Microsoft's first witness, economist Richard Schmalensee spent his final day of cross-examination coming under fire from DOJ attorney David Boies, who repeatedly attacked over the bundling of Internet Explorer in Windows. Boies even used Microsoft's own terminology against Schmalensee, who at one point was forced to agree that IE was a "commodity" that is almost identical to Netscape Navigator. The admission was a critical one, since Microsoft claims that Internet Explorer is better than Netscape and that is why the product is doing better in the market.
"Microsoft's basic premise of defense was just undercut by its chief economic expert," said Boies during a break.
Another interesting topic that came up Wednesday was Microsoft's high cost for developing Internet Explorer: Schmalensee agrees that it has easily cost the company over $500 million so far and that Microsoft has thrown away at least $120 million in revenues by not charging for it or including it in the Windows 98 Plus! pack, which costs $25-40 extra. The government would like to know why Microsoft would spend that kind of money on a product that it is giving away for free.
Microsoft's quarterly profit of $1.7 billion also came up.
"Speaking of power, did you read the newspapers today? Did you hear what profits Microsoft announced?" Boies asked.
"You can't infer monopoly power from quarterly profits," Schmalensee responded