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ANNALS OF COMMUNICATION
The New Yorker - August 16, 1999

HARD CORE

Why does Bill Gates think that the Microsoft antitrust trial has been such a disaster for him and for the company?

BY KEN AULETTA

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 world.

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 six-pack?

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 judgment.

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 sequence.”

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 markets?

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 Netscape.

 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 reply.

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 effects.”

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 million.

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 monopoly.

“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 Explorer?”

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 monopoly.

 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 constructive.”

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 people

.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 score.

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 uncomfortable.”

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 coverage.”

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. Someexcerpts:

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 declined.

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 E-mail.’”

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 changed.”

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. ©

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