Microsoft Remedy Hearings: States Drag Key Concessions Out of Gates

After an impressive and reserved first day on the stand, Microsoft Chairman and Chief Software Architect Bill Gates returned for a second day of cross-examination yesterday. And on day two, Gates couldn't resist a few verbal barbs, punctuated by nervous laughter, evasive answers, and condescending technical comments. Yes, that's the Gates I expected to see on the stand.

The best news for the nonsettling states and District of Columbia was that they were able to drag a few key concessions out of Gates, who has latched onto his company's "chicken little" defense with a death grip. According to Microsoft and, specifically, Gates, it's impossible to implement the nonsettling states' plan, which would require the company to create a modular Windows version, giving PC makers and consumers more choices. But after a bruising series of exchanges with states' attorney Steven Kuney, Gates finally dropped the rhetoric and grudgingly admitted that the plan for a modular Windows is feasible.

When Kuney confronted Gates with the infamous "Internet Tidal Wave" memo, in which Gates warned Microsoft employees that Java and Netscape could "commoditize" Windows, Gates then admitted that these technologies were indeed threats to the Windows platform and that his company treated them as such. However, in his written testimony in the original antitrust trial, Gates said that Java and Netscape were "supposedly" competitors. After much badgering from Kuney during cross-examination, Gates said he'd be "glad to strike the word 'supposedly'" from the testimony.

"I'm always interested in hearing ways you want to change your sworn testimony," retorted Kuney. The Java and Netscape concession is important because a key Microsoft argument is that these technologies never posed a serious threat to Windows.

Finally, Gates said that the company's bailout of Apple Computer in 1997--which occurred when that company was experiencing what Gates called a "'near death' experience"--would have been more favorable to Apple had the states' restrictions been in place at the time. At the time, Microsoft financially bolstered Apple with an undisclosed amount of cash (alleged to be in the $1 billion range) and pledged continued support for the Mac version of Office in exchange for Microsoft Internet Explorer (IE) software being the default Web browser on the Mac, plus other concessions. Apple also dropped a pending UI look-and-feel lawsuit against Microsoft.

Gates' most compelling comments regarded fairly mundane details of the Department of Justice (DOJ) settlement and the nonsettling states' plan. He reiterated again and again that the language of any agreement had to be specific so that Microsoft would know what it could and couldn't do. His comments about discerning which applications are middleware, for example, are correct: If such important terms aren't concisely defined, agreements won't be able to stand and, as Gates noted, competitors will second-guess his company every time it releases a new Windows version.