Economist Richard L. Schmalensee certainly did his homework before taking the stand on Microsoft's behalf. His written testimony, running more than 300 pages, was by far the longest of all the witnesses who have taken the stand to date. But it seems that the government prosecutors haven't noticed. Although Microsoft attorneys painstakingly took the Justice Dept. witnesses through their testimony virtually paragraph by paragraph, Schmalensee, dean of the Sloan School of Management at the Massachusetts Institute of Technology, barely has had to refer to his testimony.

Rather than requiring Schmalensee to answer for his testimony, David Boies, Justice's lead litigator, has chosen to attack the economist's credibility by resurrecting his expert-witness work in past cases. Boies has tried to show that in the Microsoft case, Schmalensee seems to have contradicted some of the positions taken in earlier cases.

For instance, on Jan. 19, Boies submitted part of Schmalensee's 1981 deposition testimony in an antitrust case against Data General Corp. The economist testified then that Data General computers had an advantage over other systems because once many customers became locked in, the prospect of converting their applications to a new operating system "carries with it sufficient expense, inconvenience, and risk of delay or failure." He noted that with such a "lock-in," competition could be dampened, and the company would have enough "power over price" to charge a premium for its operating system.

But in his testimony for Microsoft, Schmalensee has said that while Microsoft has the lion's share of the market for PC applications, switching costs are not great because most users didn't need all those applications. He noted during cross-examination that he has moved from Apple Computer's Macintosh to Windows and back again without trouble. He also said that it was harder to switch operating systems in the past because the customers were writing their own applications. And as far as price, he has testified, Microsoft never charged a premium because of the risk of competition.

A more recent case -- in which Schmalensee testified on behalf of Microsoft in a suit by Bristol Technologies -- also became an issue. During his cross-examination on Jan. 19, Schmalensee emphatically said that he considered Microsoft's Internet Explorer browser to be a part of the operating system -- a central tenet of Microsoft's defense. Justice claims that the browser is a separate product, and that Microsoft integrated the browser into the operating system as part of a plan to kill off a rival browser made by Netscape Communications Corp. Boies introduced an internal Microsoft E-mail that also had been evidence in the Bristol case. The December, 1995, E-mail between Microsoft executives, referring to the Bristol-Microsoft contract negotiations, noted: "I'd rather use IE as a bargaining chip to clarify the extent of their rights; i.e., treat IE as a separate deal and thereby set the precedent that apps in the box aren't really part of the OS."

Schmalensee noted that he did see that E-mail when he was preparing for the Bristol case, but he acknowledged that he never checked into whether Microsoft actually used the browser as a bargaining chip -- meaning that the company would have treated the browser as a separate product -- during its talks with Bristol.

During cross-examination, Schmalensee also said that he was unaware that Microsoft may have concluded that the biggest reason why consumers switched to Internet Explorer was because PC makers were selling operating systems with a browser program. Boies then introduced a Microsoft internal memo from May, 1998, which noted the reasons why consumers switched: "It came with my computer is the No. 1 reason people switch to IE." The conclusion, the memo noted, was that computer makers "are the best vehicle to gain browser share."

But Schmalensee refused to concede that PC makers were the best distribution channel for browsers. Although Justice has contended that integration has virtually cut off this channel for Netscape, Schmalensee noted that there is nothing preventing PC makers from installing Netscape as well. He said that because Netscape is using other methods to distribute its browser, it must have thought that other channels were a good method. But he admitted that he did not know what percentage of PC makers shipped computers with Netscape's product installed. He said that he had looked into "whether Netscape had been foreclosed from distributing software and from the Windows desktop." He said he didn't think that finding out the percentage of PC makers distributing Netscape was relevant.

Cross-examination of Schmalensee is expected to end on Jan. 20.

By Susan Garland in Washington