IBM: Microsoft warned PC makers against using OS/2

An IBM official, testifying in a pre-trial deposition, said that Microsoft Corporation threatened to withhold Windows 95 from it previous to its release in 1995 if the computer giant continued to sell OS/2, then a competitor to Windows. IBM needed Windows 95 to keep its personal computers competitive, because Windows was then (as now) the overwhelming market leader; Windows 95 went on to be the best selling operating system of all time. The official, Garry Norris, represented IBM in its negotiations with Microsoft in 1995 and 1996.

Perhaps most intriguingly, Norris says that both Compaq and Hewlett Packard wanted to bundle OS/2 with their PCs but didn't because of threats from Microsoft.

"I was simply told repeatedly that they \[the manufacturers\] feared retaliation from Microsoft," he said.

And Microsoft threatened IBM directly over OS/2 as well.

"Microsoft told us repeatedly, 'Because you compete with us \[with OS/2\], you're going to get unfavorable terms and conditions \[on Windows\],'" Norris said. Norris says that companies such as Compaq and Dell got deductions on the price of Windows because they didn't compete with Microsoft.

Norris testified that IBM paid $9 per computer for Windows 3.1 but that the price went up to $46 for Windows 95, a dramatic increase in price.

Spokesman Mark Murray, however, says that Microsoft licensed Windows to IBM "at a competitive price, and IBM continued to ship a variety of competing software programs alongside the Windows operating system.

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