Microsoft claimed in court yesterday that AOL's $10 million acquisition of Netscape was measurable proof that competition in the IT and Internet sectors is alive and well, but a leading MIT economist, begged to differ.
Franklin Fisher, MIT economist and the Justice Department's lead witness, argued that the price reflected the value of Netscape's portal business rather than its browser based revenue, which has plummeted since Microsoft bundled Internet software with Windows.
Dr Fisher argued that Microsoft shattered Netscape's browser business, and in comparison with other deals in the industry, "Netscape, if anything, was acquired cheaply."
Fisher fired a second shot across Microsoft's bows, saying that there was no economic sense in spending hundreds of millions dollars on developing a product only to give it away. He argued this was the action of a monopolist, the allegation disputed most fiercely by Redmond.
Fisher said that the possibility of new competition in the future does not prevent a company behaving in a monopolist manner today.
Fisher was at odds with Richard Schmalensee, fellow MIT economist and Microsoft expert witness, describing him as 'credulous' and his data, analysis and overall thesis as "confused...muddled...ridiculous."
The Wall Street Journal reported also that an open letter to President Clinton criticising the Justice Department and Federal Trade Commission for their anti-trust pursuit of Microsoft was signed by 240 US economists. The group was assembled by the Independent Institute, which is funded partly by Microsoft.
Fisher also pointed out that Netscape had been paying Compaq $700,000 to get its browser preinstalled onto Compaq PCs.
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