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The New Yorker - August 16, 1999
The more Bill Gates dwelled
on his problems with the govern- ment, the more agitated he became
and the more one could sense his anger in public appearances and
in private conversation. The government had pursued his company,
Microsoft, since 1990, beginning with what at first seemed a routine
Federal Trade Commission investigation, but that pursuit escalated
in 1997, when the Department of Justice began one of the largest
antitrust actions in United States history. It was, Gates told me
recently, as if the government were announcing, ³O.K., we¹ll show
that we can take some blood out of these boys!
Gates had little comfort in knowing that Microsoft, which he co-founded
in 1975, had bested the competition, including such giants as I.B.M.;
or that its software served as the essential code controlling more
than three-quarters of all personal computers; or that his company,
unlike such stock-market favorites as Amazon.com, enjoyed astonishing
profit margins of nearly forty cents on each revenue dollar and
its stock price had made it the world's most valued corporation.
Despite being the richest man on the planet—last month, his
net worth was estimated at a hundred billion dollars—Gates
nevertheless believed that he was a victim. The United States government
had become a menace unlike any he had encountered in the business
Gates felt that the government was trying to dictate to him how
to run his company—telling him that he had to alter contracts
with computer manufacturers and Internet companies, and asserting
that for Microsoft to include its own Internet browser, Internet
Explorer, in its Windows software was an illegal use of monopoly
power. Gates's response was: Didn't the package make
computing simpler? Didn't consumers benefit because the extra
features were free? How dare anyone demand that Microsoft either
untie this package or include a rival browser, like Netscape. Would
the government tell Coca-Cola to include a can of Pepsi in every
Within the company, Gates and most of his senior staff were implacable.
They invoked a phrase, "hard core," to describe both
their stance and their corporate culture. To be hard core was to
be a believer, a gladiator who preferred combat to compromise. They
might wear T-shirts and baggy shorts to work, and play soccer on
the grass of their two-hundred-and-ninety-five-acre corporate campus,
in Redmond, Washington, but Microsoft executives were tough. They
would hold rallies in Redmond at which Steve Ballmer, now the company
president, pumped up the troops by leading them in a war whoop,
screaming for victory.
For a time, peace between Microsoft and the government seemed possible.
In 1994, both sides signed a consent decree that placed a few curbs
on the company. But in 1995 the Justice Department challenged Microsoft's
proposed acquisition of Intuit, the dominant financial-software
company, and in October of 1997 Justice filed a petition claiming
that Microsoft had deliberately violated the consent decree. This
started the legal machinery that led, in 1998, to the extraordinary
antitrust suit against Microsoft.
Nevertheless, Gates's legal staff often assured him that
Microsoft would overcome this obstacle. William H. Neukom, his longtime
general counsel at Microsoft, told him that the law was its shield;
and Gates, who is the son of an attorney, embraced the belief that
the law, like science, relied upon pristine facts. Yet Gates also
knew that politics could sway the law. So he fretted; and he became
apoplectic when federal judge Thomas Penfield Jackson, in December
of 1997, issued an order to stop Microsoft from "bundling,"
or including its Internet Explorer with its Windows operating system—a
decision that Microsoft immediately appealed, saying that removing
the browser would cripple the operating system. "He just ordered
it!" Gates told me months later, still incredulous.
By the time Gates appeared as a speaker at the annual gathering
of the World Economic Forum, in Davos, Switzerland, in late January
of 1998, his public-relations handlers were surrounding him as if
he were a heavyweight champion making his way to the ring. At a
media lunch, I found myself seated next to Gates at a table for
ten that included his wife, Melinda French Gates; several editors;
and the chairman and C.E.O. of Coca-Cola, M. Douglas Ivester. Gates
has never liked small talk. He turned to me and complained about
a panel I'd moderated a few days before. He said I had allowed
enemies of Microsoft to bully his chief technology officer, Nathan
Myhrvold. (Myhrvold had more than held his own in the exchange.)
Gates sat huddled over, his arms folded across his chest; his brown
hair was unparted, unwashed, and combed straight down and into bangs,
like a little boy's. He rocked gently back and forth in his
chair, his eyes fixed on the floor. His manner was gruff, and he
seemed unwilling (or unable) to camouflage his rage. Melinda Gates
tried discreetly to get his attention, but he would not look up.
Then he suddenly declared, "Neither Nathan nor anyone else
from Microsoft will ever appear again on such a panel!"
When Gates was introduced, as the luncheon speaker, a moment later,
he refastened his C.E.O. mask and spoke calmly for about twenty
minutes, offering a compelling exegesis on the future of computing
and the alarming speed of change. He responded easily to questions
from reporters about Microsoft's legal woes. I asked Gates
what he had to say to those who believe that Microsoft has behaved
arrogantly, as if the government had no right to ask questions.
Gates plunged into a five-minute tirade, which was memorable less
for what he said than for the raw hurt he betrayed. Reporters whispered,
"What's bugging him?" After taking several more
questions, he returned to the table and, hovering above me, bellowed,
"What do you mean, 'arrogant'?" Ivester's
eyes bulged, as if to say, This is not how Fortune 500 C.E.O.s behave!
Melinda Gates looked stricken.
"Remember when you said neither Nathan nor anyone else from
Microsoft would appear on a panel again?" I said. "That
was arrogant."
"What do you expect me to do? Order Nathan to appear?"
Gates asked.
"No. But if he won't appear, you appear. This is a
democracy, and people have a right to ask questions."
Just as suddenly, the belligerent Gates was transformed into a
vulnerable adolescent. "What should I do?" he asked
plaintively. Everyone at the table fell silent.
Over the next several months, stories about Microsoft's
alleged tactics appeared in the press. It was said that several
years earlier senior Microsoft executives had offered an alliance
with Netscape and also an infusion of capital to the company if
it would abandon most of the browser market to Microsoft, and that
one Microsoft executive reportedly had threatened to cut off its"air
supply" if it refused. It was said that Microsoft had forbidden
Compaq Computer to drop the Internet Explorer icon that appeared
on computer screens—the desktop—when the machine was
turned on; otherwise, Gates & Company would refuse to sell its
Windows 95 operating system to the P.C. maker. In March of 1998,
Gates was summoned to testify before the Senate Judiciary Committee,
and there he reluctantly admitted that Microsoft's contracts
with certain Internet service or content providers precluded them
from promoting Netscape. Such behavior might qualify as the "restraint
of trade" forbidden by antitrust laws.
When it began to seem likely that the government would launch an
antitrust suit, a Microsoft team, led by Bill Neukom, met in April
and May with the Justice Department in an attempt to head it off.
Gates himself had an audience with Assistant Attorney General Joel
I. Klein, who was the chief of the Antitrust Division, to explain
Microsoft's position. The two met in the late afternoon of
May 5th, at the Washington office of Sullivan & Cromwell,
the Wall Street law firm that has done much of Microsoft's
outside legal work for the past decade. Gates was "very passionate,
very forceful," alternately informative and irate, a government
official who was there recalls. "He began with a presentation
of his plans for Windows.... It was reasonably civil. When questions
were raised, however, he grew angry, condescending, snide, and petulant."
Justice officials argued that Microsoft's power was impregnable
because consumers were so dependent on Windows. Gates exclaimed,
"You give me any seat at the table"—he mentioned
Linux, an upstart operating system, and Java, a computer language
created by Sun Microsystems, a Microsoft foe—"and I
can blow away Microsoft!" If his competitors had half a brain,
he was suggesting, Microsoft would be toast. Gates told me later
that he was also trying to say something else: "Where did
this 'monopoly' come from? Do I own all the diskettes
in the country?...It's such a silly proposition to think that
in an intellectual-property area you don't have massive competition.
There is nothing that Microsoft has that guarantees its position."
Most of the government officials were surprised. Normally, when
a target of a lawsuit asks for a meeting the target is solicitous.
They saw in Gates a swagger that announced, in the words of one
Justice official, "I'm the toughest kid on the block."
Neukom told me that Gates was trying to seek common ground, but
that he "was frustrated that the government seemed to have
such a vague understanding of our technology." Government
officials, Neukom recalled, kept asking why Microsoft needed certain
features included in the operating system, and Gates kept warning
that the government should not be in the software-design business.
This meeting was followed by a great many telephone calls and by
ten days of negotiations, all aimed at a possible settlement. "They
put on the table Thursday morning"—May 14th—"something
that could have been, for the first time, significant," Klein
recalled. Klein thought that he heard Microsoft signal a willingness
to include a Netscape icon on every copy of the desktop. Perhaps,
both Klein and Neukom hoped, the gap between them had narrowed.
Gates recalled, "We said, 'O.K., we'll at least
sit and listen.'"
Gates later told me that the Justice Department had been so vague,
so "open-ended" in its demands, that "anybody
could be part of Windows"; it was as if Microsoft were to
be the mule for the entire software industry. Neukom kept recalling
what had happened to Sears after 1977, when it signed a consent
order stipulating that it would encourage competition by not opening
stores in malls; then malls redefined shopping. By late Saturday
morning, May 16th, they had reached an impasse.
The following Monday, Klein, accompanied by Attorney General Janet
Reno, announced that, on behalf of the United States government
and joined by attorneys general representing twenty states and the
District of Columbia, he was charging Microsoft with breaking the
law in two essential ways. First, it had employed illegal tactics
to crush or coerce competitors and sometimes allies, thus harming
consumers—a key test of antitrust law. And, second, the government
claimed that it had violated antitrust laws in an attempt to preserve
its Windows monopoly and use it to dominate new markets.
Competitors applauded, although more than a few were torn between
a fear of Microsoft and a distaste for government meddling. "I
don't think there's much doubt as to the facts,"
said Eric Schmidt, the chairman and C.E.O. of Novell, a software
competitor and a sometime Microsoft partner. "There is a very
large question about what to do about it. I don't think anyone's
in favor of a Department of Microsoft Management." Scott McNealy,
the C.E.O. of Sun Microsystems, welcomed the government's
lawsuit, because, he told me, he feared that, if left unchecked,
Microsoft could use its dominance over operating systems to "leverage
into other businesses." McNealy speaks of Gates as an unstoppable
force who will ruthlessly smash all competitors, yet then declares
that new technology has "the shelf life of a banana."
Gates was heartened in June of 1998 when the federal Court of Appeals
overturned Judge Jackson's December order for Microsoft to
separate its browser from Windows. Jackson, the higher court ruled,
had "erred procedurally" by issuing an injunction before
Microsoft was allowed to challenge it, and had erred "substantively"
by acting as if judges should try to "oversee product design."
Instead of being harmed, the court said, consumers benefitted from
a free, easy-to-use browser that was integrated. Nevertheless, Gates
himself remained distraught. He did not, he told me in an E-mail
exchange, "expect competitors to try and use the government
to help them get an advantage over us."He went on, "You
are welcome to say I was naïve about this." He was shocked
that his government had sued and that it kept broadening the charges.
He saw himself as demonized, a point he emphasized both publicly
and privately. Friends compared him to Joseph K. in Kafka's
novel "The Trial"—a man charged with vague crimes
he does not comprehend. On the eve of his own trial, Gates moaned
to friends, "This isn't justice!"
ii—"a great trial"
An antitrust trial is rarely a courtroom drama, with climactic
moments when witnesses suddenly shrivel and break down. It depends
on the accretion of relevant fact piled on irrelevant fact. "I
don't think you generally get a smoking gun in antitrust cases,"
said Judge Thomas Hogan, who was appointed to the District Court
in 1982. In most of the cases he has presided over, including his
1997 ruling that a merger between Staples and Office Depot would
harm consumers, "you have to weigh all the facts," but
it comes down to "certain key facts" from among all
the competing claims. Inevitably, the credibility of the witnesses
helps a judge sort out what to believe.
The Microsoft trial, which began last October and, barring settlement,
may not yield a definitive ruling for several years, is of historic
import. George L. Priest, the John M. Olin Professor of Law and
Economics at the Yale Law School, cited only two other trials "that
have been of this calibre": the 1911 Standard Oil case, and
the Socony-Vacuum Oil case, in 1940. "There have been very
few where the imagination of the country is caught up in the outcome
of the trial," Priest said. "This ranks with one of
the great antitrust cases in the history of the Sherman Act."
The roots of antitrust law go back almost four centuries, to English
common-law cases aimed at curbing monopolies. In this country, just
after the Civil War, state governments began to sue companies that
rigged prices and choked competition. Then, in 1888, Presidential
platforms of both political parties attacked wicked corporate "trusts,"
and over the next several decades two pieces of national legislation
were enacted that remain the cornerstones of antitrust law. The
first was the Sherman Act, of 1890, whose words, such as these in
Section 1, appear deceptively simple:
Every contract, combination in the form of trust or otherwise,
or conspiracy, in restraint of trade or commerce among the several
States, or with foreign nations, is declared to be illegal.
Section 2 says:
Every person who shall monopolize, or attempt to monopolize, or
combine or conspire with any other person or persons, to monopolize
any part of the trade or commerce among the several States...shall
be deemed guilty of a felony.
The Clayton Antitrust Act, of 1914, allows injured citizens or
corporations to file lawsuits against antitrust violators, and a
later amendment, the Robinson-Patman Act, bans price discrimination
where the effect "may be substantially to lessen competition
or tend to create a monopoly."
The complex task of proving that Microsoft and Gates violated these
laws fell to the government's chief trial counsel, David Boies,
a man who does not use a P.C. Except for a few years in the late
seventies, when he was chief counsel to Edward Kennedy's Senate
Judiciary Committee, Boies had been in private practice his entire
professional life. In some thirty years at Cravath, Swaine &
Moore, he has appeared in court on behalf of clients such as I.B.M.,
in its successful thirteen-year battle to block a government claim
that it was an illegal monopoly, and the Federal Deposit Insurance
Corporation, in its case against Michael Milken, winning a $1.1-billion
Boies, whose father taught high-school history in the northern
Illinois farm community of Marengo, studied law at Northwestern,
then at Yale, and once earnedextra money by playing in bridge tournaments,
where his uncanny memory gave him an advantage. After Yale, where
he ranked second in his class, he was recruited by Cravath, which
he left in 1997 to establish a boutique law practice with an old
friend, Jonathan Schiller.
Joel Klein recruited Boies to the Justice Department in December
of 1997. "He's been through the I.B.M. wars,"Klein
told me. "I didn't want to get stuck in some quagmire.
You need someone who knows how to move a case." Boies's
usual fee exceeds six hundred dollars an hour, but the government
was paying less than a tenth of that. (At Cravath, Boies's
annual pay package amounted to two million dollars.) Nevertheless,
Boies is not terribly righteous about his public service; indeed,
he concedes that he might have represented Microsoft if it had asked
first. "I certainly didn't think Microsoft was an evil
empire," he said. "Nor do I think so now." Boies
was interested in taking the case not least because he was in the
arena and might help define whether static antitrust laws should
apply to fast-changing technology companies. "I had a view
that the antitrust laws applied to the software industry. I did
not have a view as to whether Microsoft's conduct was or was
not a violation of the antitrust laws. I did have the view that
it was not entitled to a blanket pass."
One of the ironies of the case, said William Kovacic, a law professor
at George Washington University Law School, who was a member of
the Federal Trade Commission's Bureau of Competition during
the Carter and Reagan Administrations, "is that the very litigation
success that David Boies and his colleagues at Cravath had in the
seventies and early eighties with I.B.M. now became the obstacle
to their prevailing in this matter. One of the big challenges for
the government brief-writers is to sidestep lots of the decisions
from that period that embrace the idea that the dominant firms ought
to be encouraged to compete and to compete hard."
In court, Boies had come to be feared for his mastery of detail,
his timing, and his charm. In a 1992 action brought by the government
of the Philippines against Westinghouse, after the plaintiff's
lawyer had finished a brilliant opening statement, the judge announced
that the court would adjourn for the day. Boies, at the defense
table, shot out of his seat and, insisting that he was so outraged
by the falsehoods his opponent had uttered that he couldn't
bear the thought of jurors' spending the night burdened by
them, pleaded with the judge to allow him fifteen or twenty minutes
to start his opening statement. The judge relented, and Boies reversed
the momentum. "If I had let the jury walk out of there without
challenging the integrity of what they had heard, it would have
been an uphill battle," he recalls.
In the thirty-three years that Boies has been practicing law, he
said, he has never had a trial victory reversed on appeal. The First
Amendment attorney Floyd Abrams said of Boies, "In a very
soft-spoken way, he's able to lure people who testify for
his opponent into utterly indefensible positions. Precisely because
he doesn't scream at them, they feel more secure to state
as fact matters that under cross-examination become highly dubious.
The remarkable thing is that it happens over and over again."
Boies, who has thin brown hair and protruding ears, gives an impression
of studied casualness. In court, he always wears a navy suit with
pants that drape over black sneakers; a blue-and-white pin-striped
button-down shirt; a square-bottomed dark-blue knit tie, which dangles
above his beltless waist; and a black Timex strapped over his left
cuff, so he can easily read the time. The suits, shirts, and ties
are purchased in batches from Lands' End. During the trial,
Boies stayed in a modest apartment that the Justice Department rented
for him. Despite his casual demeanor, his intensity is such that
he routinely walks past associates without noticing them. He has
become a celebrity in Washington restaurants, where he picks up
thick lamb chops in his hands and chews the bones clean. Sometimes
he takes a quick nap in a booth at the Capitol Grill. Playing tennis
or Ping-Pong with any of his children—he has six, and has
been married three times—he plays to win, as he does at craps
or card tables in Las Vegas, which he visits several times each
year. "When he plays craps," Mary Boies, herself an
attorney, says of her husband, "he remembers every roll, every
Just before ten o'clock on October 19, 1998, the first
day of the Microsoft trial, Boies entered the block-long, eight-story
E. Barrett Prettyman United States Courthouse, in Washington, rode
the elevator to the second floor, then walked past a line of reporters
parked against a mauve marble wall who were vying for the forty
daily press seats, past an even longer line of spectators on the
opposite wall, and entered Courtroom No. 2, where Judge John J.
Sirica had tried the Watergate defendants. The room has no windows,
and there is no street noise.
Then the door to the Judge's private corridor opened and
Deputy Marshal R. Kirkland Bowden, who has worked in this court
since 1962, called out "All rise!" Judge Thomas Penfield
Jackson entered and ascended his platform. Although Jackson, who
is now sixty-two, was the first judge appointed by President Reagan
to this district court and therefore might be assumed to oppose
intrusive government, Microsoft executives have learned to be wary
of him. He was the judge who ordered Microsoft to separate Internet
Explorer from Windows, and since then he had made a number of preliminary
decisions that angered the company, such as allowing unwanted excerpts
from Gates's twenty-hour-long videotaped pretrial deposition
to be played in court. Before the trial began, Jackson had announced
that it was his intention to speed it along by limiting to twelve
the number of witnesses each side could call and by stipulating
that all testimony be submitted in written form, so that all cross-examinations
could occur without delay.
After a flurry of procedural maneuvers and a brief opening by a
representative of the states involved, Boies rose and stepped to
the microphone on the podium in front of the Judge, ready to make
the government's opening argument. Mary Boies looked on from
the spectator section. Joel Klein, the bald top of his head bobbing,
shifted in the aisle seat of the bench behind the counsel table.
The Microsoft counsel, Bill Neukom, sitting at the head of the Microsoft
table, stared straight ahead, his pen and pad poised. Judge Jackson,
who has white hair and gold-framed half-glasses, nodded with a welcoming
smile to each table of attorneys.
For nearly three hours, glancing occasionally at a few notes he
had written on a manila folder, Boies described, first in summary
form and then in chronological order, how, in his view, Microsoft
had violated the antitrust laws—in particular, by "restraint
of trade or commerce"—and so became a predatory monopoly.
Coercion, he claimed, was standard operating procedure at Bill Gates's
Microsoft. Boies then gave a signal and played the first of many
excerptsfrom Gates's videotaped deposition—an excerpt
that gave a portrait of Gates at odds with the decisive, fearless
straight shooter of common lore. Shown slouched in a leather chair,
and compulsively sipping from a can of Diet Coke, Gates appeared
on several court screens:
Boies: Are you aware of any instances in which representatives
of Microsoft have met with competitors in an attempt to allocate
Gates: I am not aware of any such thing, and I know it's
very much against the way we operate....
Boies: Now, have you ever read the complaint in this case?
Gates: No....
Boies: Do you know whether in the complaint there are allegations
concerning a 1995 meeting between Netscape and Microsoft representatives
relating to alleged market-division discussions?
Gates: I haven't read the complaint, so I don't know
for sure. But I think somebody said that that is in there.
More than a few spectators laughed at Gates's professed ignorance.
Boies now paced in front of the bench, a pointer in his hand, and
asked an aide to roll the second video. Gates again filled the screen,
and, in response to a question from Boies about his understanding
of Netscape's strategy back in mid-1995, Gates said that at
the time "I had no sense of what Netscape was doing."
Using his pointer, Boies displayed on the screens various Gates
documents, including a May 26, 1995, memo titled "The Internet
Tidal Wave," which showed that Gates quite clearly saw the
importance of Netscape. In it he wrote to his managers, "A
new competitor 'born' on the Internet is Netscape. Their
browser is dominant, with 70 percent usage share, allowing them
to determine which network extensions will catch on." With
control over how software worked on-line, Gates noted, Netscape
could cheapen Windows and "commoditize the underlying operating
system," by which he meant that people using any number of
programs, for browsers, for word processing, for spreadsheets, for
printers—for all sorts of applications—might begin to
move away from Windows.
With a nod from Boies, an E-mail written by Gates five days later
and sent to his senior executives appeared on the screens. It said,
"I think there is a very powerful deal of some kind we can
do with Netscape"—a deal that would reduce competition.
"We could even pay them money as part of the deal, buying
some piece of them or something." Then, just a few weeks before
the meeting with Netscape—the meeting that Gates said he was
not involved in—he wrote, "I would really like to see
something like this happen!!"
A division of markets was proposed at the June 21st meeting, Boies
argued, producing E-mails from both Netscape and Microsoft. "What
you have here is, in and of itself, an attempt at monopolization,"
he went on, a "restraint of trade" effort prohibited
by law. Why would Netscape feel compelled to coöperate? Because,
Boies claimed, Microsoft's leverage stemmed from Windows,
which controlled ninety per cent of the P.C. operating-system market
(a somewhat inflated number, since it excluded the Macintosh and
all other machines not running on Intel-type chips). Any computer
manufacturer, or any maker of printers or software-application programs,
from spreadsheets to browsers, needed to know Microsoft's
Application Program Interfaces, or A.P.I.s, in order to be able
to connect to Windows, Boies said. He charged that Microsoft was
predatory because it threatened to crush Netscape if it did not
comply. There would be testimony, Boies promised, that one of Gates's
"top lieutenants" threatened to "choke Netscape's
air supply."
For three critical months, Boies said, Microsoft had withheld A.P.I.s
that Netscape required to be compatible with Windows 95, the
latest version of Microsoft's operating system. Unlike Netscape,
which tried to sell its browser, Microsoft adopted what Boies called
"a predatory pricing campaign" and gave its browser
away, bundling it with Windows. "Our business model works
even if all Internet software is free," Gates told a reporter
in an article that Boies cited. Microsoft imposed contracts on computer
manufacturers, Boies said—on A.O.L. and on software companies
like Intuit—restricting their ability to do business with
In his narrative, Boies sometimes seemed to be speaking less about
a software company than about the Mob. He told the court how Gates
had alternately coerced and seduced A.O.L. into abandoning Netscape's
browser and promoting Internet Explorer. As evidence, Boies produced
a January 21, 1996, E-mail in which an A.O.L. executive described
an encounter with Gates: "Gates delivered a characteristically
blunt query: how much do we need to pay you to screw Netscape? ('this
is your lucky day')."
Boies went on to tell of Microsoft's desire to boost its
browser share, and its fury at learning that some P.C. manufacturers
and Internet service providers were reconfiguring the boot-up screen
displaying the Windows 95 logo. He then produced an E-mail from
one Microsoft executive asking, "Do you think we should look
at making this harder?" Difficult to do in Windows 95, came
a reply, but it added, "We'll do something to make this
hard" in Windows 98. In other words, Boies told the Judge,
Microsoft was saying, "We're going to manipulate the
technology, not for innovation, not for consumer benefit, not for
technological advances, but to hurt competitors." Boies produced
a March, 1997, memo from a Hewlett-Packard executive to Microsoft,
which began, "We were very disappointed," and then referred
to Microsoft's refusal to let Hewlett-Packard customize the
startup sequence. This had "resulted in significant and costly
problems," the memo went on to say. "From a consumer
perspective, we are hurting our industry.... If we had a choice
of another supplier, based on your actions, I assure you that you
would not be our supplier of choice."
Microsoft, Boies continued, offered inducements to Intuit to spurn
Netscape (Intuit turned them down), and it also threatened to terminate
the vital software applications it had been providing for the Apple
Macintosh if Apple didn't limit its ties to Netscape. Even
Microsoft's close allies, Boies said, were bullied. He told
of how irate Gates had been in the summer of 1995 when he met with
Intel, the dominant chip maker, about software research it was doing,
and said to a group of Intel executives, including the Intel chairman,
Andrew S. Grove, that he wanted them to abandon that quest.
"Again, what you have is Microsoft trying to tell another
company what products it can and cannot ship," said Boies.
Boies said that by mid-1998 Netscape's share of the browser
market had dropped from more than seventy-five per cent to about
fifty per cent, while Microsoft's browser share climbed from
twenty per cent at the beginning of 1997 to fifty per cent. By one
estimate, Microsoft was now capturing seventy-six per cent of new
browser users, Boies said.
The courtroom's own air supply was hot, and the heat seemed
to make Judge Jackson and more than a few other people in the courtroom
drowsy; Jackson rubbed his eyes and sometimes closed them, then
jolted upright, straining to stay awake by chewing on ice cubes.
Boies took this as a cue, and summed up. Without "some kind
of intervention," he said, Microsoft would soon succeed in
murdering Netscape. Boies promised to prove his case by using the
very technology that Microsoft depended on—E-mail. Microsoft's
E-mails and the more than three million pages of documents that
the government had collected from them were the equivalent, Boies
implied, of the kinds of wiretaps the government used to snare criminals.
Boies had finished by two-thirty, an hour and twenty-five minutes
earlier than the time Judge Jackson had set for adjournment. Looking
down from the bench, Jackson asked Microsoft's chief trial
counsel, "Do you want to start now, or would you prefer to
defer until tomorrow morning?"
"Tomorrow morning would be fine, Your Honor," was the
Boies was secretly thrilled, for it meant that the government's
opening charge would dominate the evening news. "If it had
been left to me," Boies whispered later, "I would have
jumped to speak and declare, 'I cannot let a moment go by
without rising to protest.' "
The courtroom began to empty, and a ritual began: Reporters clustered
just outside the courtroom, checking quotes (since no recording
equipment was allowed inside), and, more subtly, checking what their
colleagues planned to use as the lead of their stories. Then the
reporters raced down a flight of stairs and out onto the granite
courthouse steps, facing Constitution Avenue, where cameras waited.
There David Boies, accompanied by the government team, gave his
version of what had happened in court, answered questions, and then
ceded his space to the Microsoft team, who offered their own spin.
On this first day, Bill Neukom, the lead Microsoft counsel, squinted
into the sun and accused the government of using "snippets
taken out of context" and material "based entirely on
loose and unreliable rhetoric." E-mail, he said, is written
in haste, is often full of bluster, and is not necessarily an accurate
reflection of what people think and do. "None of these snippets,
none of this rhetoric, even approaches proof of anti-competitive
conduct," he declared. Still, late that night, after monitoring
the TV, the radio, the Web, and the print news accounts, a former
newspaperman named Greg Shaw, who was the second-in-command of Microsoft's
public-relations department, wrote a memorandum and E-mailed it
to the company's senior executives, including Gates. It began,
"Opening day of the trial today was as tough for Microsoft's
image as we all expected. It was very bad."
iii—microsoft strikes back
Courtroom No. 2 was packed on the next day, with reporters and
spectators eager to hear Microsoft's opening arguments. Boies
sat at the head of the government table, facing the Judge; and the
same seat at the Microsoft table was filled by Neukom.
Bill Neukom is fifty-seven, and like Boies he has been married
three times and has a brood of children—four, in his case.
But if Boies were to be portrayed by Tom Hanks in a movie version
of this trial, Neukom would be played by James Mason. He is six
feet four and has wavy silver hair that does not flutter in breezes.
He never wears the same suit twice in a week. His shirts are starched,
his cuffs are fastened by gold or silver cufflinks, and his assortment
of vivid bow ties seems inexhaustible. A man of elaborate courtesies,
he always holds the gate for an opposing lawyer and never appears
rushed as he glides through the courtroom.
Neukom's father co-founded and ran the San Francisco office
of McKinsey & Company, and he and two brothers and a sister
were reared in nearby San Mateo. After graduating from Dartmouth,
and from Stanford Law, he moved to Seattle. He eventually joined
the firm of Shidler, McBroom, Gates & Lucas, where he worked
mostly on real-estate and contract law and a few criminal cases.
A fateful moment in his career came in 1978, when a senior partner
in the firm, the elder William H. Gates, strolled into his office
and said, "My kid's bringing his little business up
here to Seattle, and would you take a shot at looking out for him?"Neukom
recalled, "To this day, I don't know why he stopped
by my door."
Bill Gates's father remembers why. "The company was
becoming more and more important to the law firm," he explained.
"We needed someone to work with it—someone with good
judgment, with very good people skills." Then the company
got so big that Neukom suggested it form its own legal department.
In 1985, a year before Microsoft first sold its stock, the department
consisted of Neukom and two other employees. Fourteen years later,
it consisted of more than four hundred employees, of whom about
a hundred and fifty were lawyers.
Over the years, Neukom became a Seattle civic leader, and was active
in the American Bar Association, where he served as one of five
national officers. He is now a tireless promoter of Microsoft's
philanthropic endeavors and the founder of the Neukom Family Foundation,
whose purpose is to invest in education and health-care projects
for the poor. Among his gifts to the foundation was a transfer,
in June of 1998, of ninety-six thousand five hundred shares of Microsoft
stock valued at nearly five and a half million dollars. (S.E.C.
filings reveal that he owns Microsoft stock worth more than a hundred
million dollars.) Some at Microsoft dismiss Neukom as a legal nerd
or a slick bureaucrat, but he has long been close to Gates. Throughout
this trial, Neukom E-mailed regular reports to Gates on developments
in the courtroom. He is often described as patient. When Apple and
Microsoft were locked in a patent dispute, Neukom told Gates to
ignore the bad press and pay attention to the law. Five years later,
in 1993, when the courts ruled as Neukom had calmly predicted, he
became a source of reassurance within Microsoft.
If Boies was the quarterback of his team, Neukom was the coach
of his. In court, Neukom silently presided at the table, his tortoiseshell
half-glasses sliding down his long Roman nose while he carefully
scribbled notes, left-handed, on yellow legal pads, neatly folding
each page. He described his role: "I've got to put the
right team on the field." His designated quarterback was John
L. Warden, a partner in Sullivan & Cromwell. By contrast with
the thin, slightly dishevelled Boies, Warden, who is portly, fairly
announces himself. He wears dark-framed round glasses, carries a
thick, expensive leather case in one hand and, often, a bowler in
the other, and marches down the courthouse corridor with his arms
pumping and his wing-tip shoes slapping the carpet.
Warden is formal in court. On this occasion, his hands clasped
firmly on the sides of the podium, he introduced himself, Neukom,
and then seven other members of the legal team. He read his prepared
celebratory remarks in defense of Gates: "The antitrust laws
are not a code of civility in business, and a personal attack on
a man whose vision and innovation have been at the core of the vast
benefits that people are reaping from the Information Age is no
substitute for proof of anti-competitive conduct and anti-competitive
The evidence, Warden went on to say, "will confirm what Microsoft
has been saying all along; namely, that Internet Explorer technologies
are an integral part of the operating system and cannot be removed
from Windows 98 without seriously degrading it." The two are
dependent on each other to perform tasks like "the shutter
in a camera." The consumer benefits of this bundled product
are readily apparent, Warden pointed out; after all, "ordinary
consumers who buy computers at Wal-Mart have no interest in piecing
together an operating system from a grab bag of separately marketed
components. They want their new machine to come out of the box .
. . and just work." Consumers chose Microsoft only after Microsoft
had produced a technically better browser, he said, and not because
of Microsoft's muscle.
Rarely gesturing, Warden read on, turning now to the coercion charges.
The government contends, he said, that Microsoft's contracts
with P.C. makers and others were examples of exclusionary contracts,
prohibited by the antitrust laws. Not so; they were "pro-competitive,"
because they helped to "reduce Netscape's overwhelming
dominance and gave consumers a choice," he declared, and went
on to say that this sort of contract is common. As for Internet
service providers, to whom customers pay a monthly fee to gain access
to the Internet, Warden said, Microsoft had contracts with only
eleven out of more than three thousand, and these did not prohibit
them from doing business with Netscape. Besides, since these contracts
"became a lightning rod for criticism of Microsoft,"
he went on, the company had already suspended many of their provisions.
Nor would Microsoft enter into any more contracts of this kind,
"so this issue is truly moot."
The contracts that Microsoft had with computer manufacturers, Warden
claimed, would show that Microsoft didn't interfere with P.C.
makers who chose to install software on top of Windows 98: "If
they think it adds value, that is their business." The important
point for the court to register, Warden said, is that Netscape has
not been foreclosed in its ability to distribute its product. Nor
have customers been hindered in their ability to download Netscape
on their P.C.s; sixteen million copies were downloaded in June,
July, and August alone. He said that the claims made about an alleged
"air supply" threat were bogus. The discussions with
Netscape, like those with Apple or Intel, were normal in an industry
where companies both compete and coöperate, always "urging
your prospective partner not to ally with your principal competitors."
Warden, who was raised in southern Illinois, read his statement
in a drawl so pronounced that his words were sometimes slurred.
Microsoft did not have monopoly power under any legal definition,
he said, because in the software business competitors faced "no
structural barriers to entry." In the software business, he
added, there are "no factories to build, no mineral deposits
to locate, and no distribution infrastructure to develop."
There were also no constraints on how many copies could be produced—just
brains, and the capital to support them, were required, and both
were plentiful. He pointed out, "Any competitive position
can be lost overnight if someone else creates a technically superior
or more user-friendly product."
There is a theory advanced by some economists, and embraced by
the government, that superior products will not always win—that
in certain industries, like high-tech, products with a large market
share will tend to lock in customers. Warden argued that "if
such lock-in effects existed, it would have been impossible for
Microsoft to make a dent in Netscape's commanding lead in
Web-browsing software, a point the government's economic experts
ignore." P.C. makers have alternatives, he said, but "they
install Windows because that's what their customers want."
Concluding his presentation, Warden said he hoped the court would
decide "that this is not really an antitrust case but a return
of the Luddites," and he went on, "The government's
case is a fundamentally misconceived attack on the creation of innovative
new products by operation of the free market."
iv—man from netscape
Boies and Warden both made compelling points, but sometimes they
sounded like academics. Boies still had not proved consumer harm,
which is one crucial test for antitrust law, and, with computer
prices plunging and Microsoft giving its browser away, this would
not be an easy case to make. No doubt, Microsoft had contracts limiting
the business A.O.L. and others could undertake with Netscape, but
doesn't that resemble what Coca-Cola does when it demands
that McDonald's not serve Pepsi-Cola? And, yes, Microsoft
did give its browser away to lure customers from Netscape. But many
companies offer products at a loss in order to build market share.
Warden's opening argument had at least as many vulnerabilities.
Anyone who covered Microsoft between 1995 and 1997 knows that the
company believed it was in a struggle with Netscape, and invoked
Netscape as a spur, a way to keep Microsoft hard core. The company
fought hard—gave its browser away, delayed software upgrades,
threatened retaliation, and wrote restrictive contracts. Bundling
the browser in with Windows was a weapon to beat Netscape, not just
a means to better serve consumers.
In the eyes of the law, the Sherman Act's crucial questions,
as the Supreme Court has ruled, are:Did the company possess monopoly
power?And was that power achieved or preserved through improper
means?Other companies may exert leverage, using muscle to convince
others to do it their way, but when a monopoly acts in that manner
we graduate from hard core to restraint of trade. Coca-Cola muscles
McDonald's, but Coca-Cola doesn't dominate the soft-drink
market the way Microsoft dominates P.C. operating systems.
In the end, the Microsoft trial may determine whether antitrust
laws can fairly be applied to technology companies and the Internet,
where classic monopoly characteristics—rising prices, control
of finite resources, distribution barriers to entry, and choke holds
on innovation—are not as apparent, even if the allegations
of coercive tactics are familiar.
The center of gravity among economists has shifted away from the
populism that previously animated antitrust legislation. Throughout
its century-old history, the law has undergone as many twists and
turns as an Albanian road. For every legal precedent cited by the
government, Microsoft can cite its own. The government touts the
1912 United States v. Terminal Railroad Association of St. Louis
case, in which the court ruled that a company that controlled every
rail route into the city could not restrict access so as to disadvantage
its competitors. The government believes that Windows is just such
an "essential facility." Microsoft touts the 1979 Berkey
Photo v. Eastman Kodak decision, which held that "any firm,
even a monopolist, may generally bring its products to market whenever
and however it chooses," and be given freedom to innovate.
(It was John Warden who won the case on appeal.) One influential
decision in recent antitrust law was written in 1984 by Supreme
Court Justice Stephen Breyer when he served on the First Circuit
Court of Appeals. In Kartell v. Blue Shield he wrote that the Sherman
Act was originally seen "as a way of protecting consumers
against prices that were too high, not too low.. . . Courts at least
should be cautious—reluctant to condemn too speedily—an
arrangement that, on its face, appears to bring low price benefits
to the consumers." Increasingly, the courts are also aware
that, by the time government acts, often the problem has abated,
as happened with I.B.M.
Throughout the trial, it was as if two different companies were
being described. Each government witness would paint a grim picture
of Bill Gates and Microsoft and its rapacious culture, and each
Microsoft witness would offer a pious portrait of a model entrepreneurial
company. At the heart of the government's foreclosure-and-coercion
case, however, was Netscape, and for this reason the government
called as the first of its twelve witnesses James Barksdale, the
C.E.O. of the company. His written testimony, which, like the testimony
of all others, had been distributed to reporters in advance, ran
to a hundred and twenty-six double-spaced pages. Barksdale claimed
that Microsoft had crossed a legal line by using the "bullying
and tough tactics" of a "monopolist" to "squelch
competition in the browser market."
Before Barksdale was sworn in, on the second day of the trial,
John Warden rose and moved that parts of Barksdale's written
testimony be stricken because it contained "multiple layers
of hearsay," which in some cases was "fourth-hand hearsay."
Judge Jackson immediately ruled that if this were a jury trial "it
might be dealt with somewhat differently," but that he would
"admit the testimony in toto." However, he added, he
would recognize hearsay evidence as such and give Warden every opportunity
to rebut it. Warden thanked the Judge, and Neukom registered no
emotion as he sat at the Microsoft table scribbling notes. But this
ruling, and one that Jackson made that afternoon, denying Microsoft's
motion to disallow the playing of Gates's video as if he were
a witness, angered Microsoft. Weeks later, when I saw Gates at a
New York dinner in his honor, he was still furious, cursing and
sputtering that the Judge had permitted hearsay to masquerade as
fact at the trial.
Barksdale was a formidable-looking witness—a handsome man
with wavy gray hair and the courtly manners and slow drawl of a
youth spent in Jackson, Mississippi. He had an unusual résumé
for Silicon Valley. He was neither a young inventor with more hubris
than experience nor an entrepreneur who disdained management. Barksdale,
who was fifty-five, wore as many management ribbons as any executive
in the Valley, starting with his first eight years—from 1965
to 1972—spent at I.B.M., where he began as a salesman, and
continuing to his most recent role, as president and chief operating
officer of McCaw Cellular Communications, the cellular giant that
had been acquired by A.T. & T. in 1994. In January, 1995, he
became the president and C.E.O. of the startup Netscape, a company
whose key product, Netscape Navigator, helped propel the Internet
revolution. There were two million users of its pioneering Web browser
when Barksdale joined the company. A year later, there were fifteen
From the beginning, Neukom and his legal team believed that their
mission was to refute nearly every fact submitted by a government
witness, so Warden, in his cross-examination, chose to follow scrupulously
Barksdale's written testimony. He asked Barksdale a stupefying
number of questions, including a request that he explain "the
improvements" Netscape had made to its software, which is
not the best request to make of a former salesman. Barksdale obligingly
enumerated its many new features, ending with "I could get
you a long list."
"That will do, thanks," Warden said.
"I hope you buy the product," said Barksdale, with
a sly smile.
Theatrically, Barksdale won, but Warden had also driven home a
point: ever since the advent of the P.C., when customers were required
to pay extra for options like spreadsheets and disk drives, computer
companies have tried to combine features. At times Warden's
approach seemed to perplex the Judge, however. Warden, trying to
get Barksdale to define what he meant by "monopoly product,"
pressed him to distinguish between a diamond monopoly and a soup
"What's your question?" asked the Judge.
"My question is he's used the term 'monopoly
power,' and I want to know what it means."
"I thought he defined it once."
After a while, Warden brought up the "air supply" quote
and asked when Barksdale had first heard it. Barksdale pleasantly
surprised Warden by saying he had heard that Larry Ellison, the
chairman and C.E.O. of Oracle, used it to mean to "disadvantage
a competitor." The idea was thus planted that Microsoft executives
were not the only ones who talked like cowboys. Warden burrowed
in, asking whether Barksdale had actually heard it from Paul Maritz,
a Microsoft executive who was said to have used that phrase. Barksdale
admitted that he had not actually witnessed this. Warden moved on
to ask Barksdale whether Netscape's ambition was to destroy
Microsoft by using its browser as a substitute for Microsoft's
operating system. Barksdale maintained that he had never said that,
but admitted that the inventor of his browser, who was his chief
technologist, the twenty-six-year-old Marc Andreessen, had made
such a claim; in fact, Andreessen had once said that Netscape would
"reduce Windows to a set of poorly debugged device drivers."
This was the joke of "a young man," Barksdale said,
and not for a minute did he believe that Netscape could fully replace
Microsoft's Windows platform as the jumping-off point for
other applications. By the end of the witness's first day,
Warden had got through only the first thirteen pages of Barksdale's
written testimony.
In many ways, the first few days in the courtroom established
a story line for the trial: David—Boies, that is—slays
a bumbling Goliath. In his arsenal was a mordant wit. While questioning
Barksdale, for example, Boies, the non-P.C. user, asked about the
"log in" to an Internet service provider.
"No, it's 'log on,' " corrected Barksdale.
Boies smiled, and said, "I knew that! I was just testing
to see whether you were paying attention."
Boies produced E-mails that Netscape executives sent after the
June 21st meeting complaining that Microsoft had not given them
parts of the A.P.I. code they needed to make use of certain features
in Windows 95, which was released in August, 1995. Microsoft did
not deliver that code until October, 1995, claimed one E-mail, "which
caused us to miss most of the holiday selling season." (Microsoft
denied this.)
At the end of Barksdale's second day on the stand, Warden,
trailed by Neukom, marched out of the courtroom. He quickly passed
Boies, who was standing just outside the courtroom, surrounded by
reporters. The reporters thought Microsoft's legal team was
rigid; Microsoft's lawyers thought they were obeying court
rules, which said that journalists were not supposed to interview
lawyers in the courthouse. This was a rule that would bend as the
trial went on. But Microsoft's aloof behavior in the courtroom
and on the steps reinforced an impression that the company was being
guided by legal pedants who were ignoring the larger public trial
at their peril.
Still, Warden's cross-examination did score a few points
over Barksdale and over the government. Seeking to demonstrate that
Netscape, not Microsoft, had taken the initiative, Warden submitted
as evidence a December 29, 1994, E-mail sent at 3 a.m. by the Netscape
co-founder, chairman, and then C.E.O., James Clark, to Brad Silverberg,
a senior Microsoft executive, saying abjectly that his company "never
planned to compete" with Microsoft and offering to sell Microsoft
a chunk of Netscape. The E-mail was sent at a moment when Netscape's
revenues were slim and its capital was shrinking. Barksdale read,
"We want to make this company a success, but not at Microsoft's
expense. We'd like to work with you. Working together could
be in your self-interest as well as ours. Depending on the interest
level, you might take an equity position in Netscape." Barksdale
appeared to be flabbergasted, and told Warden that this was the
first time he had seen the E-mail. Then Warden, in perhaps the most
dramatic moment of his cross-examination, asked Barksdale if he
considered Clark "a truthful man." Barksdale did not
immediately respond, and when he did he hardly gave Clark a ringing
endorsement: "I regard him as a salesman." Barksdale
said he thought Clark was freelancing. Warden, however, had introduced
an element of doubt: Maybe the June, 1995, meeting was Netscape's
idea. Maybe Netscape was the aggressor, and not Microsoft.
Barksdale was followed by the senior vice-president of business
affairs at A.O.L., David M. Colburn, who wore a stubbly beard, cowboy
boots, and a perpetual smirk. Colburn's testimony, like Barksdale's,
offered still more evidence of what Microsoft considered hardball
tactics and the government considered thuggery. Concerned that Microsoft
had too much power, A.O.L., on March 11, 1996, had signed an agreement
with Netscape to license its browser. Microsoft then offered to
feature A.O.L. in Windows 95—if A.O.L. agreed to limit the
distribution and promotion of Netscape. On March 12, 1996, A.O.L.
acceded to Microsoft's terms, despite the deal it had made
a day earlier with Netscape.
Warden, in his cross-examination, produced internal A.O.L. documents
that said that by 1996 Microsoft's browser was technically
superior—in other words, that A.O.L. had chosen Internet Explorer
on the merits. He also produced a draft memo from the chief executive
of A.O.L., Steve Case, in which Case agreed with Andreessen's
description of Microsoft as "the Beast From Redmond"
and called for a "grand alliance" among A.O.L., Netscape,
and other companies to defeat this corporate monster.
"In your various dealings with the Department of Justice,
stirring them up against the 'Beast From Redmond,' did
you disclose that you made a market-division proposal to Netscape?"
Warden asked.
No, Colburn said. It wasn't a market division. It was a common
search for a "strategic relationship."
However, Microsoft was establishing a theme it would return to
throughout the trial: Every company does what Microsoft has been
accused of doing. In turn, the argument received this government
retort: Not every company is a monopoly, and the law prohibits a
monopoly from doing what other companies are allowed to do.
A few days later, Boies announced that he would play more of Gates's
video deposition. Microsoft objected to releasing any of the tape
to the press, whereupon Judge Jackson beckoned both sides to the
bench. The Microsoft team's sullen faces conveyed a palpable
sense that they felt surrounded by a hostile government in a hostile
city with hostile reporters waiting to pounce. Boies told the Judge
it was the government's understanding that once the excerpt
of Gates's video deposition was played in the courtroom, both
the transcript of the exchange and the taped part of the exchange
could be released. With Neukom standing stoically behind him, Warden
said he had no objection to releasing the transcript but did object
to releasing copies of the tape, which could be broadcast on television
and thus, in effect, allow cameras to invade the courtroom.
"If it were open to me, Mr. Warden, I probably would adopt
your position in toto," Jackson said. But the rule he had
followed all along, he explained, was "that anything which
is presented in open court is available to the press."
After the lunch break, Gates again appeared on the courtroom's
various screens. Still sipping from a can of Diet Coke, he rarely
looked up at his off-camera interlocutor, and alternately rocked
slowly back and forth or slouched forward as he was quizzed by Boies
or by a New York State Assistant Attorney General named Stephen
Houck. In a long portion of the deposition, Boies asked Gates whether
he had ever threatened to cancel Macintosh Office, a suite of business
applications. After Gates said no, Boies stopped the tape and told
the court that he would like to introduce some new exhibits. One
of these was a June 27, 1997, E-mail from a Microsoft employee named
Ben Waldman to Gates asking him to agree to complete the upgrade
of Macintosh Office and "detach this issue from the current
Apple discussions." Waldman, who oversees relations with Apple
Computer, continued, "The threat to cancel Mac Office 97
is certainly the strongest bargaining point we have, as doing so
will do a great deal of harm to Apple immediately." Gates
said that he didn't recall receiving the E-mail, and that
in any case it concerned nothing more than an "internal debate"
about a single upgrade.
In August, 1997, Apple and Microsoft finally made a "deal"
about their "relationship," and Apple endorsed Microsoft's
browser. Now Boies asked, "Does the deal prohibit them from
shipping Netscape's browser without also shipping Internet
Gates said he wasn't sure.
"It's your testimony, sitting here today under oath,
that you simply don't know, one way or the other, whether
Apple is today free to ship Netscape's browser without also
shipping Internet Explorer?"
"That's right."
Gates was a terrible witness. But, even if he sometimes skirted
the truth, this didn't mean he was guilty of creating a monopoly.
Disagreeable behavior may not be criminal. Over breakfast one morning,
Neukom expressed his disdain. The government's case, he said,
evades the central conclusion of the Court of Appeals decision that
permitted Microsoft to tie a browser into its operating system.
"The law is designed to encourage companies to innovate and
enhance services for consumers."
v—inside the beast
A few months into the trial, I visited Microsoft's headquarters,
in Redmond, just outside Seattle. Here the employees refer to the
place where they work as a campus, far removed from regulators in
Washington, D.C., and from competitors in Silicon Valley. They live
on a self-contained planet, where phones rarely ring, where E-mail
communication is said to total three and a half million exchanges
per day, where espresso and focaccia are served in the cafeterias,
where organized sports help keep the employees on campus, and where
most waking hours are spent in front of a P.C. screen. The average
age of the more than thirty-one thousand employees is thirty-four.
In Redmond, one encounters a sense of embattlement. James Allchin,
a senior Microsoft executive, whose testimony at the trial would
make headlines, told me, "I feel we're on the brink
of disaster every day. If you're reading newspapers and watching
what's happening—new devices, new operating systems,
attacks that claim intellectual property means nothing—it's
like a massive attack all the time." On another day, I talked
to Yusuf Mehdi, who is thirty-two and directs marketing for Windows,
and he said, "I don't think I've ever been more
worried....The threat is obsolescence. How do we respond to people
who say, 'My TV doesn't crash'? How do we respond
to people who say, as Netscape does, 'Why do you need Windows?
You can just use the Web.' We need to figure out how to make
it in this new Internet world. I look around and see tens of companies
that might have better ideas."
To come up with better ideas, Microsoft spends an extraordinary
three billion dollars each year on research and development. A portion
of this budget is earmarked for pure research—for recruiting
and funding the best scientists and engineers. In an era when such
theoretical research is usually sacrificed as impractical, and companies
strive to cut costs and boost their stock price, Microsoft is a
rare oasis. But it is also a place seeking to dominate the realm
of new products: browsers for wireless devices, software that permits
P.C.s to boot up instantly, laptop batteries that last for twelve
hours, P.C.s that accept voice commands and translate handwriting
into type, interactive toys and dolls, auto P.C.s that function
as radios and CD players as well as navigation devices that map
a driver's destination and then offer voice instruction to
turn right or left at the next corner.
Among the development projects that Gates is now most excited about
is a product called ClearType, which seeks to improve the resolution
on P.C. screens. Bill Hill, who was born in Scotland fifty years
ago and joined Microsoft in 1995, comes to work each day wearing
Bermuda shorts and with his hair in a ponytail. His mission has
been to increase the resolution on an L.C.D. computer screen from
eighty-eight pixel dots per inch to three hundred per inch. Words
on the screen will therefore look the way words do on paper, spurring
advances in electronic books and maybe in on-line reading. "Trying
to portray type with a pixel is like trying to paint the 'Mona
Lisa' with a paint roller," Hill told me. "We've
changed the size of the paint roller." Microsoft plans to
make ClearType available later this year. Eventually, ClearType
and many of the new technologies like voice and handwriting recognition
that Microsoft is developing may, like its browser, be included
in Windows. Microsoft claims such developments serve consumers;
the Justice Department claims they serve to solidify Microsoft's
In obvious ways, the Microsoft culture is egalitarian; almost
all the people there have the same modest offices, the same kind
of computer equipment, and the same relatively modest salaries.
(Gates's base salary is three hundred and sixty-nine thousand
dollars.) Almost everyone has access to Microsoft's generous
stock-option grants. In other ways, though, Microsoft is a meritocracy,
where people are pitted against each other and the ablest survive.
Rob Glaser, the C.E.O. of RealNetworks, a maker of multimedia Internet
applications, who worked alongside Gates for ten years but is now
sometimes considered an adversary, says that the people at Microsoft
think of the world as a "very Darwinian place." He went
on to explain that the peer pressure is to push, to boast of being
hard core; so a Gates negotiation is more a head-on competition
than an opportunity for both sides to win. "I once said to
Bill, in 1992, 'Shouldn't we worry about the court of
public opinion?' I was trying to ask a meaningful question,
even if this term was not mathematically well-defined. When you're
in the lead, you can play a statesmanlike role of not winning every
concession. While still maintaining leadership, you don't
have to leverage every advantage that you have. Bill thought it
was a vague, inarticulate idea."
Gates dominates not with charisma or with charm but with his brains
and his passion. "Bill can be a bad sport at games,"
a friend told me, recalling a game of charades. On this occasion,
Gates was losing, the friend said. Suddenly, his voice rising, "he
accused his friends of cheating: 'You're not allowed
to do that! Wait a minute! This is an infraction!' If he couldn't
win, he'd find an infraction. It was absurd. But when you
think about it, it all fits. 'The government is wrong! They're
just wrong!' "
Nevertheless, it is almost impossible to imagine Microsoft without
Bill Gates. Rick Rashid, the vice-president of research at Microsoft,
said to me, "Most company or university people tend to have
a cynical attitude concerning the people they work for. They complain
that their company doesn't understand them. That just doesn't
happen here."
To many people who had been sitting in court during the first
several weeks of this trial, it seemed that Gates and his adjutants
had seen too many "Godfather" movies. I came to think
that Microsoft's behavior seemed more childlike than Moblike,
recalling the sort of self-centeredness one finds in a teen-ager.
The lingering question in court was: How could such a smart man
give such a wobbly deposition? Christine Varney, a former Federal
Trade Commissioner, who represented Netscape at the trial, said
of Gates, "He's got really good lawyers. I suspect he
didn't listen to them. . . . Microsoft's lawyers are
treated like gardeners." A variation on this Gates-is-to-blame
theme was expressed by a Gates friend: he said he saw Gates's
behavior as argumentative—failing to concede the obvious.
The friend went on, "It sets him up to be untruthful, because
he contradicts things he need not have contradicted. It stems from
a belief that he can out-debate, out-micro-language Boies. I get
that impression because I know the guy. If I didn't, I'd
be stunned. It's like in a gangland trial where the gangster
says, 'No, I'm in the olive-oil business.' It
seems disingenuous."
Others blame Gates's lawyers. "He couldn't have
been briefed," Boies said. If Gates went off on tangents or
was unresponsive, he continued, it was the lawyers' task to
rein in their client: "If I were his attorney and in the room,
I would have stopped the deposition." Neukom shrugs off these
theories. "He was advised to be precise," he said, defending
both Gates and himself. "He was asked questions. It was not
possible to remember every E-mail, every contract or conversation."
When I talked to Gates in the late spring, I asked him how he would
explain the gap between the omniscient C.E.O. described by employees
and the senescent Gates on the videotape. He leaned forward and
said, "I'd love to have you pick any part of the deposition
and let me answer."
What about the part, I suggested, when he refused to say he was
"concerned" about Netscape?
Gates replied, referring to Boies, "He was trying to make
it as though we only had one competitor, which was Netscape. Look
at that sequence of questions....Take market share. There are so
many ways of measuring browser market share....Whose job is it to
ask precise questions? That's the lawyer's job."
He continued, "Are you saying that you wish that when he asked
'Are you concerned?' I had just said, 'Yes, that's
the only thing I was concerned about,' and under any definition
of the word 'concerned' the answer absolutely has to
be 'yes'? That is, totally, a misportrayal of those
years. . . . I don't know what it means for a company to be
'concerned.' Honestly, I don't. I mean, am I concerned
about Squiggle Corporation right now? I've never heard of
Squiggle Corporation. Is it possible that there's some guy
writing E-mail that says, 'Oh, Squiggle is going to put us
out of business'? Are you saying I shouldn't have tried
to give precise answers? Is that what you're thinking? The
issue is to give truthful answers. I gave totally, absolutely truthful
answers. You're saying that 'Oh, it didn't look
good.' O.K., fine. That's not what a deposition is about."
What really bugged him, he continued, was "some notion that
somebody says I don't have a good memory about things, that
I showed a poor memory about things. That is an unbelievable lie!
There is no part of that deposition where in any way, in any time,
I show anything but the most excellent memory."
Boies, who earned credibility with reporters because he is so candid,
concedes that he is stereotyping Gates. "What goes on in the
courtroom is only a slice of what is relevant about him,"
he told me. "This is not a trial about Bill Gates. It is only
in a limited way a trial about Microsoft. This is a trial about
certain aspects of Microsoft's conduct. And it may not be
the most important aspects of Microsoft. To get a sense of Gates
as a person, you have to look far beyond what we're talking
about in this trial."
vi—who is bill gates?
Gates does not exactly look like a leader of men. Crowds do not
part when he enters a room. His voice, though it has a high-pitched
trill, does not command attention. There is no poetry in his speeches,
no swagger in his gait. He is partial to wisecracks and to words
like "cool," "neat," and "super."
He sits slumped on a stage, looking less like a mogul than like
a boy ordered to wear a suit. But while Gates may not fit familiar
molds, he is a leader nonetheless. Rick Rashid has described the
"awe" he and other scientists at Microsoft feel when
they meet with Gates and he has read their technical briefing papers.
One moment Gates is jotting equations on a white board or arguing
passionately with the mathematicians about incipient infinite clusters—"I
only roughly understand it," Rashid said—and the next
he is arguing with economic specialists about monetary trading.
Gates's breadth of knowledge continually astonishes Rashid.
At his birth, on October 28, 1955, William Henry Gates was given
the same name as his father, grandfather, and great-grandfather,
and he was nicknamed Trey. His mother, Mary, who died of breast
cancer in 1994, devoted her considerable energies to myriad charitable
and civic activities, most notably serving as chair of United Way
International and president of the University of Washington's
Board of Regents. His father, a powerful physical presence, at six
feet six inches, and a dominant partner in his law firm, was himself
the son of an entrepreneur who established a well-known furniture
store in the Seattle suburbs. The family had a box at University
of Washington football games, and counted the governor and members
of Congress as friends.
"My mom was naturally social in a way that was incredibly
great, reaching out to people," Gates told me, and he added
that she "immediately made a stranger feel her warmth."
His father always rigorously analyzed issues. Their son, whose birth
came between that of two daughters, did not display much charm.
As a teen-ager, he had a slight build and big feet; he wore his
pants hiked high over his waist, buttoned the top button on his
shirt, forgot to comb his hair and sometimes to bathe, and, unless
his mother intervened, never put things away. Above all, he immersed
himself in books and, later, computers.
Over a lobster salad in the unremarkable suburban house in which
Bill Gates grew up (a nearby road is now called Mary Gates Memorial
Drive), his father, who is seventy-three, told me, "We knew
he was a smart kid. That was pretty evident. More than smart, he
was so curious about everything. He did not possess the innate social
skills that a lot of other kids come up with. He was shy, and didn't
have a lot of self-confidence."
What was perceived as odd behavior—the rocking, the volatile
outbursts, the jumping, the brilliance, and the shyness—has
provoked cruel whispers that maybe Bill Gates is borderline autistic.
Gates's father recalled that Bill's "rationality"
stood out—his insistence on asking questions, on engaging
in logical argument. At the private Lakeside School, where he enrolled
when he was twelve, Bill and a schoolmate, Paul Allen, discovered
computers. They wrote software programs, and started a business
analyzing the traffic patterns of various communities. They used
a Lakeside computer and won a contract from a major corporation
to analyze the electrical-power needs of the Northwest and Canada.
Because his family had ties to Congressman Brock Adams, Bill landed
a job as a congressional page, in 1972, when he was sixteen. Because
Gates loved politics, it's a mystery why his own government
relations have proved to be so inept. Perhaps the answer may be
found in something he told me this spring: "You don't
have to have a lot of political protection to be allowed to innovate."
The roots of Gates's competitiveness may undoubtedly be found
in a childhood spent in a household where sport was transformed
into Olympian contests. He traces his business talent to having
been exposed to commerce by his father at the dinner table and to
his own curiosity. A good friend of his, the investor Warren Buffett,
has a simple explanation for people like Gates: "They're
wired in such a way that when they see business questions or problems
or activities they tend to get the picture very quickly. They don't
get tangled up in prejudices or biases they may have. They just
tend to get the right answers. It's sort of like 'Why
was Ted Williams a great hitter?' It's about seventy-five
per cent DNA."
At Harvard, Gates rarely ventured outside his own circle, except
when a dorm-mate and fellow math whiz, Steve Ballmer, persuaded
him to attend parties. By his own admission, Gates was depressed
in Cambridge and wondered what he would do with his life—at
least, until Paul Allen, who had left college to work at Honeywell,
outside Boston, visited him one weekend and showed him a copy of
Popular Electronics. It contained a cover story on the M.I.T.S.
Altair 8800, one of the first P.C.s, which was being sold as a kit
for just three hundred and sixty dollars. A New Mexico company marketed
the primitive machine, and in early 1975 Bill and Paul wrote to
the president of M.I.T.S., telling him that he needed software to
make the machine come alive. That winter, the two of them holed
up in Gates's dormitory and madly wrote code. Allen then flew
to Albuquerque to demonstrate how their software made the machine
talk. For three thousand dollars and a slice of royalties, Gates
and Allen, at the ages of nineteen and twenty-one, had decided what
to do with their lives. In the spring of 1975, Allen signed up as
M.I.T.S.'s software director, and in June Gates took a leave
from Harvard to join him. By July 1st, they were shipping their
version of basic 2.0, as it was called. That November, the Gates-Allen
partnership was christened Micro-soft.
Early photographs of Gates, Allen, and their handful of employees
show a group of kids wearing open-necked shirts, scruffy beards,
and determined smiles. Gates was a skinny, baby-faced young man
with doelike eyes and oversized, octangular, clear-framed eyeglasses;
Allen wore identical glasses and a Karl Marx beard. By the end of
its first full year of operation, Microsoft (now hyphenless) had
seven employees and twenty-two thousand dollars in revenue.
In 1979, Microsoft moved to Seattle. It now had twenty-eight employees
and nearly two and a half million dollars in revenue, and its basic
software was fast becoming the lingua franca of a new computer industry.
Among the fateful choices that Gates and Microsoft would make, or
have the good luck to have made for them, was I.B.M.'s decision
to do business with the company. I.B.M. had contracted with Intel
to produce computer-processing chips, or brains, for the first sixteen-bit
machines; now it needed an operating system. Instead of understanding
that software, not hardware, was the oil of the Information Age,
I.B.M. chose to license from Microsoft the MS-dos (Microsoft disk
operating system) and other software programs. Years later, Dell,
Compaq, and Gateway would sell what came to be known as Wintel—Windows
plus Intel—machines. Microsoft became more dominant in software
than Saudi Arabia is in the production of oil.
Another decision of considerable importance was the hiring, in
1980, of Gates's Harvard friend Steve Ballmer, who had become
a Procter & Gamble marketing executive and had then gone
to business school at Stanford. Ballmer helped professionalize both
the marketing and the management at Microsoft; he was also a cheerleader—an
unabashed enthusiast for Team Microsoft. Three years after Ballmer
arrived, Paul Allen left. Allen and Gates were partners, but Gates
claimed sixty-four per cent of the stock to Allen's thirty-six
per cent; Gates was chairman, and Allen was the executive vice-president.
("I dropped out of school to run Microsoft without being paid
while Paul had his M.I.T.S. job," Gates told me.) Allen had
tired of his boyhood friend's propensity for yelling and his
tendency to ignore him, which was what Gates did in offering not
only a job but an ownership stake to Ballmer. Allen was also suffering
from Hodgkin's disease, and although he recovered, he chose
not to rejoin Microsoft. He sits on the board and is the company's
second-largest shareholder, but his relationship with Gates endured
a long frost—one that did not thaw until the mid-nineties.
In 1983, Microsoft announced the birth of Windows—a bet by
Gates that users would prefer the friendlier point-and-click graphics
pioneered by Xerox and then adopted by Macintosh. Microsoft had
produced a product that captured consumer support. In 1984, Microsoft's
sales almost doubled, to just under a hundred million dollars—a
geometric growth that would be replicated again and again in subsequent
years. This was a propitious moment to take Microsoft public, and
after Bill Neukom signed off on the legal documents, on March 13,
1986, Microsoft stock went on sale for twenty-one dollars per share.
The stock has since split eight times: someone who had invested
ten thousand dollars in 1986 would have seen his stock value soar
to just under six million dollars.
And yet Gates, fearing that companies, like athletes, lose their
edge, was afraid that Microsoft was one minute away from extinction.
Microsoft, therefore, to retain its lead, did what many companies
do: leveraged strength to shore up weakness. It incorporated new
software into Windows, including such features as simple word processing,
a calculator, a calendar, new graphics, fax programs, and games.
Then, more recently, it added a browser, enticing customers to buy
upgrades on schedule and not to stray to a competing product. Microsoft
brazenly used discounts and market dominance to keep computer manufacturers
bound to it, and devised contracts that placed rival software companies
at a disadvantage—a practice that the trial would highlight.
As a chief executive, Gates can be brusque—ignoring social
niceties and bluntly challenging fellowexecutives to defend themselves
after telling them, "That's the stupidest thing I've
ever heard!" As a businessman, one Wall Street figure who
knows him well observed, he is mature beyond his years, and yet
in "emotional areas he's younger than his age."
Gates has, after all, never had a boss, never been reprimanded or
fired, and rarely confronted business adversity. At an Allen &
Company retreat in Sun Valley, Idaho, several years ago, many witnessed
a moment when Gates rushed up to John Malone, then C.E.O. of the
nation's largest cable company, Tele-Communications, Inc.,
and yelled, "Why are you trying to screw me?" On the
telephone, Malone recalled, Gates would often exclaim, "How
could you do this to me? I thought we were friends!" I asked
Malone, who admires Gates's strategic grasp, if he could think
of another C.E.O. who had such outbursts. "I've known
guys who have done that, but I always regarded it as manipulation,"
he told me. "Psychologically, he needs to win. 'You're
with me or you're against me' kind of thing."
Gates can be extraordinarily considerate. When Russell Siegelman
was a senior executive at Microsoft, he blacked out one day in 1993
and had to have emergency brain surgery. Siegelman, who later became
a partner in the Silicon Valley venture-capital firm of Kleiner
Perkins Caufield & Byers, remembers the note he received from
Gates: "It was so Billish. It said, 'We're with
you. Don't rush. It's your job when you come back.'
He's not this guy who just thinks of business." Ann
Winblad, a co-founder of Hummer Winblad Venture Partners, who dated
Gates in the mid-eighties and has since been a close friend, says,
"He sends hand-done birthday cards to friends." And
at parties he loves "to lead sing-alongs," she added.
"Bill knows the complete words to Broadway shows—the
whole libretto." Each spring, Gates and Winblad spend a long
weekend alone, usually at her North Carolina beach cottage, where
they play golf, take walks on the beach, read, and ponder big and
small questions. To those who question the idea of a married man
vacationing alone with a female friend, Winblad answers, "People
wouldn't ask if Bill went with a male friend."
According to most accounts, Gates has mellowed since marrying Melinda
French on New Year's Day, 1994. She had joined Microsoft in
1987, and rose to an executive position before she started dating
the boss. "It's hard to separate her influence from
the stage of his life he's in," said Patty Stonesifer,
who was Melinda's supervisor at Microsoft and is now the head
of the Gates Learning Foundation. For an engagement party, in September,
1993, Gates, inspired by one of his favorite novels, dressed as
Jay Gatsby; Melinda came as Daisy Buchanan.
The Gateses' version of East Egg, however, is beyond F. Scott
Fitzgerald's imaginings. Bill and Melinda moved into a forty-thousand-square-foot
compound that Gates built on Lake Washington at an estimated cost
of seventy-five million dollars. The house features an underground
garage for a hundred cars and a huge indoor trampoline. Why someone
who is unconcerned with appearances should choose to live so ostentatiously
is a mystery. "I had a couple of things in mind when I planned
it," Gates told me in an E-mail. "One was to make it
a showcase for technology, the other was that I wanted to make it
big enough so I could have up to a hundred people over for charity
events or to celebrate company successes. Having a great library
or the incredible screens has been a lot of fun but I still can't
enjoy these things without feeling a little guilty about it."
Not too guilty, however. Around the base of a library dome is this
inscription from "The Great Gatsby": "He had come
a long way to this blue lawn and his dream must have seemed so close
he could hardly fail to grasp it."
vii—the charm offensive
In Washington, D.C., the first wave of government witnesses seemed
to tip the case toward the government. Microsoft was also being
judged by public opinion, and that judgment was not going well.
The company's public-relations department wanted Neukom and
the other lawyers to be more accessible to reporters. They worried
that even though polls showed that Microsoft was widely admired,
in the long run the company would be hurt by the bad press.
"We have the wrong lawyers," a senior Microsoft executive
said. "These are antitrust lawyers," he explained. "In
most antitrust cases, there are no witnesses. It's all transcripts,
briefs." His disdain for Sullivan & Cromwell was matched
by his disdain for Neukom's approach to the trial: "He
likes to think of himself as a lawyer's lawyer. . . . He's
as much a legal nerd as we're computer nerds." This
man equated David Boies with "the Johnnie Cochran school of
law, swaying people with emotion," and went on to say, "Normally,
you wouldn't hire Gerry Spence or F. Lee Bailey for an antitrust
case, but here we should have." Neukom, on the other hand,
insisted that colleagues focus on the law; he feared that a public-relations
offensive would offend Judge Jackson and might telegraph Microsoft's
trial strategy.
The debate became so intense in December that Gates himself got
involved. He became convinced, he told me in an E-mail exchange,
that the government had turned the case "into a show trial
with the primary goal of embarrassing us every day, rather than
focusing on the facts of their damaged case. In some ways, when
we started this trial, we were a little old fashioned—we believed
the real trial was in the courtroom." He told Neukom that
Microsoft should be more proactive, and that he should be more accessible
to reporters. Yet neither side in this internal battle wished to
acknowledge that the person who probably most harmed Microsoft's
credibility was Bill Gates. While polls showed that the public respected
Gates, the audience that counted in this trial was one person: Thomas
Penfield Jackson. A few days before the trial recessed for Thanksgiving,
Microsoft's lawyers had received an ominous warning of what
Judge Jackson thought about the Gates deposition. Warden had argued
that Boies should cease playing the Gates tape in short, excruciating
snippets, and just show it all at once. Jackson stared at Warden,
rejected his request, and chilled him with these words: "If
anything, I think your problem is with your witness."
Perhaps the best news that Microsoft received during the first
months of the trial had come from outside the courtroom. Ostensibly,
it was bad news. On November 24th, A.O.L. announced that, in exchange
for $4.2 billion of its stock, it was acquiring Netscape and joining
with Sun Microsystems to build an Internet service company that
could rival Microsoft and I.B.M. The partnerships would bring three
Microsoft competitors together into a single potential colossus.
Neukom appeared on the front steps of the courthouse and declared,
"This proposed deal pulls the rug out from under the government.
It proves indisputably that no company can control the supply of
technology." A month later, on the afternoon before the Christmas
break, Judge Jackson startled the courtroom by announcing that this
new alliance "might be a very significant change in the playing
field." A sense grew that maybe the trial was dealing with
yesterday, while the industry it concerned was being transformed
tomorrow, and that maybe Microsoft was as vulnerable outside the
courtroom as inside.
Gates suddenly began to show a warmer side. In December of 1998,
he appeared, wearing a gray sweater, on "The Rosie O'Donnell
Show," and made it clear that he was there to talk not about
the trial or about competitors but about his two-and-a-half-year-old
daughter—what she liked to have read to her and how she liked
to play. He allowed Rosie to break the news that Melinda Gates was
again pregnant. He talked about his large house, and he showed off
Arthur, a Microsoft talking toy.
In January, he appeared on Martha Stewart's TV program, where
he talked about his daughter again and also about Stewart's
mother, who, she said, was now on E-mail. "That's fantastic,"
Gates purred.
Later that month, he travelled again to the World Economic Forum,
in Switzerland, and before he made his annual luncheon speech to
journalists his handlers instructed the conference spokeswoman,
Barbara Erskine, to announce, "Mr. Gates is not prepared to
comment on the Department of Justice trial." Before he could
hear a groan, Gates stepped forward and declared, "I'll
take one or two questions on it, but at some point I'll get
tired of it." He didn't tire of it. Although one of
his close friends had told me that morning that Gates was depressed
and angry about the antitrust suit, Gates himself told a different
tale. He was asked if the trial made him angry at the Justice Department.
With his left hand on his hip, he said, "No. I don't
think bringing an emotional approach to an issue like that is very
Gates's charitable activities also became more visible. At
a dinner given by Rosie O'Donnell last December in New York,
he and Melinda were honored—along with Jane and Michael Eisner,
of Disney—by the For All Kids Foundation. The next day, the
Gateses held a press conference to announce that the William H.
Gates Foundation was making a hundred-million-dollar gift to speed
the distribution of vaccines in the Third World. The Gates Foundation
and the Gates Learning Foundation had made many generous gifts in
the past, but this was presented in a far more public way. Gates
is now poised to become America's foremost living philanthropist.
A few months earlier, Microsoft had retained Mark Penn,
a pollster for Bill Clinton and Al Gore, to explore how Gates and
Microsoft could be better perceived as good corporate citizens.
An internal Microsoft E-mail exchange suggests that the company
had gone to extraordinary lengths not to miss what it called "a
public relations opportunity." On February 22nd, David Kaefer,
the marketing research manager, sent an E-mail to Barbara Dingfield,
the director of community affairs, who reports to Bill Neukom, and
to nine other staffers. "This mail is intended to recommend
and spur discussion concerning which five or six image attributes
we should use to access the effectiveness of our branded philanthropic
communication efforts," Kaefer wrote. He then listed "image
attributes we have used in past research": approachable, arrogant,
caring, greedy, good corporate citizen, only looking out for itself,
etc. Kaefer said that a senior executive, Ann Redmond, had asked
him to consult experts to "help us arrive at a preferred set
of attributes," among which were these contenders:
.Microsoft cares about making a difference in my community
.Microsoft is a leader in good corporate citizenship
.Microsoft's charitable giving improves the lives of many
.Microsoft is honest
.Microsoft is a company I trust
.Microsoft is a generous and supportive corporate citizen
When the trial resumed, for its tenth week, on January 4th of this
year, Bill Neukom seemed like a different person: he mingled with
reporters, shaking their hands, and chatting with them about holiday
vacations. From then on, Neukom appeared almost daily on the front
steps to field questions.
The government's last witness, who appeared
shortly after the trial resumed, was Franklin M. Fisher, an economics
professor at M.I.T., who was known to be David Boies's favorite
economist; Boies had first relied on him in 1970, for the I.B.M.
case, in which Fisher argued that the computer giant was not a monopoly.
Fisher was good-natured but professorial, ostensibly humble but
brimming with certitude about economics, intellectually acute but
abstruse. He was paid five hundred dollars an hour for testifying
in court and also for every hour he had spent in preparation.
Fisher asserted that Microsoft was a monopoly engaged in unlawful
practices, because it dominated P.C.s and because it had the power
to raise prices at will and because there were barriers on competitors
who wished to enter its market. "Computer manufacturers,"
he testified, "do not believe they have any alternative to
the acquisition and installation" of Windows. By bundling
and giving away its browser, Fisher added, Microsoft was guilty
of classic "predatory" behavior.
Under questioning from the Sullivan & Cromwell attorney
Michael Lacovara, Fisher made a startling admission. He was asked
if consumers were being victimized by Microsoft, and, after hesitating,
he declared, "On balance, I would think the answer was no,
up to this point." Neukom smiled. David Boies stoically stared
straight ahead, as did Joel Klein. William Kovacic, of the George
Washington University Law School, who had been reading the daily
transcripts of the trial, later told me that Fisher's admission
was "the single greatest testimonial blunder for the government"
in the entire trial, ranking with the harm done to Microsoft by
Bill Gates's videotaped failure "to tell their story."
The real harm to consumers, Fisher hurried to assert, would appear
in the future, as Microsoft blocked innovation and raised prices—an
assertion easier to make than to prove.
viii—trick questions
It was now Microsoft's turn to call twelve witnesses, many
of whom radiated hubris: they would turn the case around for Microsoft;
they would educate the Judge; they would prove that David Boies
was a computer illiterate; they would prove that they were smarter;
they would take a bow. And indeed, some Microsoft witnesses would
Microsoft, however, was not always helped by its first witness,
Richard L. Schmalensee, the dean of M.I.T.'s Sloan School
of Management. He released an eye-glazing three hundred and sixty-four
pages of written testimony, much of it contradicting his former
mentor, Franklin Fisher. Pay no heed to the "small mountain
of E-mails," to the "speculation" over who might
be harmed, he said, for what counted was whether consumers were
harmed. They were not, he said; nor was Microsoft capable of exerting
monopoly power. Schmalensee, like Fisher, reminded those in the
courtroom that economics is not always an exact science. The two
"scientists" drew from the same pool of "facts,"
yet reached opposite conclusions.
With Schmalensee, as with others, Boies demonstrated a basic courtroom
technique. "During a cross-examination, David takes a friendly
walk down the hall with you while he's quietly closing doors,"
observed Jeffrey Blattner, who served as Joel Klein's de-facto
chief of staff and was in court each day. "They get to the
end of the hall and David turns on you and there's no place
to go. He's closed all the doors." After allowing Schmalensee
to express himself, Boies started closing doors. He approached the
lectern, blowing his nose into a paper towel, which he then folded
to fit into his back pocket. (He had forgotten a handkerchief.)
How long had Schmalensee been "retained" by Microsoft?
There was no formal retainer, though he had done work for the company
since 1992. (He was paid eight hundred dollars an hour.) Was it
accurate, Boies inquired, to refer to him as Microsoft's "house
economic expert"? Was it true that Microsoft held a monopoly
over operating systems for Intel-based personal computers? The expert
witness said that he did not consider this a "relevant"
question. After declaring that rival operating systems and such
devices as the Palm Pilot posed a "significant" threat
to Windows, Boies demanded to know whether the Palm Pilot was a
"significant" threat today. Schmalensee retreated, saying,
"As it stands, it is not a significant competitor. It is a
germ of a potential competitor." Judge Jackson helped keep
the witness on the defensive by asking whether the viable operating-system
competitors he cited had made any money. Schmalensee responded,
"I would be stunned if they were making a lot of money."
Boies's strategy was obvious: if Schmalensee appeared to be
contradicting himself, to be splitting hairs, his credibility would
be tarnished.
Microsoft's worst moment may have come in the testimony
of its executive in charge of Windows, James Allchin. In court,
after Allchin piously repeated what he had said in his deposition—that
Microsoft combined the products to serve its customers better—Boies
produced a December, 1996, E-mail from Allchin to his boss, Paul
Maritz, which Boies said he considered one of the most incriminating
pieces of evidence among the more than three million pages that
the government had collected. As Allchin ruminated about "concerns
for our future," the very first of eight concerns that he
cited was how Internet Explorer was losing to Netscape Navigator.
His solution—which Boies sees as proof that Microsoft was
guilty of classic predatory behavior—was wickedly simple:
I don't understand how IE is going to win. The current path
is simply to copy everything that Netscape does packaging and product
wise. Let's [suppose] IE is as good as Navigator/Communicator.
Who wins? The one with 80% market share. Maybe being free helps
us, but once people are used to a product it is hard to change them.
. . . My conclusion is that we must leverage Windows more. Treating
IE as just an add-on to Windows which is cross-platform [loses]
our biggest advantage—Windows market share. . . . We should
think first about an integrated solution—that is our strength.
In a more publicly devastating move, Boies attacked a Microsoft
video that purported to show that a program written by a government
computer expert to remove Microsoft's browser caused significant
"performance degradation." Boies's technical advisers
had noticed that the line at the top of the open window did not
say "Windows 98," as it would have if the program had
run, which meant that the video did not show what it claimed. Boies
stunned Allchin by pointing this out. The witness still had days
of testimony left, but Boies had already won the psychological war
game between lawyer and witness.
Humiliated, and obviously furious at this mistake, Allchin left
the courthouse on February 2nd, his arm shielding his face from
cameras. The next day, he endured still another humiliation, when
Boies showed that Microsoft's taped demonstration did not
rely on a single P.C., as had been implied, but, rather, spliced
together footage of at least two different machines. Boies was so
psyched for his questioning of Allchin that day that this creature
of habit, who usually skips lunch during a trial, asked his wife
to bring him a bag of cinnamon-raisin bagels. He wolfed down seven
of them while he studied documents in the witness room during the
lunch break. At about 4 p.m., when Judge Jackson turned to face
the witness and declared, "It's very troubling, Mr.
Allchin," Boies knew he had achieved a Perry Mason moment.
With Joel Klein and the entire Justice Department team beaming from
the spectator seats, Boies abruptly announced that he was finished
with the witness. Microsoft's lawyers hurriedly asked for
a bench conference with Judge Jackson to request that he allow Allchin
to prepare a new video overnight, which he would personally supervise
and narrate.
The government got the headlines, but Allchin's testimony
was not as bad as it seemed. Of the many claims made by Allchin
in his hundred-and-thirty-nine-page deposition, Boies attacked relatively
few, and, the next day, in court, Allchin did finally show that
the government had wrongly asserted that it could decouple the browser
from Windows: it had hidden the browser icon, but could not entirely
remove the browser. Allchin had proved his point, but at what cost?
Bill Neukom stood outside, cautioning the press not to mistake theatrics
for substance. With his hands clasped, he tried to defuse the prosecutorial
zeal of reporters, and he spoke lightly of the mishaps: "We
make very good software. We did not make a good tape." Nevertheless,
the headlines carried one message: Arrogant Microsoft.
Boies was shaky when he questioned William Poole, who had supervised
Microsoft's relationships with Internet content providers,
such as Intuit. Boies may have been paying for his insistence on
personally conducting the cross-examination of eleven of the Microsoft
witnesses. It was clear that his back was hurting him, for he walked
more slowly than usual, and shuffled his feet. Things went better
when he began questioning Cameron Myhrvold, the brother of Nathan
Myhrvold, who was the chief technology officer; Cameron was a vice-president
of Microsoft, and he supervised the division that worked with Internet
service providers. He quickly corrected some of Boies's questions,
as if he were helping the lawyer better understand exactly what
he meant to ask.
Boies then slyly undercut his witness, saying, "Most of my
questions are not trick questions. Some are."
"Would you tell me which ones?" Myhrvold asked.
"If I'm going to ask a trick question, I'll raise
my hand," said Boies, and both Judge Jackson and Bill Neukom
joined in the laughter.
Boies then lobbed a softball. Would Myhrvold agree that Internet
service providers like A.O.L. and computer manufacturers were the
most important distributors of browsers?
"I've certainly heard that," but it wasn't
necessarily true, said the witness.
"Have you heard yourself say that?" asked Boies, provoking
laughter as he ostentatiously raised his hand. And at that he asked
the witness to look at page 43 of his written deposition, where
he asserted a contrary view. Myhrvold then acknowledged that he
had been mistaken.
Around this time, one sensed that Bill Neukom's nerves were
frayed. When court adjourned on February 9th, as reporters and lawyers
mingled, I was off to the side on the courthouse steps, chatting
with Blattner. I was taking notes, and I noticed a pair of polished
brown shoes attached to long legs suddenly stationed in front of
us. It was Neukom, his hands clasped in front of his double-breasted
suit, his purple polka-dot bow tie brighter than the tight smile
on his face. He just stood there, listening. Blattner was stunned,
because Neukom had studiously avoided speaking to him or catching
his eye for months. Blattner looked at him, as if to say "What?"
For a moment, they glared silently at each other—Blattner
puzzled and Neukom determined. Blattner's sunglasses, thick
mustache, and dark hair that falls to his collar no doubt reinforced
Microsoft's sinister stereotype of him. Ever since Blattner
joined Justice, in March of 1998, Microsoft believed that he had
orchestrated leaks to various reporters, and particularly to those
at the Wall Street Journal, a claim Blattner denies. Microsoft knew
that Blattner, as chief counsel to Senator Edward Kennedy's
staff on the Judiciary Committee, had played a pivotal role in the
sometimes vicious battle to deny Robert Bork a seat on the Supreme
Court. Bill Gates spits out the name "Blattner" as if
it were a curse, and on the court steps that day, after staring
at Blattner for a long, silent moment, Neukom declared, "This
is a public space." He would not move, so we did. On being
asked weeks later about this encounter, Neukom said, unconvincingly,
that he was not trying to make a statement. "I was interested
in knowing what he was talking about," he said. "I may
have misjudged his reaction. I didn't mean to make him feel
Of the twelve Microsoft witnesses who took the stand between January 13th
and February 26th, among the least effective was John Rose, then
a senior vice-president and group general manager of the Enterprise
Computing group at Compaq Computer. A weakness of the government's
case, which Justice officials privately acknowledged, was that its
lawyers had failed to recruit a P.C. manufacturer to testify against
Microsoft. If Microsoft could demonstrate that it had not bullied
manufacturers, the government's accusation that it had monopolized
distribution would topple. Unfortunately, Rose looked like a cross
between Jimmy Hoffa and John Gotti, in a black suit and white, cufflinked
shirt, with short black hair combed straight back, accentuating
a receding hairline. He shook the hands of reporters on the way
in, looking cocky, as if he were accepting congratulations. When
he got on the stand, he had a disconcerting habit of smiling at
the press section, and when he smiled his eyebrows curled up and
his white teeth glistened. Rose insisted that Compaq enjoyed a "frontline
partnership" with Microsoft, distinguishing this from the
mere "partnership" it had with most other companies.
Boies quickly portrayed Rose as a puppy and Compaq as a company
that jumped when Microsoft barked.
ix—could they settle this?
Over a late dinner in a Georgetown restaurant in mid-February,
Bill Neukom took off his tie and tried to relax. The witness phase
of the trial was almost over, and he was still certain that the
government had not proved its claims and that Microsoft would triumph.
Why, then, I asked, was there such a disparity between what he saw
and what the press reported?
"It's a combination of things," he said thoughtfully.
"First, the technology at the heart of this case is so complex
and changing so rapidly that even the top players in the industry
can't predict for certain where it will go next. So it has
been a challenge to put the government's accusations into
a proper industry context for reporters. Second, a civil trial in
federal court is not a completely intuitive, spectator-friendly
theatre. It's not designed to be engaging to the gallery.
It's pretty dry stuff, frankly. Third, the Sherman Act is
a very short couple of paragraphs interpreted by federal courts,
and it's much misunderstood. Some people want to believe that
the Sherman Act is a sort of competitor-protection act.... That's
not what the law is. The Sherman Act recognizes some competitors
inherently have advantages over others, and it encourages rough-and-tumble
competition so consumers get the best product at the lowest price.
When you couple that with an intellectual-property business like
ours, you have a fourth level of complexity."
He continued talking: "Add to this deadline pressures. Our
defense by its very nature was complicated and extremely dense with
facts and economic analysis. We think the government's case
has been short on facts but long on theatre. The press has worked
very hard...but given the deadline pressures, it's no surprise
that the theatre often won out over the dry substance in the daily
Nor has Microsoft been deft in its dealings with reporters. Nearly
every Microsoft executive who sits for an interview, either in D.C.
or on the Redmond campus, is accompanied by someone from public
relations. "My shadow is joining us for dinner," a Microsoft
official announced one evening. At dozens of interviews on the Microsoft
campus, someone from the public-relations office was always present,
scribbling furiously, and sometimes interrupting to suggest that
a question was out of bounds. The P.R. staff, in its best, no-surprises
mode, prepared dossiers on reporters: a multipage memo would be
sent to those about to be interviewed, offering glimpses of the
journalist's bio, his or her alleged biases, beliefs, conflicts,
friendships, and the questions that the reporter had asked in prior
interviews. Before one of my visits to Redmond, John Pinette, a
former Catholic priest, who would be my pleasant but omnipresent
shadow, internally E-mailed a three-page, single-spaced document,
much like a raw F.B.I. report, to people I would be interviewing.
The memo asserted, for instance, that "David Boies and his
wife are very close with Auletta." I had never met Mary Boies
before Justice filed this case, and I knew Boies himself only superficially.
Our objectives in having you meet with him are to portray the company
as still faithful to its fundamental vision—and working hard
for customers. . . . Ken wants to know if we are demoralized, and
we want to show people who are excited about the contributions they're
making. If they're paranoid about anything, it's not
the trial, but the competitor's latest development that could
make their product obsolete. This is the human side of Redmond.
Good people (genuine, positive, forthright) with good motivations
(wanting to make a contribution vs. greed or anti-competitiveness).
Your approach to this interview . . .
If he thinks you're just stating the party line, you will
lose credibility in his eyes. Be sincere. It's okay to acknowledge
that we can always do better as a company.
At the end of one of several visits to the Microsoft campus, I
asked Pinette why he took such voluminous notes and what he did
with them. He evasively said they provided a record of what each
interviewer said, so that when the reporter's piece appeared
in print Microsoft could rebut any inaccuracies. Months later, after
I had seen Pinette's E-mail, I asked him, "Why are you
folks so controlling?" He replied, "Indeed, it is a
very aggressive approach to preparing people for interviews."
I asked where he'd heard that I was "very close"
to the Boieses. "I saw it in another document written by someone
else in P.R.," he said.
On February 26th, after Microsoft's final witness completed
his testimony, Judge Jackson recessed the trial, for what turned
out to be thirteen weeks. During that period, pressures on Microsoft
to settle intensified. Intel, on the eve of a March hearing, had
suddenly reached an agreement with the Federal Trade Commission.
Although the charges against Intel were narrower than those lodged
against Microsoft, the two sets of charges were alike in that other
companies in the industry needed access to the architecture of both
the dominant chip maker and the dominant software company in order
to design products that meshed.
In early February, Judge Jackson had held an unpublicized closed-door
meeting with the parties. He told both sides that it might be better
for all concerned if they settled the case instead of waiting for
an imposed settlement. Then, in a status conference in his chambers
on March 31st, Jackson told the lawyers that he had a new trial
schedule: each side would be permitted three rebuttal witnesses,
after which the court would recess for thirty days while Microsoft
and the government prepared briefs setting out what they believed
to be the incontrovertible facts of the case. Then would come final
oral arguments, followed by a findings-of-fact ruling by the Judge.
During another recess, each side would prepare a brief on how antitrust
law applied to this case. Then would come more oral arguments, and
after them a conclusions-of-law ruling. By splitting the facts from
the law, which both Boies and Warden said was innovative, Jackson
would inevitably prolong the trial. The less obvious consequence
was that this schedule put pressure on both sides to settle, since
the Judge was now going to begin showing his cards.
During the recess, a subtle but important shift took place in Microsoft's
attitude regarding a negotiated settlement. Throughout the trial,
a Microsoft insider admitted, Microsoft had thought that it would
lose some and win some in this courtroom and win everything on appeal.
By splitting the findings of fact from the findings of law, however,
Jackson had altered this core assumption; now it feared that its
chances of winning everything on appeal were more tenuous. Microsoft
was now prepared, the insider said, to cut its losses. In secret
meetings with Joel Klein, on February 24th, March 30th, and in the
first week of June, Bill Neukom submitted discussion drafts that
indicated more flexibility. Microsoft had submitted three different
draft versions of a proposed settlement, but the Justice Department
had rejected such a settlement as unsatisfactory. "We're
running out of runway here," a Microsoft executive said then.
When the trial resumed, on June 1st, neither side would succeed
in altering the trial's dynamics. When the last rebuttal witness
had finished, on June 24th, Judge Jackson called another recess.
Before doing so, he announced that he was directing each side to
prepare by August 10th a brief specifying what they believed to
be the incontrovertible facts of this case. "All right, gentlemen,"
Jackson said with a smile. "It has been almost all pure pleasure
up to this point. Let's keep it that way."
x—in search of bill gates
During the spring recess, I went back to Microsoft to see Bill
Gates. Among the forty-five buildings on the Microsoft campus, Gates's
office, in Building 8, is unusual: its floors are carpeted and,
compared with other offices, it is vast. At any other Fortune 500
company, it might house someone of the rank of, say, vice-president
for community relations. Gates's office has few personal flourishes:
the desk is a slab of plain oak, and the only pictures on a wall
are two framed covers from The Economist given to him by his sister
Libby—a diagram of an Intel chip and a chart describing the
bandwidth of various radio frequencies. The P.C. was a Toshiba laptop
with a docking station and two oversized monitors (one screen is
separated into four quadrants, which stream information from selected
Web sites all day). There is a gray couch and four chrome-based
green-and-blue wool-covered Breuer-style chairs around a square
maple coffee table. On a credenza rest several family pictures.
On the day we talked, in late May, Gates wore a handsome, royal-blue
open-necked dress shirt buttoned at the sleeves, and with "WHG"
embroidered on the chest, navy slacks, unpolished black loafers,
and clear-framed oval eyeglasses. His skin was the color of eggshells,
as if he had spent too many hours indoors. His hair was unwashed,
the bangs chopped near the roots, as if by shears. The previous
afternoon, Melinda Gates had given birth to their second child,
a son, and Gates had spent part of the day at the hospital. That
afternoon, Microsoft would announce the birth, yet Gates said not
a word about it to me. Upon greeting me, he plopped onto a chrome-based
chair, folded his arms across his thighs, and began rocking rapidly
back and forth, slapping the carpet with the soles of his loafers
as he came forward and creating the impression that his body was
a metronome.
Gates has often been compared with another great business figure
who ran afoul of the government, John D. Rockefeller. Both enjoyed
a market share of more than eighty per cent, made huge investments
in R. & D., were generous philanthropists, were messianic in
their belief that their business served the public weal, were not
concerned with yachts or creature comforts, although they did enjoy
extravagant homes. Each understood the underlying value of his business.
Rockefeller knew that more money was to be made in processing oil
than in drilling for it; Gates knew that more was to be made in
creating software than in building hardware. And each endured a
costly trial against the government that might have been averted
had he been more flexible. The differences between the two men were
also great, however. Rockefeller was scorned by the public, whereas
Gates remains an icon of innovation for a majority of Americans.
Rockefeller's Standard Oil dominated a scarce resource and
the means of distributing it, whereas the intellectual property
that Gates owns is not scarce, and a distribution system like the
Internet can hardly be controlled.
The official line at Microsoft is that the trial in Washington,
D.C., is "white noise"; everyone in Redmond, it is said,
is focussing on business. But Gates is as agitated today about what
he sees as the ludicrousness of the government's case as he
was a year ago. "If you have talented people doing the right
thing, the shares—the position of the product—can be
changed," he said. "That's why we invest so much
more in R. & D. every year. . . . Even with all the
great people we have, we face probably more intense competition
now than ever before. Only in a courtroom can somebody say, 'Hey,
Linux is a serious competitor,' and the press laughs in a
way that makes the judge think, O.K., that must be a false statement,
that must be posturing. "
In discussing with Gates what he sees as the great gap between
the world of Washington and the business world he inhabits, I asked
him if he felt another sort of disconnection when the Justice Department
told him that he and Microsoft had done bad things and when he felt
that he had done good ones. Did he sometimes feel, as a friend had
said, like Joseph K.? "I don't know Joseph K., sorry,"
he said. On being told that Joseph K. was the main character in
Franz Kafka's "The Trial," Gates said, "He
sounds like my kind of guy!"
Turning to the charges presented against his company, Gates said,
"Let's look at what actually happened. They went in
saying that the consent decree banned us supporting the Internet,
putting the browser capability into the operating system. They said,
black and white, 'Hey, all you have to do is delete these
files and this pie here will be eliminated. So issue an order telling
them to delete these files. It's that simple.' Well,
it wasn't." He continued, "Our guy goes in, testifies
under oath, 'Hey, if you delete those files that thing does
not boot right.'" Nevertheless, Judge Jackson, in December
of 1997, had ordered that the browser and the operating system be
untied. "Where did that all end up? The appeals court was
very clear: the consent decree does not touch on this, what's
gone on here, in any way." He cited as equally satisfying
the appeals court's admonition that government should not
attempt to design software products.
Yes, there have been discussions with people at the Justice Department
about a possible settlement, Gates said, but talking with them is
frustrating. He explained, "We keep trying to get them to
articulate what features under this new law they're trying
to create—what features we are allowed to add and what features
we are not allowed to add. And we say...in any discussion we have
with them, 'What is your principle here? How should we have
known that you would think supporting the Internet is a bad thing?'
And we say to ourselves, 'It's the most defensible feature
that we've ever added in.'. .. Didn't we create
the product that won all the reviews? Didn't we create the
product that people didn't have to pay extra for? . . . Somebody
who was paying attention, they would know to laugh!" In the
real world, he continued, Netscape is bought for billions of dollars.
Yet in a Washington courtroom the government cries that Netscape
has been foreclosed and Microsoft has killed Netscape by offering
a free browser. "What the heck logic is there behind this?"
I asked if he regretted not having settled in May of 1998. "I
wish we could have settled," he said. "I wished that
at the time. I wish that now. Look, I'm not in this thing
to prove some principle. Thank goodness, there are some principles
and some laws in this country about how things are done. We've
always wanted to settle this thing." The stumbling block,
he said, was that he couldn't go back to the government for
permission each time he wanted to add a new feature, just because
a competitor like Netscape whined about the added feature. "You
have to have a business left when you settle," he said. At
that moment, he saw no way out.
I asked Gates how he assessed the job that his legal team was
doing. He rocked back and forth in his chair several times before
answering, then talked about the five-year legal battle with Apple:
"We went through a lot on that one," including a bad
press before the victory.
He hadn't answered the question, so I asked it again.
"Well, there's a lot of things about this that they
don't control," he said. "They don't control
the leaking of the government." Then he said, "I haven't
been back there at all," and only "meet with the lawyers
from time to time." Then he trailed off.
"Do you think they've done a good job in the law?"
Again, there was a long pause before he replied. Then he said,
"Well, as far as this case goes they've certainly proved
that Netscape was not foreclosed. And they've certainly proved
that there are immense benefits to developers and users of our putting
these Internet features as well as other features into the product.
They've done a very good job establishing those things. And
those are the issues at hand."
I then asked what he admired about Bill Neukom. There was a pause
of about ten seconds before he answered. Then he said, "He's
a very good lawyer himself and he also brings in, both into his
department and through outside relationships, people with a lot
of expertise." He paused, thoughtfully, then continued, "I
myself am not a lawyer."
Gates was unhappy about the broad brush applied to him and to his
company, and he pressed me to take one fact—one incident from
Intuit, Intel, I.B.M., from "all this mud that's been
slung"—and find out whether it really demonstrated bad
behavior by Microsoft.
What about coercion, I asked—the charge that Microsoft muscled
Intel to stay out of the software business?
"I don't know what muscle means," he said.
What if his daughter came to him some years hence, I suggested,
and asked, Dad, how do you explain some of these E-mails and things
like the threat to cut off Netscape's air supply?
Gates was composed, but he answered in a shrill voice. "A
great lie! A great lie!" he cried out. "An unbelievable
lie!" It was secondhand hearsay, he said. His voice rising,
yet better controlled, he went on, "Did anyone utter those
words? Our E-mail, every piece of it has been searched. I wish we
had found somebody who had said it. Then we could take him out,
and we could hang the guy, then we'd say, 'O.K., mea
culpa. We found him—the guy who said, "I'll cut
off your oxygen."' First of all, there's no law
against saying that. Second of all, I never heard anybody say it.
Third of all—hey, if there's any company that would
know damn well whether it was said or not, this is the company.
Every piece of E-mail I have ever sent for the last ten years has
been read and read, and if there is any way that people can misconstrue
any statement that I've ever made it has been done. You look
at any E-mail sent by me or received by me, and tell me what is
it you think is at all inappropriate?"
What about his offering a million-dollar "favor" to
Intuit if it chose his browser over Netscape's?
"The fact that I was willing to put a million dollars into
joint marketing, a million dollars into helping them do the engineering,
just shows I was desirous of getting them to exploit our technology,"
he answered. "And what's wrong with that? This is the
kind of thing that blows the mind! Yes, I was so anxious to have
them show off" the new features of the I.E. browser, which
Netscape's browser did not have. "How can that be characterized
as something inappropriate? If I hadn't offered that million
dollars, you'd have to say to me, 'Bill, are you doing
your job?' " Besides, he lamented, it's all a
moot point: "no such thing ever happened," since Intuit
When I asked Gates about the ethical dimensions of Microsoft's
hardball tactics, he replied, "There is nothing I want more
than to find something to do a mea culpa on. The fact that we're
so successful, people really do want to know that we're behaving
responsibly, in terms of how we work with partners, how we work
with customers, how we think about things in long-term ways, and
I believe Microsoft has been exemplary in those things. Go ask the
analysts how Microsoft behaves with them in terms of the integrity
of the information. Go ask some of our customers. You take our relationship
with Apple. This is a company where, during the time they sue us
to try and put us out of business, who was developing more software
for the Macintosh than anybody else? They're not letting us
get the [Mac Operating System] information. They're discriminating
against us. They're doing joint marketing with all of our
competitors. Just mistreating us every single step of the way. We're
always trying to figure out some way to help them, to work with
them. The notion that somebody could misconstrue those negotiations
with Apple! We did something incredibly valuable to them. We invested
in the company where people had lost faith in Apple. We renewed
our commitment to do all these new versions of software at a time
when that was very important to them." What people misunderstand,
he continued, is that Microsoft's belated discovery of the
Internet was really what drove it to bundle the browser and to focus
more on Netscape. "We were slow. We hadn't recognized
the importance of it. And this trial, in a sense, comes out of that."
By early August, there had been no further contact between Microsoft
and the Justice Department, and both sides privately agreed that
if settlement talks were ever to get serious this would probably
not happen until the fall, around the time of Judge Jackson's
first ruling on the findings of fact. Microsoft received good news
in July, when a Connecticut jury found in its favor in an antitrust
suit brought by Bristol Technology which raised some of the same
arguments as the Department of Justice. No matter how Jackson rules,
though, Microsoft may lose even if it wins in court. Some people
suspect that the case will rob the company of the drive and the
passion that have contributed to its extraordinary success, as the
I.B.M. case did. The shift within Microsoft could be seen in April,
when Steve Ballmer said at a conference that the company might consider
opening the source code to Windows 2000. "That could be significant—if
they meant it," Boies told me during the recess. "It
might change the remedy." He meant that if Microsoft lost
in court the government might be less inclined to seek a "structural"
remedy—like breaking up Microsoft—provided that Microsoft
adopted a "behavioral" remedy.
Still, the government will always dog Microsoft, as will the more
than three million documents that the Justice Department collected
for the trial. As Gates saw it, "No matter what the outcome
the lawsuit is a bad thing. The costs to the company and the taxpayers
have been huge. The last thing any company wants is to be sued by
the government." One reason for this is that any finding against
Microsoft which is upheld on appeal might be used against the company
in future lawsuits. Greg Maffei, the senior vice-president who is
the chief deal-maker for Microsoft, said, "There's not
a deal we were stopped from doing. Maybe subconsciously we shied
away from things." What they now seek to avoid, he admits,
are deals that the government can delay. Inevitably, Microsoft may
come to second-guess itself. "I worry that it will make the
whole industry more defensive," said Charles Simonyl, the
chief architect at Microsoft Research, who fled Communist Hungary
in 1966 and became a leading figure in the computing revolution.
"I grew up in a society where people are afraid of talking.
Now you worry about your E-mail. People say, 'Delete your
Because of this trial, competitors and also former allies will
more freely challenge Microsoft. While Jim Allchin remains, in his
words, "super hard core" in his belief that Microsoft
is fighting to innovate and thus serve the public good, he acknowledged
that "the negative P.R. we've endured" may "embolden
competitors." Rob Glaser, of RealNetworks, said, "We've
sort of reached glasnost at this point, regardless of the outcome
of the trial. In the past, a lot of companies did things because
of an aura of fear or an environment of intimidation, whether or
not there was actual intimidation by Microsoft. That's forever
Perhaps all of this could have been avoided, but Microsoft, despite
its rhetoric, was not truly hard core when it came to the antitrust
battle. If Bill Gates and his company had been as ruthlessly practical
as they insisted they were, they would have settled the case before
it went to trial. But to Gates settling would also have meant settling
for something unacceptable: a surrender of control over his company's
intellectual property. As it turned out, Microsoft made a strong
case that it had not harmed consumers, but Boies persuasively argued
that the company had mugged its competitors. In the end, Microsoft
mugged itself.
Now the company is taking its political problems far more seriously.
Gates, who once told me that you don't need "a lot of
political protection to be allowed to innovate," has hired
top Washington lobbyists and substantially increased campaign contributions
to both major parties. Around the time that the trial adjourned,
he appeared before the Senate's Joint Economic Committee to
talk about the future of the Information Age. A year earlier, after
testifying matterof-factly before the Judiciary Committee, he had
rushed from the hearing room. This time, with hair neatly parted,
he replied graciously to even the dimmest questions. "You've
raised an interesting issue," he said repeatedly, and then
he worked the room, bestowing "Hi, nice to see ya" handshakes
on senators. It was as if Gates now understood that Microsoft, like
the software that had made him rich, needed an upgrade. ©