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TESTIMONY IN the US government's anti-trust trial against Microsoft concluded in Washington last week. Microsoft's final witness, Richard Schmalensee, dean of the Massachusetts Institute of Technology Sloan School of Management and an expert economic witness for the defence, argued that the state of competition in the computer industry was such that Microsoft was not a monopolist. He cited the deal between AOL and 3Com to allow Internet access via palm-held devices that ran no Microsoft software as evidence - and said that it did not use its dominance to gain unfair advantage for its other products, specifically its Web-browsing software.

That argument was undermined when the department of justice (DoJ) submitted notes of a telephone conversation with Microsoft's chairman, Bill Gates saying that AOL, "doesn't have it in their genes to attack us in the platform space".

The DoJ lawyer David Boies was also able, as so often in this trial, to seize upon factual errors in Microsoft's case. He displayed two charts depicting quarterly estimates of Netscape browsers shipped with PCs that were included in Schmalensee's testimony. The numbers did not add up, and Schmalensee admitted that one of them was wrong, saying that the charts were prepared by his staff and that he had reviewed only one of them before using them in his testimony.

Each side has 30 days to submit proposed findings of fact. The judge will then hear arguments before issuing tentative findings to form the basis for his final decision. Arguments are scheduled to be closed by 21 September. A final decision is not likely before mid-October.

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AOL SAID last week that it was entering into a strategic partnership with 3Com to bundle AOL software with PalmPilot personal organisers, allowing users to access e-mail and other AOL online services. "Offering our members the benefits of connected interactivity beyond the computer is another piece of our AOL Anywhere strategy to make AOL available through multiple connections and multiple devices," said AOL's president, Barry Schuler.

In Europe, AOL is considering offering free Internet access to retain market share in the wake of proliferating free providers such as Freeserve.

Analysts expect AOL to launch new services rather than overhaul its existing business completely. Expected changes include a service with no monthly subscription fees and a subscription service using a freephone number.

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AMD UNVEILED its new processor last week and predicted an operating loss of close to $200m (pounds 125m) for the second quarter on revenues that will not exceed $600m. The company chairman, Jerry Sanders, said it was suffering from Intel's pricing policy on Celeron and Pentium II processors. The company is pinning its hopes of recovery on its new high-speed, low- cost K7 processor, which was unveiled last week. The processor, which will be marketed as the Athlon, is expected to out-perform Pentium III chips running at the same speed. Initial speeds are 500, 550 and 600Mhz. IBM and Compaq are expected to produce systems using the chip.

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HITACHI AND NEC unveiled an alliance pact last week, including joint development of dynamic random access memory (Dram) chips. The alliance is designed to reduce development costs by economies of scale as well as increasing profits in existing divisions hurt by falling demand and keen competition. The companies said they intend to capture 20 per cent of the global market.

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