States Imply That Qwest Testified Because Of Dire Financial Situation

Microsoft

Questioning Gregg Sutherland, the senior vice president in charge of Qwest's corporate strategy group, attorney John Schmidtlein implied that Qwest's financial problems were a motivating factor in Sutherland's agreeing to testify.

According to Schmidtlein, Qwest's financial problems include its plummeting stock price (at $4.90 Monday afternoon, down from a 52-week high of $41.83) and an ongoing investigation by the Securities and Exchange Commission and other law enforcement bodies about Qwest's accounting practices and its entry into the long-distance telephone market.

When Microsoft attorneys objected to this line of questioning, Schmidtlein told U.S. District Court Judge Colleen Kollar-Kotelly that Qwest's stock value and the investigations have a bearing on the company's financial status. The judge permitted Schmidtlein to continue.

Sutherland, who also worked in the past for American Management Systems and Cap Gemini Ernst and Young, said he agreed to testify in February after his managers asked him to do so. He referred to testimony given last month in the trial by SBC Communications' engineer Larry Pearson, saying he "[thought it was incorrect."

In his testimony, Pearson said he believed that Web services posed a "significant threat" to Microsoft's PC operating system monopoly. Sutherland said he disagreed "quite a bit" with that statement, adding that in fact Web services would make a PC even more valuable, as the computer will continue to be the conduit through which the user interacts with the Web services.

Before this morning's testimony began, the states had sought to have portions of Sutherland's written direct testimony thrown out, citing what they described as Sutherland's lack of knowledge about unified messaging, Web services and other topics.

When Judge Kollar-Kotelly said she would in fact admit the testimony, Schmidtlein then attempted to show that in Sutherland's previous jobs he had virtually no experience with or understanding of Web services.

Displaying Sutherland's resume on a large screen in the courtroom, Schmidtlein reviewed Sutherland's career point by point. According to Sutherland's credentials, he had been with Cap Gemini Ernst and Young for five years, and had most recently managed the consulting firm's telecommunications strategy.

But "it's not true you worked for Cap Gemini Ernst and Young for five years, is it," said Schmidtlein, in part because Cap Gemini acquired Ernst and Young's consulting arm in June 2000. "And did you understand Cap Gemini Ernst and Young was a significant supporter of Microsoft products?"

Schmidtlein and the other states' attorneys displayed press releases about a relationship Cap Gemini Ernst and Young created with Microsoft about Windows 2000, and several more detailing aspects of the partnership between Qwest and Microsoft.

Quotes from Microsoft executives figured prominently in Qwest's annual reports for 1999 and 2000. The 2000 report featured a large color photograph of Microsoft CEO Steve Ballmer grinning, which elicited a few snickers in the courtroom.

Sutherland said that executives from other companies, including Ann Livermore, who heads Hewlett-Packard's global services arm, were also featured in the reports.

Schmidtlein also said Microsoft has invested millions of dollars in Qwest, and that Qwest stood to reap billions more in a deal in which Qwest .Net customers would be transitioned over to Microsoft's MSN network. Qwest.Net and MSN are the companies' respective Internet-content products.

Qwest is expected to announce its quarterly financial results tomorrow.

Microsoft's next witness Monday was Rob Short, the company's vice president for Windows Core Technology.