For the first time since its landmark antitrust battle with U.S. Justice Dept. began three days ago, Microsoft landed some stinging punches on the trustbusters. Cross-examining James Barksdale, CEO of Netscape Communications Corp., Microsoft lead attorney John Warden hammered away at one of the pillars of the government's case: that Bill Gates's software giant tried to put Netscape out of business.

Warden's most powerful piece of evidence came from a surprising source, Netscape founder James Clark. In a deposition earlier this year, Clark acknowledged that in October, 1994, Gates had publicly announced plans to bundle its Internet browser into the Windows operating system.

Noting that the Microsoft CEO made this statement before Netscape had even released the first version of its Navigator browser, Warden argued that his client's only goal was to improve its product -- not to drive the still insignificant Netscape into oblivion.

OPEN AVENUES. All day long, Warden bored into Barksdale. Though the Netscape chief never lost his composure, he was forced to acknowledge that Microsoft's Explorer browser had won better product reviews than did Netscape's Navigator and that Netscape still had plenty of ways to distribute its products -- in spite of exclusive deals that Microsoft had signed with Internet service and content providers.

These admissions all undercut important parts of Justice's argument that Microsoft won the Internet browser war by fighting dirty -- rather than on the merits of its product. But all is not lost for the trustbusters. When Justice lead attorney David Boies begins his redirect examination of Barksdale -- which may not be until next week -- the Netscape CEO will have plenty of opportunity to lash back at Microsoft.

Still, Barksdale will have a hard time erasing all of the damage that Microsoft did to the government's case on Oct. 21. The Clark testimony about the October, 1994, Network Economy Conference gives Microsoft grounds to argue that its plan to integrate a Web browser into its Windows operating system had nothing to do with Netscape. According to Clark, Gates said "I hope no one plans to make money on browsers because they will get bundled into the operating system."

At one point during the cross-examination, Barksdale was also forced to admit that -- by Netscape's own count -- Microsoft had won 10 out of 16 recent browser product reviews. Additionally, Warden argued that Microsoft's entry into the browser market forced Netscape to improve its product more rapidly than it would have done otherwise. Barksdale didn't deny this point but said that Microsoft's decision to offer browser software for free had ultimately slowed the pace of innovation. If Netscape could still charge for a browser, Barksdale said, we would be "innovating a heck of a lot more."

TOO MUCH TROUBLE? To contradict government claims that Microsoft had cut off Netscape's avenues of distribution, Warden pointed out that Barksdale's company still sold its product through thousands of distribution partners, including developers, Internet service providers, and computer makers. Moreover, Warden pointed out that it's easy for consumers to get Netscape's Navigator for free on the Web.

"Isn't it a fact that home PC users...may freely chose at no cost to use Netscape's Web browsing software?" Warden asked.

"Most people are not going to go to the trouble to do it," Barksdale responded, noting that it's easier for consumers to simply use the browser that comes with their computer.

Later, Warden released an E-mail that Clark had written to Microsoft's Dan Rosen and Brad Silverberg. In it, Clark suggests that Microsoft take an equity interest in Netscape. "We want to make this company a success, but not at Microsoft's expense," Clark wrote. Warden argued that this contradicted the government's portrayal of events -- which is that Microsoft approached Netscape with an investment offer.

Later outside the courtoom, Justice lead attorney Boies said Clark's idea was rejected by Microsoft and quickly disregarded at Netscape. He said Warden was merely trying to divert attention away from the central issue at the trial: Microsoft's predatory tactics. "It's just another attempt to change the subject," Boies said.

Barksdale will likely stay in the hot seat for at least another full day. Warden, who has been attacking the statements Barksdale's 127-page written testimony in the order they are made, has reached only page 24. And because the court won't be in session on Friday, it now appears that the government's next witness, Avie Tevanian of Apple Computer, won't appear until next week.

By Mike France in Washington