Microsoft pressure on Acer alleged

[Mitch Stone <mstone@vc.net>]

Microsoft pressure on Acer alleged 
By  Reuters July 19, 1998, 10:20 a.m. PT 
http://www.news.com/News/Item/0%2C4%2C24360%2C00.html?sas.mail 

Pressure tactics by Microsoft often  led computer maker Acer America to 
use the software giant's products, according to a former Acer product 
manager.   

In a series of interviews with Reuters, Ricardo Correa said Acer opted to 
use Microsoft applications on its consumer line of computers to satisfy 
the software firm in making three separate  decisions.   

Acer and Microsoft denied Correa's claims and said the charges come from 
a disgruntled employee.   

The allegations emerge at a sensitive time as the federal   government 
presses ahead with a major antitrust case against  Microsoft charging 
that the giant software company uses strong-arm tactics to dominate the 
market.   

Whether Acer and other computer makers live in a climate  of fear that 
drives them to seek safe relationships with Microsoft  is a key focus of 
the government's probe of Microsoft. The Justice  Department declined 
comment on Correa's allegations.   

Few industry insiders have been willing to be quoted publicly  on the 
details of their dealings with Microsoft. But Correa agreed  to tell his 
version of dealing with Microsoft because he was  disillusioned with the 
industry.   

"The account manager at Microsoft would say to me, 'Ricardo,  we really 
don't consider you a Microsoft partner just because  you buy the 
operating system,'" adding that Microsoft CEO "Bill  [Gates] is not happy 
with you."   

Acer America is based in San Jose, California, and is member of the Acer  
Group of Taiwan, which makes personal computers for sale  to business and 
consumers, and technology for the industry.   

Correa said that Acer planned to place the full-featured  Lotus Smart 
Suite--which included a  word processor, spreadsheet  and other 
programs--on its consumer PCs.  But when Microsoft got wind of  the 
change, its top management  called Acer's top management in a coordinated 
campaign, he said.   

Correa said that two days before a contract was to be signed  with Lotus 
in early 1997, "I was ordered to kill it."  Lotus was replaced  with a 
more limited package that included  only Microsoft Word and the reference 
package Microsoft Bookshelf,  he said.   

Correa said he and his boss managed to keep Lotus on the  small portion 
of machines that make up the commercial market  and they are there to 
this day. Lotus, a unit of IBM,  had no comment.   

In another negotiation, Correa said that one of his bosses  soured on a 
software licensing deal with Corel   early this year. The boss feared 
Microsoft would back off from  cooperating on a joint technology project. 
  

"He said to me, and this is a quote, 'I would pay $2 million  more to 
keep Microsoft happy,'" Correa said.   

Correa said he handed in his resignation in early April,  after an Acer 
manager ruled out replacing the Microsoft Encarta  encyclopedia with 
World Book, made by IBM. Later World Book did  get on the low end of the 
line after protests by IBM, an important  customer, he said.   

Correa, who lives in San Francisco, said he decided to talk  with Reuters 
because he was quitting the field of computers and  software entirely.   

"I'm telling this story because there are so many people  fed up in this 
industry and I'm fed up," said Correa.   

Microsoft spokesman Mark Murray described Correa's allegations  as "false 
and misleading." Acer also strongly denied the allegations.   

Michael Culver, vice president and general manager of Acer's  consumer 
business division, said Correa was a disgruntled employee  who did not 
understand how decisions were made.   

"The financial and business decisions are secondary to 'ease  of use' 
requirements," Culver said. "In each of these cases,  Smart Suite and 
Corel were disqualified based on our  ease of use testing, not based on 
any business negotiations."   

Culver said that contracts were confidential and he was  unable to 
disclose terms, but he could say flatly that "there  was no pressure 
brought to Acer by Bill Gates or anybody else  at Microsoft regarding the 
decision to bundle Microsoft's  applications versus any of the 
competitive applications."   

Acer's corporate counsel, Suchitra Narayen, said in a fax  to Reuters 
that the company believed Correa's account was inaccurate  or incomplete 
and said he was not in a position to have  direct knowledge about 
Microsoft matters.   

But people from other companies who dealt with Correa disagreed.   

Steve Houck, a sales account manager with Canadian software  maker Corel, 
a rival of Microsoft best known for its Word Perfect  and Corel Draw 
products, said anyone who wanted to license software  to Acer went to 
Correa.   

"He would see the inner workings of that side of the business,"   Houck 
said. "In everything I've dealt with him he's been on the  up-and-up and 
very professional."   

Other people who had professional dealings with Correa also  spoke to 
Reuters but declined to be identified, citing a fear  of retaliation from 
Microsoft.    

"You're lucky to get him," said one of them. "We all know  the stories 
but no one will go on the record. What's amazing  is he decided to leave 
the industry."   

As part of a broad complaint against Microsoft that goes  to trial on 
September 8, the government wants a judge to prevent  the Redmond, 
Washington, software firm from "taking or threatening  any action adverse 
to any person" for "failure to license or  distribute Microsoft's 
Internet browser software or other software  product."   

But fear pervaded Acer, Correa maintained, recalling that one  of his 
bosses said: "Look, we cannot afford retaliation."   

Correa said Acer executives feared the software giant would  retaliate by 
withholding crucial updates and "bug" fixes for  the Microsoft Windows 
operating system.    

"If Microsoft does not give us information we are basically  paralyzed," 
Correa said.  "So if by accident they happen to forget to give  us a bug  
report or they forget to give us a software update or they forget  to 
include us in a training session that would definitely hurt  the 
business."   

But Microsoft said Correa's account mischaracterized the  relationship, 
noting Gates spoke at Acer's 20th anniversary  celebration in Taiwan in 
1996. Correa's allegations center on  events starting in early 1997.   

"We have a strong relationship with Acer," Microsoft's  Murray said. 
"Their decisions over the years on what applications  to ship have never 
had any impact on our operating system  relationship."   

In fact, Correa said he greatly admired Microsoft. "Microsoft is probably 
the most professional, the most  competent, the most directed company I 
have ever done business  with," he said. "Not once, not twice, but every 
time they are  able to outperform their competition in single-mindedness, 
in  determination to accomplish the deal."   

Story Copyright   1998 Reuters Limited. All rights  reserved.