An antitrust expert said the testimony by senior vice president Joachim Kempin came close to an admission that Microsoft Corp holds monopoly power, a central issue in the case.

Perhaps equally important, district judge Thomas Penfield Jackson questioned Kempin intensively about sworn statements by a Gateway 2000 Inc. executive who said that his computer manufacturing firm was threatened by Microsoft.

Together, the two issues are the heart and soul of allegations by the justice department and 19 states that Microsoft holds monopoly power in the market for the Windows personal computer operating system and has abused that power in order to preserve and expand it.

Kempin, the 11th of Microsoft's 12 witnesses, sets the prices for Windows operating systems sold to computer makers.

Government lawyer Steven Holtzman asked Kempin in a deposition taken October 1, 1998, whether he considered the royalties charged by other vendors when he set the price for Microsoft.

"We look at some of them once in a while but in this particular case we really compared it with Windows 95," said Kempin. "It was the closest in value you could get to it."

Kempin, asked if he had looked at competition more generally, replied: "I look at the competitors but Windows 95 or 98, when it comes to value propositions, it just doesn't come close to anything else. Meaning I believe that the competitors are basically selling inferior type products."

A company with monopoly power can set prices without regard to what its competitors are charging and a Washington lawyer said the testimony was significant.

"This comes close to an admission that Microsoft holds monopoly power," said Steve Newborn, a lawyer with Rogers & Wells, who once worked on a case against Microsoft for the Federal Trade Commission.

But a Microsoft lawyer said Microsoft already charges less than other operating systems and called it "weird" to be concerned "that Microsoft prices so attractively."

"It's odd you can have this beautiful Rolls Royce car priced less than an (inexpensive) Jetta but that somehow is pricing like a monopolist," said Steven Holley.

Government lawyers said that Kempin had admitted to monopoly power and made a second important concession as well, acknowledging there were barriers to entry from would-be competitors.

Kempin said in his deposition that the number of applications and peripheral devices supported on Windows is "so huge that the benefits for people buying into that platform is huge." And that means that software makers write for the "highest volume platform there is," namely Windows.

Microsoft's Holley said that was no barrier to entry because "the only way it would constitute a barrier is if you could prove that no one will write for any other platform."

Microsoft spokesman Greg Shaw said that Kempin had testified that "Microsoft faces intense and unpredictable competition." But government lawyer David Boies said that "when you can ignore your competitors, that defines monopoly."

In another important development, the government presented written answers to government questions from James von Holle, an executive with Gateway 2000. The answers were made under oath.

The government says that Microsoft competed unfairly against Netscape Communication Corp in its attempt to win a war for share of the market in Web browsers used to surf the Internet.

Von Holle testified that Microsoft warned his company that its decision to offer Netscape Navigator could pose a "serious issue that could affect our working relationship."

Von Holle also said that "Gateway's license of Windows NT Server," software to run network computers, was "contingent on Gateway's agreement not to offer competitive products on some of its server models."

Kempin, who heads relations with computer makers, dismissed the allegations by saying, "I have no knowledge of this."

Judge Jackson intervened and said soberly: "Gateway is responding to an official inquiry by the Department of Justice and says that Microsoft representatives" made the threats. "Are you saying that never happened?" asked the judge. "I have no knowledge," insisted Kempin. He said he would have expected to hear from the Chief of the company and because he did not, Kempin assumed" insisted Kempin. He said he would have expected to hear from the Chief of the company.