling a $2 billion buyout by Microsoft's Bill Gates, Intuit Inc. software executive Scott Cook considered the price of saying no.

The immensely successful Intuit was maker of the world's most popular personal finance software, called Quicken, and an attractive target for Microsoft, whose Windows operating system is dominant but whose own rival finance software at the time was panned by critics.

In a confidential letter to his company's directors, Cook outlined Intuit's options if it rejected the offer, made in the summer of 1994: Microsoft might try to improve its own finance software to compete with Quicken, or Microsoft might try using its operating system as leverage against Intuit.

"We fear the second approach," Cook wrote.

In written testimony made public Wednesday, the company's chief executive officer, William Harris, described for the judge in the Microsoft antitrust trial how Microsoft has "unparalleled power" in the nation's high-tech industry because of its influence as the maker of Windows.

"Microsoft's ability to be the gatekeeper of the Internet will be unchallenged and competition on the Internet will be constrained," Harris warned.

Microsoft responded by calling Harris' allegations "half-baked" and noting that Quicken successfully competes directly with Microsoft's product, called Money.

"Intuit apparently wants the government to guarantee it a permanent lead in the marketplace without actually competing," Microsoft said, saying the government's lawsuit "has degenerated to a state where any competitor with a business grudge can come to Washington and use the (Justice Department) as a weapon."

In its antitrust case, the government alleges that Microsoft illegally wielded its influence to "crush" a rival Internet software company and to extend its dominance from operating systems to other types of software.

The trial resumes Monday.

Harris said Intuit's fear that Microsoft might include finance features within Windows -- as described in Cook's 1994 memo -- influenced its decision agreeing to the $2 billion buyout.

The deal was called off in 1995 after federal regulators raised antitrust concerns because Intuit and Microsoft together dominated the market for financial software.

Harris alleged Intuit's worst fears were realized shortly after the deal was canceled, when rival CheckFree Corp. disclosed that Microsoft had approached it to develop banking software, called WinATM, to be built into Windows. Microsoft never carried through with the plans.

"WinATM was to be bundled with the operating system, so that it would be universally and freely available and be the default option for personal finance and online and payment activities for all users of the Windows operating system," Harris wrote.

Harris said CheckFree made the disclosure because Intuit later became the company's largest shareholder, and Harris sits on CheckFree's board.

Microsoft said WinATM was "an idea that never made it off the drawing board."

"To this day," the company said in a statement, "Microsoft has not added personal finance functionality to Windows, and Intuit continues to thrive as the leading developer of personal finance software."

Harris also complained about restrictions Microsoft placed on Intuit in 1997 against distributing Internet software by rival Netscape Communications Corp. In exchange, Microsoft included a valuable link to Intuit's Web site in Windows and it customized a version of its own Internet software to work with Quicken.

Harris said Intuit agreed to the deals with Microsoft -- a direct competitor -- because "only Microsoft could offer placement on the Windows desktop."

Microsoft noted that Intuit's own technical staff recommended against use of Netscape's Internet software.