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Deposition of Bill Gates
August 27, 1998, Page 1

On Wednesday, April 28, 1999, the official transcript of the
deposition of Microsoft Chairman Bill Gates was released.

What follows is the transcript in its entirety (only
references to the transcription service have been edited out).

	5	UNITED STATES OF AMERICA,	)                   
	6	        Plaintiff, 	)
	7	         vs.	) No. CIV 98-1232(TPJ) 
	9	        Defendant. 	)        
10 	_________________________________	)     
13	             DEPOSITION OF BILL GATES, a witness
14	herein, taken on behalf of the plaintiffs at 
15	9:09 a.m., Thursday, August 27, 1998, at One
16	Microsoft Way, Redmond, Washington, before Kathleen
17	E. Barney, CSR, pursuant to Subpoena.  
22	Kathleen E. Barney, 
		CSR No. 5698
		Katherine Gale
24	CSR No. 9793
25	Our File No. 1-49005         
			450 Golden Gate Avenue
	5		Box 36046
		San Francisco, California  94102               
6		(415) 436-6660
	8		80 Business Park Drive
			Armonk, New York  10504-1710
	9		(914) 273-9800  
13		One Microsoft Way              
			 Redmond, Washington  98052
14		(425) 936-3103
16		125 Broad Street
			New York, New York 10004
17		(212) 558-3546       
22		120 Broadway
			New York, New York 10271-0332        
23		(212) 416-8275    
			MICHEL CARTER, Video Operator    
	1				        I N D E X
	3	Bill Gates		        Mr. Houck	 5
	4				        Mr. Boies       
	7		337	E-mail dated 5/22/96	23
	8		338	"Microsoft OEM Sales"	30
	9		339	E-mail dated 10/25/94	36
10		340	E-mail dated 3/27/97	45 
11		341	E-mail dated 4/6/95	51
12		342	E-mail dated 4/24/95	57
13		343	E-mail dated 1/31/95	70
14		344	Series of e-mails, first one	75       
				dated 4/12/95
15   		345	"The Internet Tidal Wave"	77
16   		346	Series of e-mails, first one	85      
17			dated 5/3/95
18		347	"Financial Analysts Day	86
					Executive Q & A"
			348	Series of e-mails, first one	88 
20			dated 1/8/97	      
21		349	Series of e-mails, first one	93
				dated 7/14/97
			350	Series of e-mails, first one	94
23			dated 6/12/97     
	2	351	E-mail dated 6/23/95	 96
	3	352	E-mail dated 7/28/96	114
	4	353	E-mail dated 12/1/96	114
	5	354	E-mail dated 5/19/96	121
	6	355	Financial Times Article	130
	7	356	"Netscape:  Sitting Pretty	138
or Sitting Duck?"
		357	PC Magazine Online Article	142
		358	E-mail dated 1/5/96	143
		359	PC Value Analysis	146
		360	E-mail dated 12/16/97	146
		361	E-mail dated 9/8/97	147
		362	E-mail dated 4/25/97	149
		363	E-mail dated 5/15/98	152
		364	The Financial Times Comment	172
16		and Analysis
	1		       BILL GATES,              
	2	a witness herein, having been duly sworn, was deposed
	3	and testified as follows:  
	5		MR. HOUCK:  Mr. Heiner, I understand
	6	you want to make a statement?  
	7		MR. HEINER:  Very briefly.  This
	8	deposition is being taken, of course, pursuant to the
	9	protective order in the case and we will exercise our
10	rights under that to have this transcript treated
11	confidentially.  
12		MR. HOUCK:  Okay.  
13		MR. HEINER:  We'll make the appropriate
14	designations in accordance with the schedule set out
15	in the protective order.
18	BY MR. HOUCK:  
19	       Q.	Mr. Gates, as I've indicated, my name
20	is Steve Houck, I represent the plaintiff states. 
21	I'll be examining you first and I suspect that
22	Mr. Boise on behalf of the U.S. Government will have
23	some questions for you.  I understand from your
24	lawyers you don't want to be here any longer than
25	necessary.  I will do my best to accommodate that. 
	1	If I move too quickly, let me know and I'll slow
	2	down.  
	3			I'll be showing you some documents
	4	during the course of the deposition and I may point
	5	out to you, to speed up the process, portions of the
	6	document that pertain to the questions I have, but
	7	feel free if you want to take more time to read the
	8	entire document to get it in context.  
	9			Also, if you don't understand any of my
10	questions, if they are unclear in any way, let me
11	know and I'll try to make them a little more clear.  
12			I understand that you are one of the
13	co-founders of Microsoft; is that correct?
14		A.	Yes.
15		Q.	When was the company founded?
16		A.	1975.
17		Q.	What positions have you held with
18	Microsoft since then?
19		A.	Partner, chairman, CEO.
20		Q.	What is your present title?
21		A.	Chairman and CEO.
22		Q.	Have you been deposed before, sir?  
23		A.	Yes.
24		Q.	In other litigations?
25		A.	I'm sorry?  
	1		Q.	In other litigations?  You've been
	2	deposed in other litigated matters where Microsoft
	3	was a defendant; is that correct?
	4		A.	I've been deposed in cases where
	5	Microsoft wasn't a defendant and in cases where it
	6	was the defendant.
	7		Q.	So you understand the deposition
	8	process and how it works?  Any questions before we
	9	proceed into the substance about the procedures?
10		A.	I'm not sure what you mean.
11		Q.	Well, are you comfortable with the
12	procedures here?  Do you have any questions before we
13	proceed about how this deposition works?  You have
14	the right to speak to counsel if you'd like.  As I
15	indicated, if you have any clarifications with
16	respect to any of my questions, please ask me, but I
17	assume you understand the general process since
18	you've been deposed before.  
19			With whom have you spoken in
20	preparation for the deposition today?  Anyone other
21	than your counsel?
22		A.	No.
23		Q.	I assume you've reviewed written
24	materials in connection with your preparation for the
25	deposition today; is that correct?
	1		A.	I was shown some written documents.
	2		Q.	Did you review in that connection any
	3	documents that were prepared especially to prepare
	4	you for this deposition as opposed to documents that
	5	were generated in the normal course of Microsoft's
	6	business?
	7		A.	No.
	8		Q.	Do you keep any work-related files at
	9	home as opposed to the office?
10		A.	In general?
11		Q.	Yes.
12		A.	I don't have a filing system at home. 
13	I sometimes take paper home, but I don't keep paper
14	there.
15		Q.	Do you use a computer at home?
16		A.	Yes, I do.
17		Q.	Do you use that on work-related
18	matters?
19		A.	Some of the computers I do and some of
20	the computers I don't.
21		Q.	Do you know whether those computers
22	were searched in connection with a document search in
23	this litigation?
24		A.	Those computers don't have storage.
25		Q.	But you don't know whether the hard
	1	disk was searched for any material that might be
	2	there that --
	3		A.	You should understand it's a portable
	4	computer, it moves back and forth.  That's the
	5	computer with my e-mail, it moves back and forth.  So
	6	it's the same computer in my office as at home.
	7		Q.	I see, okay.  And I assume the computer
	8	in your office was searched for relevant e-mails; is
	9	that your understanding?
10		A.	Yes.
11		Q.	I gather from time to time you give
12	interviews to the press; is that right?
13		A.	Yes.
14		Q.	During those interviews, does anybody
15	from Microsoft or Microsoft's PR firm take notes or
16	record remarks that you make to the press?
17		A.	Sometimes they do.  Most times they
18	don't.
19		Q.	Who would be responsible for doing that
20	at Microsoft when that's done?
21		A.	Well, if there is nobody in the
22	meeting, then no one.  If there's -- usually it would
23	have to be somebody that was actually present.
24		Q.	Correct.  Is there somebody in the
25	Microsoft PR department that is responsible for
	1	making notes or recordings of interviews you give to
	2	the press?
	3		A.	I said if there is someone in the
	4	meeting, then they can choose to do so.
	5		Q.	I understand that.  
	6		A.	There is no particular person who comes
	7	to those meetings.  Sometimes there is no one in
	8	those meetings and sometimes there is someone in the
	9	meeting.
10		Q.	When there is somebody there, who
11	undertakes to take notes or make recordings of your
12	remarks?
13		A.	The person who is there.
14		Q.	And who has that been in the past?  Can
15	you identify any specific people who would have done
16	that?
17		A.	Well, I wouldn't know all their names. 
18	Sometimes Mitch Matthews might be in interviews. 
19	Sometimes -- Katie Erling was in when I talked to an
20	analyst once.  Marianne Allison, not in the last few
21	years.  Melissa Wagner maybe 15 years ago.  Pam
22	Edstrom.  Dean Katz.  Collins Hemingsway.  
23			I don't remember everyone who ever sat
24	in an interview with me.
25		Q.	Okay.  Have you had any communications
	1	with anyone from a company outside Microsoft with
	2	respect to whether or not somebody from that company
	3	might testify at the trial of this matter?
	4		A.	No.
	5		Q.	Sir, are you familiar with the
	6	Microsoft Press computer dictionary?
	7		A.	No.
	8		Q.	You've never cracked it open before?
	9		A.	No.
10		Q.	Well, I'll introduce you to it.  I have
11	here the Microsoft Press computer dictionary.  It's
12	the third edition dated 1997.  It says -- it claims
13	to be the authoritative source of definitions for
14	computer terms, concepts and acronyms from the
15	world's most respected computer software company. 
16	I'll give you a softball question.  
17			Would you agree that Microsoft is the
18	world's most respected computer software company?
19		A.	Some people would agree with that, some
20	people wouldn't.
21		Q.	What's your opinion?
22		A.	I think we are the most -- if you took
23	it on a statistical basis, yes, we'd be the most
24	respected software company.
25		Q.	This computer dictionary defines
	1	operating system as follows:  "The software that
	2	controls the allocation and usage of hardware
	3	resources such as memory, central processing unit,
	4	time, disk space and peripheral devices."  
	5			Is that an accurate definition of an
	6	operating system?
	7		A.	Well, the notion of what's in an
	8	operating system has changed quite a bit over time. 
	9	So that definition is not really complete in terms of
10	how people think of operating systems in the last
11	decade or so.
12		Q.	So this definition in the 1997
13	dictionary is incomplete in your estimation?
14		A.	What I said is that over time the
15	number of things that are in operating systems has
16	increased and so if you want to look at operating
17	systems in the last decade, you'd say the definition
18	is incomplete.
19		Q.	Is it accurate?  
20			Let me read it to you once again.  
21	"The software that controls the allegation and usage
22	of hardware resources such as memory, central
23	processing unit, time, disk space and peripheral
24	devices."  
25		A.	I said in terms of operating systems in
	1	the last decade, it's an incomplete definition.
	2		Q.	In what respects is it incomplete?
	3		A.	There are aspects of the operating
	4	systems in the last decade that aren't included in
	5	that definition.
	6		Q.	And what aspects?
	7		A.	Do you want -- I mean it's a long
	8	answer to that question.  Shall we go through them
	9	all?  
10		Q.	Sure, go ahead.  
11		A.	Okay.  Well, typically the way people
12	interact with computers now is on a graphical basis
13	and so the constructs that relate, for example, to
14	fonts are now, in the last ten years, a typical part
15	of the operating system.  
16			For example, the idea of how you take a
17	font and render it at different sizes, whether you
18	have descenders, how you deal with ligatures, how you
19	deal with, say, Arabic ellision, how you deal with
20	Kanji characters or Hangul characters.  And so there
21	is a font rasterizer and a set of font resources and
22	a set of font substitution algorithms that are
23	included in the computer.  So that when people write
24	applications that run on top of that computer, they
25	can call on those resources in order to render the
	1	glyphs on the computer screen.  And there is a lot of
	2	utility software that relates to the management of
	3	those fonts.
	4		Q.	Is that the end of your answer?
	5		A.	No.  No.  Another thing that is typical
	6	in operating systems for the last decade is a set of
	7	utilities for managing the disk space that's on the
	8	computer dealing with backup, dealing with being out
	9	of memory, dealing with security aspects of managing
10	the disk there.  And so the various utility programs
11	help you make sure the disk is being used for the
12	most recent information, to help you archive that
13	information in a variety of ways.  So that's
14	something that has been in operating systems over the
15	last decade.  
16			Also operating systems have a shell
17	type function that is a way of interacting with the
18	user to navigate through the informational resources. 
19	Actually, that's more than a decade that that's been
20	a typical inclusion in the operating system.  
21			Do you want me to keep going on?  
22		Q.	Yeah, finish your answer and I'll ask
23	you another question.  Let me know when you're done.  
24		A.	There's enough things here that I doubt
25	I'll be able to hit them all, but I'll hit another
	1	set of them.  
	2	              It's typical in terms of interacting
	3	with the user to have some sort of facility for
	4	helping the user.  That is, if the user is confused
	5	about the commands, which utility to use and what to
	6	do.  It's typical now to have something where they
	7	can give some sort of ask for help and help will come
	8	up onto the computer screen and be displayed in order
	9	to let them interact.  
10	              It's also typical now not just to 
11	map the low-level hardware but also to have very 
12	high-level graphics support that's even independent
13	of what's in the hardware that's there.  It's typical
14	to have remote booting capabilities so you can get
15	the operating system that can come across the
16	network.  It's typical to have things that relate to
17	viruses that you find in computer systems.  
18	              Let's see.  It's also typical to have
19	as well what you think of as disk management
20	utilities, some application type programs that let
21	you go in and show off some of the strengths of that
22	operating system, what's actually available with that
23	system.  So, for example, if you take a Macintosh,
24	when you get it, it has a variety of little things
25	that you can play around with.  
	1		It's also typical to have a thing like
	2	a control panel, I don't know if you've used that on
	3	the Macintosh, but it lets you go in do things like
	4	set the sound settings and set the keyboard settings,
	5	the keyboard repeat factor.  It's -- because of the
	6	way operating systems now handle languages, there are
	7	a lot of things that have to do with configuring the
	8	system in that respect.  
	9		In the whole area of networking there's
10	more and more that's being included in operating
11	systems to let people get out and do things,
12	including often the ability to create electronic
13	mail, receive electronic mail, deal with the system
14	in that fashion.
15	       Q.	Is it your testimony that the control
16	panel is part of the operating system?
17		MR. HEINER:  Objection.  What operating
18	system are we talking about?
19		MR. HOUCK:  Macintosh operating system.  
20		MR. HEINER:  Okay.
21		THE WITNESS:  Well, they have a control
22	panel that is part of the Macintosh OS, yes.
23	       Q.	BY MR. HOUCK:  Is that part of any OS
24	marketed by Microsoft?
25	       A.	No.  The Macintosh control panel is
	1	actually unique to the Macintosh operating system. 
	2	It only appears in the Macintosh operating system.
	3		Q.	During the course of your answer, you
	4	used the word "application" several times, and let me
	5	see if you agree with the definition in the Microsoft
	6	dictionary of that term.  
	7			Application is there defined as:  
	8	"A program designed to assist in the performance of a
	9	specific task, such as word processing, accounting or
10	inventory management."  
11			Is that an accurate definition,
12	Mr. Gates?
13		A.	Could you read it again?
14		Q.	Sure.  "A program designed to assist in
15	the performance of a specific task, such as word
16	processing, accounting or inventory management."  
17		A.	I'd say it's a pretty vague definition.
18		Q.	Is it accurate, as far as it goes?
19		A.	I'd say it's vague but accurate.
20		Q.	Another term I'm sure we're going to be
21	using throughout the course of the deposition is Web
22	browser.  And let me read you the definition from
23	your company's dictionary and see if you think that's
24	accurate.  
25			Web browser is defined by the Microsoft
	1	computer dictionary as follows:  "A client
	2	application that enables a user to view HTML
	3	documents on the World Wide Web, another network for
	4	the user's computer, follow the hyperlinks among them
	5	and transfer files."  
	6			Is that accurate?
	7		A.	It's actually describing browsing
	8	functionality.
	9		Q.	Is it an accurate definition of
10	browsing functionality?
11		A.	It describes part of what you do when
12	you browse.
13		Q.	What is your definition of a Web
14	browser?
15		A.	I'd say browsing technology is what
16	lets you navigate through -- typically it means
17	something that lets you do HTML display and
18	navigation.	  
19		Q.	Is that what you mean when you use the
20	term Web browser?
21		A.	Well, software that lets you do Web
22	browsing is sometimes referred to as a Web browser.
23		Q.	And Microsoft has marketed a Web
24	browser under the trade name Internet Explorer; is
25	that correct?
	1		A.	We've used the term Internet Explorer
	2	to refer to the Internet technologies in Windows as
	3	well as some stand-alone products we've done.
	4		Q.	Let me see if you agree with this
	5	definition in the 1997 edition of Microsoft's
	6	computer dictionary.  The definition is of the term
	7	Internet Explorer.  
	8			Internet Explorer is defined as
	9	follows:  "Microsoft's Web browser introduced in
10	October, 1995."  
11			Is that an accurate definition of
12	Internet Explorer?
13		A.	I'm not sure why they say October.  I
14	don't think that's right.
15		Q.	When is your recollection that it was
16	introduced?
17		A.	Well, we shipped Windows 95, including
18	browsing functionality, in August, 1995.
19		Q.	Was IE shipped as a stand-alone product
20	in or about October, 1995?
21		A.	No.
22		Q.	Was it ever shipped as a stand-alone
23	product?
24		A.	Well, it depends on what you are
25	referring to.  If you are talking about Unix or the
	1	Macintosh, we did create a set of bits that stood by
	2	themselves and could be installed on top of those
	3	operating systems.
	4		Q.	When were those versions of IE first
	5	marketed?
	6		A.	Certainly not in October, 1995.
	7		Q.	Apart from the timing issue, would you
	8	agree that Internet Explorer is defined here
	9	correctly as Microsoft's Web browser?
10		A.	Did you actually read what was in
11	there?
12		Q.	Yeah, I read the first sentence.  I can
13	read you the whole thing if you'd like.  
14		A.	Well, it seems strange.  If you're
15	trying to use the dictionary, you might as well read
16	what it says.  You could show it to me.
17		Q.	I'll read it to you and I'll show it to
18	you and you tell me if you think there is anything in
19	here that is inaccurate.  
20			The full entry of Internet Explorer
21	reads as follows:  "Microsoft's Web browser
22	introduced in October, 1995.  Internet Explorer is
23	now available in Windows and Macintosh versions. 
24	Later versions provide the ability to incorporate
25	advanced design and animation features in the Web
	1	pages and recognize ActiveX controls and Java
	2	applets."  
	3			Take a look at it and tell me if there
	4	is anything else in there that you think is
	5	inaccurate?   
	6		A.	Well, certainly the product we shipped
	7	that was before October, 1995 was Windows 95.  The
	8	browsing functionality we had in it we've updated
	9	quite a bit several times.  And so defining Internet
10	Explorer to be what we shipped just on one particular
11	date can't be considered accurate.  You have to say
12	that many times we've taken the browsing
13	functionality in Windows, which we refer to as
14	Internet Explorer, and we've updated that
15	functionality.  So you can't really pin the
16	definition to a particular date.  It's really a brand
17	name we use for those technologies.
18		Q.	Was this definition accurate in 1997
19	when Microsoft's computer dictionary was sold to the
20	public?
21		A.	I already told you that reference to
22	October, 1995 certainly makes the definition
23	inaccurate.
24		Q.	Apart from that, is it accurate?
25		A.	It's not accurate to say that Internet
	1	Explorer is defined at a single point in time, that
	2	it's one set of bits because it's a brand that we
	3	have used for a set of technologies that have evolved
	4	over time.  And in that sense I would take exception
	5	to the way that the book, that I've never seen there,
	6	happened to define it.
	7	       Q.	You've described the Web browser as a
	8	killer application, haven't you?
	9	       A.	I'm not sure what you're talking about. 
10	You'd have to show me the context.
11	       Q.	Okay.
12		MR. HOUCK:  I'd like to mark as
13	Government Exhibit 1 a memorandum from Mr. Bill Gates
14	to the executive staff dated May 22, 1996.  
15		MR. HEINER:  We'd like three copies,
16	Mr. Houck.  
17		MR. HOUCK:  Unfortunately, I have one
18	for the witness.  This is yours, Mr. Gates.  You can
19	use the original marked by the court reporter and 
20	we'll hand out a keepsake for counsel.  We have just
21	one, unfortunately.  
22		MR. HEINER:  You were not expecting
23	more than one of us on this side of the table?  
24		MR. HOUCK:  I expected to have one
25	lawyer to be the principal representative of
	1	Mr. Gates and if you feel incapable of that, maybe at
	2	the break we can make other copies.  
	3			MR. HEINER:  We're capable of having
	4	one, but we'd like to have our side have --
	5			MR. HOUCK:  In the past I've been at
	6	depositions where several DOJ and state
	7	representatives have appeared and we've received just
	8	one ourselves from Microsoft, so I extended you the
	9	same courtesy, sir.  
10			MR. HEINER:  Okay.  
11			(The document referred to was marked
12	by the court reporter as Government Exhibit 337 for
13	identification and is attached hereto.) 
14		Q.	BY MR. HOUCK:  I'd like you to look at
15	Exhibit 1, Mr. Gates, right here in front of you. 
16	This is a memorandum that purports to be from you to
17	your executive staff dated May 22, 1996, and it
18	attaches, for want of a better word, an essay
19	entitled "The Internet PC" dated April 10, 1996.  
20			Do you recall writing that essay?
21		A.	It looks like this is an e-mail, not a
22	memorandum.
23		Q.	Do you recall writing the essay dated
24	April 10, 1996 entitled "The Internet PC"?
25		A.	Well, it looks like an essay I wrote. 
	1	I don't remember specifically, but it does look like
	2	something I wrote.
	3		Q.	The portion I refer you to is at the
	4	bottom of the first page under the heading called
	5	"The Latest Killer App."  Do you see that?
	6		A.	I see a heading.
	7		Q.	First paragraph under that heading
	8	reads as follows:  "Our industry is always looking
	9	for the next 'killer application'-- for a category of
10	software that, by its utility and intelligent design,
11	becomes indispensable to millions of people.  Word
12	processors and spreadsheets were the killer
13	applications for business PCs starting in 1981." 
14			And the next sentence reads, "The
15	latest confirmed 'killer app' is the web browser."  
16			Do you recall writing that, sir?
17		A.	No.
18		Q.	Do you have any reason to believe you
19	didn't write it?
20		A.	No.                
21		Q.	Can you explain what you meant here by
22	describing the Web browser as a "killer app"?
23		A.	I just meant that browsing would be, in
24	our view, a popular thing, not necessarily on the Web
25	but just browsing in general would be a popular
	1	activity.
	2		Q.	Is a killer application an application
	3	that drives sales of other products like operating
	4	systems and hardware?
	5		A.	No.
	6		Q.	Do you have a definition in your own
	7	mind of killer application?
	8		A.	It means a popular application.
	9		Q.	Let me resort again to the Microsoft
10	computer dictionary, and I'll read you what that says
11	about killer applications.  You may disagree with it,
12	and if so, you can tell me.  
13			The Microsoft computer dictionary, 1997
14	edition, defines killer app as follows, and it gives
15	two definitions.  And I'll be very complete this
16	time, Mr. Gates.  
17			The first definition is, "An
18	application of such popularity and widespread
19	standardization that fuels sales of the hardware
20	platform or operating system for which it was
21	written."  
22			Do you agree with that definition?
23		A.	Are you saying to me that there is more
24	in there and you're just reading me part of it?  
25		Q.	I'm going to read you the second
	1	definition as well.  
	2		A.	So you're asking me about it without
	3	reading me the whole thing?  
	4		Q.	No, sir.  There's two definitions. 
	5	You're familiar with dictionaries, I take it? 
	6	Sometimes they have more than one definition of a
	7	term; correct?  
	8		A.	Sometimes terms have more than one
	9	meaning, so it's appropriate that dictionaries would
10	give the two different meanings.  And generally
11	before you'd ask somebody if they agreed with the
12	dictionary, you'd actually give them the benefit of
13	reading them what is in the dictionary, not just a
14	part of it.
15			MR. BOISE:  Move to strike the answer
16	as nonresponsive.
17		Q.	BY MR. HOUCK:  I read you the first
18	definition and asked you if you agreed with that
19	definition.  
20		A.	I don't think it's the only definition.
21		Q.	Is that an accurate definition?
22		A.	I'd like to hear what the other --
23		Q.	I'll read it to you.  The second
24	definition is, "An application that supplants its
25	competition."  
	1			Let me go back and read you the first
	2	definition again, now that you've heard both of them. 
	3			The first definition reads as follows: 
	4	"An application of such popularity and widespread
	5	standardization that fuels sales of the hardware
	6	platform or operating system for which it was
	7	written."  
	8		A.	I already told you that my definition
	9	of killer app is a very popular application.
10		Q.	Is this definition accurate?
11		A.	I told you, when I use the term "killer
12	application," in particular when I use it in a piece
13	of e-mail, what I mean by it -- I'm sure there's
14	people -- 
15		Q.	I understand.  You've told me that, but
16	there's another question on the table.  Do you have
17	any disagreement with this definition?
18		A.	I think most people when they use the
19	word "killer app" are not necessarily tying it to any
20	relationship to hardware.
21		Q.	What about a relationship to an
22	operating system?
23		A.	Usually they're just talking about it
24	being a very popular application.  I certainly know
25	of things that have been referred to as killer
	1	applications that haven't driven hardware sales or
	2	operating system sales.
	3		Q.	What other applications would you
	4	identify as being killer applications?
	5		A.	Applied simulator.
	6		Q.	Any others?
	7		A.	Well, you always have to take a year
	8	and a context for those things.  For example, when
	9	desktop publishing software became popular in the
10	1980's, many people referred to it that way.  When
11	people are talking about interactive TV, they thought
12	video on demand would be a killer application.  And
13	something went wrong because, you know, the whole
14	thing never caught on.  But people had been using
15	that term, the idea of letting people watch movies,
16	as something that would be extremely popular.
17		Q.	In what time frame was the Web browser
18	a killer application?
19		A.	Well, I think Web browsers became very
20	popular between, oh, '95 and '97 they became very
21	popular.
22		Q.	So at that point in time the Web
23	browser was, in your definition, a killer
24	application?
25		A.	They were very popular, yeah.
	1			MS. CLEARY:  If I could interrupt for a
	2	minute, I'd just like to keep the record straight. 
	3	We need to renumber Exhibit 1 as Exhibit 337.  
	4		Q.	BY MR. HOUCK:  Microsoft currently
	5	markets operating systems for personal computers;
	6	correct?
	7		A.	Yes.
	8		Q.	What's the current version called?
	9			MR. HEINER:  Objection.
10		Q.	BY MR. HOUCK:  What operating systems
11	for personal computers does Microsoft currently have
12	on the marketplace?
13		A.	Well, we have MS DOS.  We've got
14	Windows CE that's got a lot of different versions. 
15	We've got Windows 3x, Windows 95, Windows 98, 
16	Windows NT Version 3, Windows NT Version 4.  
17		Q.	Are all those operating systems
18	currently being marketed by Microsoft?
19		A.	Yes.
20		Q.	Does Microsoft endeavor to track its
21	market share with respect to operating systems on
22	personal computers?
23		A.	There's not some unified effort to do
24	that.
25		Q.	Is there anybody in Microsoft
	1	responsible for trying to determine what Microsoft's
	2	market share is with respect to PC operating systems?
	3		A.	No.
	4		Q.	Have you seen any figures indicating
	5	what Microsoft's market share is with respect to
	6	operating systems on personal computers?
	7		A.	From time to time people doing
	8	marketing analysis may pull together some figures
	9	like that.  And depending on, you know, what the
10	context is, they will be different numbers.
11		Q.	Do you have any -- strike that.
12			MR. HOUCK:  I'd like to mark as 
13	Exhibit 338 a Fiscal Year 1996 Midyear Review dated
14	January 22, 1996.  
15			(The document referred to was marked
16	by the court reporter as Government Exhibit 338 for
17	identification and is attached hereto.) 
18		Q.	BY MR. HOUCK:  Is Exhibit 338 the type
19	of document you referred to that contains market
20	share information?
21		A.	I don't know anything about 338.
22		Q.	Have you ever seen it before?
23		A.	No.
24		Q.	Do you know what position Joachim
25	Kempin held in January, 1996?
	1		A.	Yes.
	2		Q.	What was his position at that time?
	3		A.	He is in charge of our relationships
	4	with hardware manufacturers.
	5		Q.	Do you have any understanding that in
	6	connection with that position he endeavored to
	7	determine what Microsoft's market share was with
	8	respect to operating systems sold to hardware
	9	manufacturers?
10		A.	I'm sorry, say that again.
11		Q.	Do you have any understanding that one
12	of Mr. Kempin's job responsibilities in that
13	connection in 1996 was to try to determine what
14	Microsoft's market share was with respect to
15	operating systems sold to hardware manufacturers?
16		A.	No.
17		Q.	I'd like you to turn to the page of
18	this document that ends in 022.  And the heading
19	reads "x86 OS Analysis for Fiscal Year '96."
20		A.	Okay.
21		Q.	On the page that is titled "x86 OS
22	Analysis for Fiscal Year '96" appears a statement,
23	"All other competitive licenses, less than 5%" 
24			Do you have any understanding that in
25	or about early 1996 Microsoft's share of the market
	1	with respect to operating systems sold for x86
	2	computers was in the vicinity of 95 percent?
	3		A.	No.
	4		Q.	What is your understanding of what the
	5	Microsoft market share was at that time?
	6		A.	I wouldn't know.
	7		Q.	Do you have any idea, as you sit here
	8	today, what Microsoft's market share is with respect
	9	to operating systems sold for x86 architecture
10	computers?
11		A.	Well, piracy alone is greater than 5
12	percent.  But no, I don't know the number.
13		Q.	What other companies besides Microsoft
14	sell operating systems for x86 architecture
15	computers?
16		A.	There's a great number.
17		Q.	Can you identify them?
18		A.	Santa Cruz.  Red Brick.  Caldera.  IBM
19	in many different products.  Sun Microsystems.  
20	Microware.  Wind River.  
21			Those are all I can think of right now.
22		Q.	Do you have any estimate as to what the
23	collective market share of those companies is with
24	respect to operating systems sold for x86
25	architecture PCs?
	1		A.	No.
	2		Q.	Is it under 10 percent?
	3		A.	Well, I've said to you I don't know the
	4	numbers.
	5		Q.	Can you estimate it?
	6		A.	Actually, I know something about
	7	piracy.  Are you including that or not?  
	8		Q.	No, sir.  My question was, you've
	9	identified a number of companies that market
10	operating systems for x86 PCs; correct?
11		A.	Yes.
12		Q.	And the question is, do you have any
13	understanding at all as to approximately what their
14	collective market share is with respect to operating
15	systems sold on x86 machines that come equipped with
16	operating systems?
17		A.	I wouldn't be the best source for that
18	data.
19		Q.	Can you answer my question?
20		A.	I don't know their market share.
21		Q.	You are unable to estimate it; is that
22	right?
23		A.	I don't think I'd be accurate in
24	guessing and I don't think it's a good idea to guess.
25		Q.	You have no idea whatsoever as to
	1	approximately what the market share is; is that
	2	correct?
	3		A.	I'm reluctant to give a number because
	4	I don't consider myself someone who knows the volumes
	5	involved.
	6		Q.	You have no understanding whatsoever as
	7	to the approximate market share these companies have?
	8		A.	Are you asking me for a number or just
	9	a --
10		Q.	I'm asking for your best -- 
11		A.	If you're asking does Microsoft sell
12	more than they do, yes, I can safely say that.  But
13	when you say to me what is their share, which I
14	thought was one of the questions you asked, I'd say
15	it's not good for me to guess at the number.
16		Q.	Do you have any understanding as to
17	whether the collective market share of those
18	companies is under 20 percent?
19		A.	What time period were you talking
20	about?  I guess I should -- what time period are you
21	saying?  
22		Q.	Fiscal year 1997.  Do you have any
23	understanding whatsoever as to whether or not the
24	collective market share of all of Microsoft's
25	competitors in operating systems for x86 PC machines
	1	is under 20 percent?
	2		A.	It's probably under 20 percent.
	3		Q.	Okay.  Any idea how far under?
	4		A.	No.
	5		Q.	Who is the author of documents you've
	6	seen at Microsoft with respect to market share
	7	information on operating systems?
	8		A.	I've told you there is no one whose
	9	particular responsibility it is to track those
10	figures, so I'm not sure what documents you're
11	referring to.
12		Q.	Correct me if I'm wrong, but I thought
13	you said you had seen documents that contained market
14	share information; is that right?
15		A.	I've seen documents where people
16	attempt in some context to estimate various numbers.
17		Q.	And what people are you referring to?
18		A.	I'm just saying I've seen documents
19	like that.  I'm not saying any particular --
20		Q.	Do you know who authored those
21	documents?
22		A.	No.
23		Q.	Do you recall what unit of Microsoft
24	they came from?
25		A.	They could have come from the product
	1	groups or the sales and marketing groups.
	2	       Q.	Do you have any understanding as to how
	3	the folks who prepared those documents go about
	4	tracking Microsoft's market share?  
	5		MR. HEINER:  Objection.  Misstates the
	6	testimony.
	7		THE WITNESS:  Well, I think IDC and
	8	Dataquest are examples of firms who are in the
	9	business of trying to measure the size of various
10	product sales.  And so sometimes we might look at
11	their numbers.  I think the Microsoft library
12	subscribes to a number of services that are in the
13	business of trying to guess at numbers.  
14		MR. HOUCK:  I'd like to mark as 
15	Exhibit 339 a memorandum or e-mail from Anthony Bay
16	to Ben Slivka dated October 25, 1994.  
17		(The document referred to was marked
18	by the court reporter as Government Exhibit 339 for
19	identification and is attached hereto.) 
20	       Q.	BY MR. HOUCK:  Would you take a look at
21	Exhibit 339, Mr. Gates.  Exhibit 339 contains a
22	number of e-mails, and I want to ask you a couple
23	questions about one on the first page from Russell
24	Siegelman to yourself and others re MCI as an access
25	provider dated October 13, 1994.  
	1			Do you recall receiving this e-mail?
	2		A.	No.
	3		Q.	Do you have any reason to believe you
	4	didn't get it?
	5		A.	No.
	6		Q.	What was Mr. Siegelman's position in
	7	October of '94?
	8		A.	He was involved with looking at Marvel.
	9		Q.	And what was Marvel?
10		A.	It was a code name for what we would do
11	in terms of Internet sites or online service
12	activity.
13		Q.	Do you understand that in this e-mail
14	here Mr. Siegelman is opposing a proposal to give MCI
15	a position on the Windows 95 desktop as an Internet
16	service provider?
17		A.	I don't remember anything about MCI. 
18	This talks about how we'll have a Mosaic client in
19	Windows 95.  I don't see anything in here about the
20	desktop.
21		Q.	It references in this e-mail the
22	Windows box.  What do you understand the Windows box
23	to mean?
24		A.	Well, the Windows box is certainly not
25	the Windows desktop.  The Windows box is a piece of
	1	cardboard.
	2		Q.	Is it your understanding that when he
	3	uses "Windows box" here, he means a piece of
	4	cardboard?
	5		A.	Well, he is probably talking about the
	6	stuff that's inside.  He is saying access to the
	7	Windows box.  He is talking about the bits that are
	8	on the -- 
	9		Q.	What do you understand to be the
10	subject of the memorandum here that he is addressing?  
11			MR. HEINER:  Mr. Houck, you're at risk
12	here of cutting off the witness.  
13			MR. HOUCK:  I'm sorry.  
14			MR. HEINER:  Or I should say you did
15	cut off the witness.
16			MR. HOUCK:  I apologize if I did.  I'm
17	just trying to move this along, but if I cut you off,
18	I apologize.  
19			MR. HEINER:  Can we have the last
20	question and answer read back.  
21			(Record read.) 
22			THE WITNESS:  This is electronic mail
23	and Russ is suggesting that he disagrees with doing a
24	deal with MCI under these particular terms.
25		Q.	BY MR. HOUCK:  In the e-mail he refers
	1	to Windows distribution as a unique and valuable
	2	asset, more specifically as "our one unique and
	3	valuable asset."  Do you see that?
	4		A.	I see a sentence that has those words
	5	in it.
	6		Q.	Do you have an understanding as to what
	7	he meant?
	8		A.	Well, the Marvel people were having a
	9	hard time coming up with a strategy, and in
10	retrospect we can look back and say they didn't come
11	up with a good strategy.  And they were looking at,
12	you know, what could they do that would be attractive
13	to a lot of users.  And sometimes their goals and the
14	goals of the Windows group were different.  And in
15	retrospect it's clear they weren't able to attract a
16	lot of users.
17		Q.	Mr. Gates, I indicated at the outset of
18	the deposition I do want to move through this
19	deposition as quickly as possible, but I must say I
20	think your answers are nonresponsive and rambling,
21	and if that continues to be the case, I'm just
22	letting you know this is going to take much longer
23	than I would have hoped.  So I'll pose my question
24	again because I think your answer was nonresponsive. 
25			Do you have any understanding as to
	1	what Mr. Siegelman meant here by his reference to
	2	Windows distribution being "our one unique and
	3	valuable asset"?
	4		A.	Was that the question I was asked --
	5		Q.	Yes, sir.  
	6		A.	Can you read me back the previous
	7	question?  
	8			(The record was read as follows:  
	9			"Q.  In the e-mail he refers to Windows
10		distribution as a unique and valuable asset,
11		more specifically as 'our one unique and
12		valuable asset.'  Do you see that?
13			"A.  I see a sentence that has those
14		words in it.
15			"Q.  Do you have an understanding as to
16		what he meant?"
17			THE WITNESS:  Well, maybe there is some
18	understanding -- you said do I understand what he
19	meant.  I thought you were asking about his e-mail as
20	a whole.
21		Q.	BY MR. HOUCK:  Let me reask it for the
22	third time and see if I can get an answer.  
23			Do you have any understanding what
24	Mr. Siegelman meant when he referred to Windows
25	distribution as our one unique and valuable asset?  
	1			MR. HEINER:  This is a line of
	2	questioning about the mail that Mr. Gates does not
	3	recall reading; is that right?  
	4			MR. HOUCK:  The question has been put.
	5			THE WITNESS:  I think the Marvel group
	6	in their search for what they could do to get
	7	millions of users at this particular point in time
	8	was thinking about making it easy to sign up to the
	9	Windows box being something that would be helpful to
10	them and therefore an asset for the Marvel group in
11	what they were doing.
12		Q.	BY MR. HOUCK:  Do you understand that
13	Mr. Siegelman in his reference had in mind the large
14	market share that Microsoft has with respect to
15	operating systems?
16		A.	I don't see anything about that in
17	here.
18		Q.	That's not your understanding?
19		A.	Remember, Russ isn't involved with the
20	Windows business, he is involved with the Marvel
21	business.
22		Q.	Do you consider Windows distribution a
23	unique asset of Microsoft?
24		A.	I know that the inclusion of what
25	Marvel became didn't lead to its being popular.
	1	       Q.	Again, let me ask the question,
	2	Mr. Gates.  I wasn't asking about Marvel.  I was
	3	asking about Windows distribution.  
	4	       A.	Well, Marvel was a thing that was put
	5	into the Windows box and so, in fact, if the question
	6	is is putting things in there, is that valuable in
	7	the sense that it creates popularity for those
	8	things, there are many good examples that we know
	9	where it obviously does not create popularity.  So in
10	terms of how much of a value that is, it's very
11	instructive to look at Marvel and what subsequently
12	happened to that because we did include it in the
13	Windows box as one of the things that the user had on
14	the desktop.
15		MR. HOUCK:  Move to strike the answer
16	as nonresponsive.  
17		MR. HEINER:  Mr. Houck, I'm afraid that
18	if you ask a question with vague terms, you may get
19	answers that you don't like, but that was a very
20	responsive answer to the question.
21	       Q.	BY MR. HOUCK:  Let me put the question 
22	again without reference to this document.  Mr. Gates,
23	do you believe that Windows distribution is a unique
24	asset that Microsoft has?  
25		MR. HEINER:  Objection.  Form. 
	1	Foundation.  Defined terms.
	2			THE WITNESS:  What do you mean when you
	3	say "Windows distribution" there?
	4		Q.	BY MR. HOUCK:  Do you have an
	5	understanding what Mr. Siegelman meant by the phrase
	6	"Windows distribution" in his e-mail that he wrote to
	7	you?
	8		A.	He means -- I think he means, I don't
	9	know for sure, I think he means including an icon on
10	the desktop for access to Marvel.
11		Q.	And by "the desktop," you mean the
12	Windows desktop?
13		A.	In this case, yes.
14		Q.	He goes on in the e-mail to say as
15	follows:  "The only real advantage we have in this
16	game is Windows distribution.  Why sell it so cheaply
17	when we think is will be a big market and can give us
18	leverage in so many ways in the Iway business."  
19			Do you have any understanding what he
20	meant by the phrase "Iway business" here?
21		A.	No.  I've never -- I don't remember
22	ever seeing that term before.
23		Q.	What distribution channels has
24	Microsoft employed to distribute Internet Explorer?
25		A.	Well, the primary distribution channel
	1	is the Internet where people very easily download
	2	whatever version of Windows Internet technology
	3	they're interested in.  
	4			We've also distributed it through
	5	retailers, the Windows 95 update product and, you
	6	know, wherever Windows goes out, which includes
	7	retail, OEM.  And then people who do Internet signups
	8	have also done some distribution.  There's a lot of
	9	different marketing programs where we'll have like a
10	conference and we'll make available Internet Explorer
11	to people that attend the conferences.  
12			I think we've also included it with
13	Microsoft Office in some cases.
14		Q.	Has Microsoft done research to
15	determine which distribution channels are most
16	effective in delivering browsers that are actually
17	used by people?
18		A.	I think somebody did a survey to ask
19	people where they get their browser at some point.
20		Q.	Do you have any recollection who did
21	that survey?
22		A.	No.
23		Q.	Do you recall what the results were?
24		A.	I know the Internet has always been the
25	primary distribution channel for browsers.
	1		Q.	You're talking about specifically
	2	Internet Explorer?
	3		A.	No.
	4			MR. HOUCK:  I'd like to mark as 
	5	Exhibit 340 a memorandum -- or rather an e-mail --
	6	from Kumar Mehta to Brad Chase and Yusuf Mehdi dated
	7	March 27,	1997.  
	8			(The document referred to was marked
	9	by the court reporter as Government Exhibit 340 for
10	identification and is attached hereto.) 
11		Q.	BY MR. HOUCK:  Is this an example of
12	the type of memorandum you've seen in which Microsoft
13	has endeavored to determine which distribution
14	channels are most effective in distributing Web
15	browsers?
16		A.	No.
17		Q.	What position in the company did 
18	Mr. Mehta have in March of 1997?
19		A.	I don't know.
20		Q.	Do you know if one of his
21	responsibilities was market research?
22		A.	No.  I mean I'm not copied on this.  I
23	mean just looking at it -- and I certainly have no
24	recollection of seeing this.  It also seems to
25	contradict some other things that I have seen.
	1		Q.	The e-mail reads as follows:  "Bob
	2	Foulon is gathering data for a John Roberts meeting
	3	with Bill Gates tomorrow.  Apparently they are going
	4	to discuss whether IE and Memphis should be bundled
	5	together."  
	6			Do you recall such a meeting with 
	7	Mr. Foulon and Mr. Roberts?
	8		A.	No.
	9		Q.	Do you recall Mr. Foulon or Mr. Roberts
10	sharing with you market research data with respect to
11	how people get their browsers?
12		A.	I don't know Bob F-o-u. 
13		Q.	Do you understand that is a reference
14	to Bob Foulon?
15		A.	I don't know Bob Foulon.  I don't know
16	anyone whose name is Bob F-o-u anything.
17		Q.	Do you know John Roberts?
18		A.	Yes.
19		Q.	What position does he have with
20	Microsoft?
21		A.	He at this time -- is that what you're
22	interested in?
23		Q.	Yes.
24		A.	At this time I think he works for Brad
25	Chase.
	1		Q.	Did you have a meeting that you recall
	2	with Mr. Roberts and/or Mr. Chase in or about March
	3	of 1997 where you talked about the results of market
	4	research to determine how people obtained Internet
	5	Explorer?
	6		A.	I don't remember.
	7		Q.	The e-mail I quoted attaches another
	8	e-mail dated March 27, 1997, which says in the first
	9	two paragraphs, which I'll read, "Bob, here is some
10	information on how people get and use IE that might
11	help you guys.  My feeling, based on all the IE
12	research we have done, is that it is a mistake to
13	release Memphis without bundling IE with it.  IE
14	users are more likely than other browser users to get
15	it with their computers.  Overall, 20% of people who
16	use IE at home obtained it with their computer; and
17	24% of those using IE at work got it with their
18	computer.  Effectively we would be taking away the
19	distribution channel of almost a quarter of all IE
20	users."  
21			Do you have any understanding as to the
22	accuracy of the numbers he cites here with respect to
23	the number of people using IE who obtained it with
24	their computer?
25		A.	I have no idea what we're talking about
	1	in terms of what kinds of users he surveyed or looked
	2	at.  So no, I have no opinion on it whatsoever.  I
	3	mean who knows.
	4		Q.	Do you have any reason to believe the
	5	information he reports here is inaccurate?
	6		A.	I don't have enough of a context to
	7	even state an opinion.  It doesn't even say what kind
	8	of users or anything.
	9		Q.	Do you have any understanding
10	whatsoever as to approximately what percentage of IE
11	users have obtained IE through the OEM channel?
12		A.	The only data point I know along these
13	lines is I'm pretty sure I've seen that about 60 to
14	70 percent of people, the browser they're using they
15	got through the Internet, that's the way they got the
16	browser they're working with.
17			MR. HOUCK:  Move to strike the answer
18	as nonresponsive.  
19			Can we have the question back, please.  
20			MR. HEINER:  It's just a way to cut
21	through the line of questioning, which is not really
22	going anyplace and he is telling you about the only
23	data point he has in this general subject area, so
24	it's just a question of efficiency.
25			(The record was read as follows:  
	1			"Q.  Do you have any understanding
	2		whatsoever as to approximately what percentage
	3		of IE users have obtained IE through the OEM
	4		channel?"    
	5			THE WITNESS:  Well, I guess I need to
	6	explain then how it works.  If you take 100 percent
	7	and you take the one number that I say I know, which
	8	is 60 to 70 percent get it through the Internet, it
	9	at least places an upper bound on the number you
10	asked for.  And that's all I would know about that
11	statistic.  
12			MR. HOUCK:  Move to strike that answer
13	as well.
14		Q.	What information -- strike that.  
15			Can you identify any specific documents
16	you've seen that indicate how IE users obtained IE?
17		A.	No.
18		Q.	Have you seen any documents like that
19	at Microsoft prepared by Microsoft employees?
20		A.	I believe I have, yes.
21		Q.	Do you know who prepared them?
22		A.	No.
23			MR. HOUCK:  Do you want to take a break
24	here?  
25			MR. HEINER:  Sure.  
	1			VIDEOTAPE OPERATOR:  The time is 10:16. 
	2	We're going off the record.  
	3			(Recess.)  
	4			VIDEOTAPE OPERATOR:  The time is 10:31. 
	5	We're going back on the record.
	6		Q.	BY MR. HOUCK:  Was Netscape the first
	7	company to market a Web browser that gained
	8	widespread consumer usage?
	9		A.	I think Mosaic was the first browser. 
10	I don't know what your criteria -- what you're
11	implying in terms of widespread.  Mosaic was the
12	first popular browser and that predates the existence
13	of Netscape for their browser.
14		Q.	Did Netscape's browser supplant the
15	Mosaic browser as the most popular one?
16		A.	There's a point in time where
17	Netscape's browser became more popular in terms of
18	usage share than Mosaic.
19		Q.	Do you recall when that was?
20		A.	I'm sorry?
21		Q.	Do you recall when that was?
22		A.	No.  I don't think anybody knows
23	exactly when that was.
24			MR. HOUCK:  I'd like to mark as 
25	Exhibit 340 -- excuse me.  I'd like to mark as
	1	Exhibit 341 a series of e-mails, the first one being
	2	from Pat Ferrel, F-e-r-r-e-l, to Bill Gates and
	3	others dated April 6, 1995.  
	4			(The document referred to was marked
	5	by the court reporter as Government Exhibit 341 for
	6	identification and is attached hereto.) 
	7		Q.	BY MR. HOUCK:  I hand you Exhibit 341,
	8	Mr. Gates, and this is a series of e-mails and the
	9	one I want to ask you about is the one on the second
10	page from Mr. Siegelman to yourself and others dated
11	April 6, 1995.  Take a minute to take a look at it.  
12			Have you finished reviewing the e-mail?
13		A.	I looked at it.
14		Q.	The e-mail starts off as follows:  "Pat
15	Ferrel and I have been thinking about this problem a
16	lot and watching Netscape very closely.  I too am
17	very worried."  
18			What position did Mr. Ferrel hold at
19	Microsoft in or about April of 1995?
20		A.	He wasn't involved with Windows.  He
21	was involved with Marvel.
22		Q.	Is he still a Microsoft employee?
23		A.	I don't think so.  I'm not sure.
24		Q.	Do you recall personally being worried
25	about Netscape in or about April of 1995?
	1		A.	No.
	2		Q.	Do you recall discussing Netscape with
	3	Mr. Siegelman in this time period?
	4		A.	I'm sure Russ and I discussed the
	5	effect of the Internet in general on online service
	6	strategies like the work he was doing that became
	7	MSN, but not Netscape in particular, no.
	8		Q.	The next sentence of the e-mail says, 
	9	"I agree with most of your problem statement, but I
10	think you underestimate the publisher/ISV threat. 
11	Netscape is already opening up API hooks in their
12	viewer and many ISVs are hopping aboard."  
13			Do you know what his reference is to
14	your "problem statement"?
15		A.	No.
16		Q.	Do you understand what he means here
17	when he talks about opening up API hooks and many
18	ISVs hopping aboard?
19		A.	I don't know what he meant.  I can
20	guess if you want.
21		Q.	Do you have any understanding as you
22	sit here what he meant by the language used in this
23	e-mail?
24		A.	I don't know what he meant.  I'd have
25	to ask him what he meant.
	1		Q.	I'm asking for your understanding.  Do
	2	you have one or not?
	3		A.	Understanding of what?  Of what he
	4	meant?
	5		Q.	Yes.  
	6		A.	No.  Of what those words might mean, I
	7	can guess.
	8		Q.	I don't want you to guess.  I'm asking
	9	if you have any present understanding of what these
10	words mean.
11		A.	I've told you I don't know who he means
12	by "you."  I don't know what he means by "problem
13	statement."  So I'm a little unclear about what he
14	means in this paragraph.
15		Q.	Do you have any understanding -- strike
16	that.  
17			By ISV do you understand him to be
18	referring to independent software vendors?
19		A.	That acronym refers to independent
20	software vendor.
21		Q.	And what does the acronym API refer to?
22		A.	Application programming interface.
23		Q.	Do you recall yourself having a concern
24	in or about April, 1995 about the possibility that
25	Netscape was going to open up API hooks in the
	1	Netscape Web browser?
	2		A.	I can't pin any recollection to that
	3	particular time period, no.
	4		Q.	Did you at some point come to the
	5	conclusion that the prospect that Netscape might open
	6	up API hooks in their browser was a threat to
	7	Microsoft?
	8		A.	I think in late '95 Andreeson was
	9	talking about how he was going to put us out of
10	business, suggesting that their browser was a
11	platform.  And, in fact, they did have APIs in their
12	browser.
13		Q.	Do you recall having any concern
14	yourself before late 1995 with respect to the threat
15	posed by Netscape opening up API hooks in their
16	browser?
17		A.	No.
18		Q.	Do you recall that other folks at
19	Microsoft had such concerns before late 1995?
20		A.	It's hard to recall other people's
21	concerns.  No, I don't recall other people's
22	concerns.
23		Q.	In the last paragraph of the e-mail
24	Mr. Siegelman refers to the "danger of letting
25	Netscape create a new platform and get
	1	ISV/merchant/content provider support." 
	2		Do you have any understanding what he
	3	meant by that language?
	4	       A.	Well, he was in charge of our online
	5	service strategy and so he thought of the various
	6	things going on in the Internet as affecting what he
	7	was going to do.  In particular, online services, up
	8	until the Internet really exploded in popularity,
	9	they'd had content that was unique to their online
10	service.  And the whole Internet phenomenon was
11	changing that.  And so for Marvel that was a
12	challenge to the business strategy they'd gone down,
13	so I'm sure he is referring to that general issue.  
14	       Q.	Did you understand Mr. Siegelman had a
15	concern in or about April, 1995 that the opening up
16	of API hooks in Netscape's browser constituted a
17	threat to the Windows operating system?
18	       A.	Well, certainly he wasn't involved in
19	the Windows operating system and none of this is
20	about the Windows operating system, so to try to read
21	that into here is certainly incorrect.  
22		MR. HOUCK:  Move to strike as
23	nonresponsive.  
24		Repeat the question, please.  
25		(Record read.)
	1			THE WITNESS:  I'll give the same
	2	answer.  
	3		Q.	BY MR. HOUCK:  In the next sentence
	4	Mr. Siegelman says, "I don't think that the way to
	5	fight back is simply with a better Web browser
	6	either."  
	7			Do you recall having any discussion
	8	with Mr. Siegelman on what the best way to fight back
	9	was?
10		A.	I certainly had discussions with him
11	about our online strategies, which subsequently were
12	not successful, and certainly it's clear that for the
13	online strategy, he needed to do quite a bit,
14	including content relationships, not just browsing
15	functionality.
16		Q.	Did you have any discussion with 
17	Mr. Siegelman as to what the best way was for
18	Microsoft to fight back with respect to any threat
19	posed by Netscape to Windows as a platform?
20		A.	Mr. Siegelman wasn't involved with
21	Windows, so I don't understand why you keep asking me
22	about --
23		Q.	Well, you can say yes or no, sir.  I
24	don't mean to interrupt, but --
25		A.	No.  My discussions with Russ were
	1	about his responsibilities, which were online service
	2	activities.  
	3			MR. HOUCK:  I'd like to mark as 
	4	Exhibit 342 a series of e-mails, first one being from
	5	Nathan Myhrvold to Mr. Gates dated April 24, 1995.  
	6			(The document referred to was marked
	7	by the court reporter as Government Exhibit 342 for
	8	identification and is attached hereto.) 
	9		Q.	BY MR. HOUCK:  Before you take a look
10	at that document, do you recall that there was a
11	general discussion at Microsoft at the top executive
12	level in or about April, 1995, with respect to the
13	threat to Microsoft posed by Netscape?
14		A.	No.
15		Q.	What position did Mr. Myhrvold hold
16	with Microsoft in April of 1995?
17		A.	He was Russ Siegelman's boss, so he
18	wasn't involved in the Windows business.  He was
19	involved in our online service activities.
20		Q.	Was he one of your top executives?
21		A.	He was an executive.  I'm not sure what
22	you mean by top executive.  He didn't manage any of
23	the large products that we offer.
24		Q.	Was he sort of Microsoft's resident
25	strategic thinker?
	1		A.	No.
	2		Q.	Did you value his advice?
	3		A.	Not over the advice of people who are
	4	more directly involved in their businesses.
	5		Q.	Do you recall consulting Mr. Myhrvold's
	6	advice in or about April, 1995 as to how Microsoft
	7	should respond to Netscape?
	8		A.	I'm sure since Nathan was in charge of
	9	online services at that time there was some
10	discussion or e-mail about the effect of the Internet
11	growth on the Marvel and Blackbird strategies, but
12	not in a general sense.
13		Q.	If you would, would you take a look at
14	Exhibit 342, and in particular the e-mail on the
15	second page, which is from Mr. Myhrvold to yourself
16	and others regarding Internet strategy dated 
17	April 18,	1995.
18		A.	There's a lot of different e-mails
19	here.
20		Q.	The one I referred you to is the one on
21	the second page, sir, the one at the bottom of that
22	page, and it's from Mr. Myhrvold to yourself and
23	others dated April 18, 1995.
24		A.	Doesn't the same e-mail extend for
25	about nine pages or ten pages?  Isn't that all one
	1	e-mail?  
	2		Q.	That's the one I want to ask you about.  
	3		A.	So it's on all those pages; right?
	4		Q.	Right.  And the questions I have, to
	5	help you focus, are going to be with respect to the
	6	first couple pages of the e-mail.
	7		A.	Okay.
	8		Q.	The first paragraph reads, "There has
	9	been a flurry of e-mail about Netscape and our
10	general Internet development strategy.  This e-mail
11	is my contribution to this topic."  
12			Does this refresh your recollection
13	there was a general discussion at the upper levels of
14	Microsoft in or about April, 1995 with respect to
15	Netscape and how to respond competitively to
16	Netscape?
17		A.	Well, I think that's a
18	mischaracterization.  It appears there was some mail
19	about the effect of Netscape and their activities on
20	our online service strategy.
21		Q.	What do you understand about
22	Mr. Myhrvold's reference here to general Internet
23	development strategy?  
24		A.	This memo is about our strategy with
25	the Blackbird front end and how it should relate to
	1	Internet protocols.  And it's a very long, nine-page
	2	thing about Blackbird and his various opinions about
	3	Blackbird.  The interesting thing is Blackbird
	4	basically was canceled.
	5		Q.	Is it your testimony and your
	6	understanding that this memorandum is limited to a
	7	discussion about Blackbird?  
	8			MR. HEINER:  Object to the question
	9	because you know the witness hasn't read it.
10			MR. HOUCK:  He has read it.  He took
11	time to read it.  
12			MR. HEINER:  You said you would direct
13	him to two pages and he read two pages.  He can read
14	nine pages and tell you what the nine pages are
15	about, if you'd like.  
16		Q.	BY MR. HOUCK:  Take as much time as you
17	need to review the memorandum and answer my question.  
18			MR. HEINER:  Could I have the question
19	read back.
20			(The record was read as follows:  
21		"Q.  Is it your testimony and your
22		understanding that this memorandum is limited
23		to a discussion about Blackbird?")
24			THE WITNESS:  You keep using the word
25	memorandum to refer to electronic mail.  I don't
	1	think of electronic mail as a memorandum.  So this
	2	e-mail, which I haven't read, the part I've glanced
	3	at, all the action items, all the things he is saying
	4	we should do all relate strictly to Blackbird and the
	5	online services activities.
	6		Q.	BY MR. HOUCK:  Did any of the
	7	recipients of this e-mail have responsibilities for
	8	Windows?
	9		A.	Well, let's see.  He copies Russ, who
10	works for him in online services.  He copies Craig,
11	who works on interactive TV, not Windows.  He copies
12	Dan Rosen, who works on online service.  Pat Ferrel,
13	who works on online service.  Peter Neupert, who
14	works on online service.  And then he copies Paul,
15	who has another part of the business that includes
16	Windows, and he copies me.  So Paul and myself have
17	broad responsibilities, but otherwise all the other
18	people are online service people.
19		Q.	Were you and Paul Maritz two senior
20	executives with responsibilities for Windows in
21	April, '95?
22		A.	I'm not sure how you'd characterize my
23	role.  I'm the CEO of the company, so all the
24	products of the company -- I'm not sure you'd say --
25	you'd use the description you used.
	1		Q.	Windows is a very important product to
	2	Microsoft, is it not?
	3		A.	That's right.
	4		Q.	Is it fair to say you devote a fair
	5	amount of your time to Windows and strategies for
	6	marketing Windows and making sure it's a successful
	7	product?
	8		A.	I spend some of my time on that.
	9		Q.	Was that one of Mr. Maritz's principal
10	responsibilities in April of 1995?
11		A.	It was one of his, yes.
12		Q.	In the third paragraph of this e-mail
13	Mr. Myhrvold states, "The big issue to be concerned
14	about is the same issue that we have faced in the
15	past - proprietary standards coming from competing
16	software companies.  Netscape is certainly one of the
17	many companies who will try to promote their
18	proprietary extensions (and entirely new protocols)
19	on the world."  
20			Do you have any understanding as to
21	what he was referring to by his reference to issues
22	that Microsoft had faced in the past?
23		A.	No.
24		Q.	Do you know if he is referring to Lotus
25	Notes there?
	1		A.	I'm quite certain that's not what he
	2	was referring to.
	3		Q.	Do you have any present understanding
	4	as to what he meant?
	5		A.	I'm not sure.
	6		Q.	On the next page, first full paragraph,
	7	Mr. Myhrvold states, "The world of the Internet is
	8	rapidly becoming Windows centric because Windows will
	9	be the most popular client operating system by a wide
10	margin."  
11			Did you understand he was referring
12	here to market share enjoyed by Windows?
13		A.	I've said I don't remember the memo
14	specifically, so it's hard for me to say I remember
15	something he was referring to.
16		Q.	You have no present understanding of
17	what he meant by this language; is that correct?  
18			MR. HEINER:  That's a different
19	question.
20			THE WITNESS:  It's a different -- which
21	question should I answer?  
22		Q.	BY MR. HOUCK:  Do you have any present
23	understanding of what -- strike that question.  
24			Is it your present understanding that
25	by the reference here to Windows being the most
	1	popular client operating system by a wide margin, 
	2	Mr. Myhrvold was referring to the market share
	3	enjoyed by Windows in or about April, 1995?  
	4		A.	He may have been.
	5		Q.	Several paragraphs further on in this
	6	e-mail Mr. Myhrvold states, "As platform specific
	7	work is done on the Internet, we want it to be done
	8	on our platform.  As proprietary technology and
	9	protocols are used, we want them to be ours - in as
10	many broad mainstream areas as is reasonably
11	possible."  
12			Is it your understanding that his use
13	of the word "platform" here is a reference to
14	Windows?
15		A.	No.
16		Q.	What is your understanding?
17		A.	He is talking about all our platform
18	activities.
19		Q.	Which would be what?
20		A.	That include Blackbird.  That's the
21	primary subject of the memo, as we discussed.  
22		Q.	Did you consider Blackbird a platform
23	at this point in time?
24		A.	Yes.  What else is it?
25		Q.	Did you have a concern in April of 1995
	1	that Netscape was somehow threatening Blackbird,
	2	Microsoft's product?
	3	       A.	There was a concern that our whole
	4	online service strategy, including the Blackbird part
	5	of it, may have been something we should change
	6	because of all the activity on the Internet in
	7	general, including the things Netscape was doing.
	8	       Q.	Did you have a concern that what
	9	Netscape was doing was threatening Blackbird as a
10	platform?
11	       A.	The whole phenomenon of people doing
12	Websites using HTML was changing the framework that
13	had existed for online service people, and so the
14	Marvel and Blackbird strategy, you really had to call
15	into question whether changes should be made.  And so
16	Netscape was part of a phenomenon that was making us
17	rethink did Blackbird make sense.  And eventually,
18	due to size and speed and delays and various changes
19	in the market, we actually canceled Blackbird.  
20		MR. HOUCK:  Move to strike the answer
21	as nonresponsive.  
22		Can you read the question back, please.
23		(Record read.) 
24		MR. HEINER:  The answer was directly
25	responsive to the question.  You can move to strike
	1	all the answers and we'll have a short transcript.
	2			THE WITNESS:  If there is some part of
	3	my answer you don't understand, I'll be glad to
	4	elucidate, but it's one hundred percent responsive to
	5	the question.
	6		Q.	BY MR. HOUCK:  Isn't it a fact, 
	7	Mr. Gates, that Blackbird never did become a platform
	8	at all?
	9		A.	I told you we canceled Blackbird, but
10	Blackbird -- the whole idea of Blackbird is to be a
11	platform for people to write enhanced content on. 
12	That's the reason we invested so much money in
13	building Blackbird.  As it says in this memo, there
14	were people who were enthusiastic about what we've
15	done in Blackbird, including Nathan.
16		Q.	Isn't it a fact that you executives at
17	Microsoft back in April of '95 were concerned that
18	Netscape's Web browser posed a threat to Microsoft's
19	Windows platform?
20		A.	Well --
21		Q.	You can answer it yes or no, sir.  
22		A.	I don't know when people began to think
23	of Netscape as a competitor to Windows.  I don't
24	think it was that early, but it might have been.  I
25	know that by late '95 when people thought about the
	1	various competitors to Windows, they did think of
	2	Netscape.
	3	       Q.	What's the earliest date you could put
	4	on the concern expressed to you by Microsoft
	5	executives that Netscape posed a threat to the
	6	Windows platform?  
	7		MR. HEINER:  Asked and answered.
	8		THE WITNESS:  I said that in late '95
	9	I'm pretty sure people thought of them as a
10	competitor.  I couldn't name a date earlier than
11	that.  
12		I know that online service people were
13	thinking about Netscape and the Internet at earlier
14	dates.
15	       Q.	BY MR. HOUCK:  Let me ask you a few
16	questions about page 898 of this document, several
17	pages later on.  I'll read you the portion of it I
18	want to ask you some questions about so you have that
19	in mind.  
20		"The front end which supports these
21	services is basically the union of the MSN front end
22	with Blackbird and O'Hare.  At some point this is
23	very smoothly integrated, but at first they are
24	separate pieces of code stuck together at the end
25	user level.  
	1		"The front end should be given away as
	2	widely as possible, including:  
	3		"Put into Windows.  I agree with Paul
	4	Maritz's comment that we should distribute the front
	5	end very broadly by having it Windows, at least at
	6	some point down the line.  
	7		"Distributed free on the Internet. 
	8		"Distributed free with MSN."  
	9		Do you recall any general discussion of
10	this subject with Mr. Myhrvold or Mr. Maritz back in
11	April of '95?
12	       A.	I know there was a plan to have
13	Blackbird include all the HTML support and so it
14	would be a superset in that sense.
15	       Q.	Is the reference to O'Hare a reference
16	to Internet Explorer?
17	       A.	Probably.  
18		He says -- in the memo earlier he says,
19	"I've had people tell me that the O'Hare people
20	either are (or should be) working on their own plan
21	to superset Internet protocols."  So it appears that
22	the author of this memo is pretty confused about what
23	the O'Hare people are doing and therefore what O'Hare
24	is.  
25		MR. HOUCK:  Move to strike the last
	1	remark, which was not responsive to any question on
	2	the table.
	3			THE WITNESS:  I was answering about
	4	what the author of this memo meant by the word
	5	"O'Hare".  And believe me, that sentence that I read
	6	to you is very informative on that point.
	7		Q.	BY MR. HOUCK:  Isn't it a fact that
	8	O'Hare is a code name used at Microsoft for Internet
	9	Explorer?
10		A.	There was a group of people who were
11	looking at doing the Explorer.  Nathan says he
12	doesn't know what those people were doing, what their
13	strategy was at this time he wrote the memo.  
14			MR. HOUCK:  Move to strike again the
15	last portion of his answer.
16		Q.	Do you know a gentleman by the name of
17	Ben Slivka?
18		A.	Yes.
19		Q.	What were his responsibilities, if any,
20	at Microsoft back in early 1995?
21		A.	I'm not sure.  
22			MR. HOUCK:  I'd like to mark as
23	Government Exhibit 343 a series of e-mails, the first
24	one being from Alec Saunders to various people at
25	Microsoft dated January 31, 1995, the subject being
	1	Frosting and O'Hare.  
	2			(The document referred to was marked
	3	by the court reporter as Government Exhibit 343 for
	4	identification and is attached hereto.) 
	5		Q.	BY MR. HOUCK:  To expedite your review
	6	of this document, Mr. Gates, I'll tell you my
	7	questions are going to be limited to the e-mail on
	8	the last page of the document.  This is an e-mail
	9	from Ben Slivka to Tim Harris and others at Microsoft
10	dated February 13, 1995 and does not show you as a
11	recipient.  
12		A.	Which one?
13		Q.	The top one.  
14			The first sentence of the e-mail from
15	Mr. Slivka states, "O'Hare is the code name for our
16	Internet Client, and we plan to ship it in the Win95
17	'frosting' package, which sim-ships with Win95."  
18			Do you understand his reference here to
19	O'Hare and the Internet Client to be a reference to
20	what became known as Internet Explorer?
21		A.	I think Internet Explorer 1.0 that was
22	in part of the Windows 95.
23		Q.	Do you recall a plan back in early 1995
24	to ship a product known as Frosting?
25		A.	I don't recall the plan.  I know we
	1	worked on what we called Frosting.
	2		Q.	What is your understanding of what
	3	Frosting was?
	4		A.	It became the Windows Plus Pack.  It
	5	didn't sim-ship I don't think.  
	6		Q.	Was it your understanding that at some
	7	point in time it was Microsoft's intention to include
	8	Internet Explorer in the Frosting package as opposed
	9	to Windows 95?
10		A.	Well, for the primary Windows 95
11	distribution channel, we included Internet Explorer
12	1.0 with Windows, so when you say Windows 95, it was
13	part of Windows 95.  Then there is the Windows 95
14	Upgrade that was sold at retail, which that had a box
15	labeled "Windows 95 Upgrade" and a box labeled
16	"Windows 95 Plus Pack."
17		Q.	Do you recall that in or about
18	February, 1995, it was Microsoft's intention to
19	include Internet Explorer in the Frosting package and
20	not in Windows 95?  
21			MR. HEINER:  Objection.
22			THE WITNESS:  No.  I think you
23	misunderstood what I said.  Windows 95, the full
24	product, included IE.  Windows 95, the upgrade
25	product, did not.  But Windows 95, the full product,
	1	whether sold through the OEM or whatever, that
	2	included the capabilities.  It was just the upgrade
	3	that did not.
	4	       Q.	BY MR. HOUCK:  I understood your
	5	answer.  Let me ask the question again because I
	6	don't think you understood the question.  
	7		The question was, is it your
	8	understanding that as of February, 1995, it was not
	9	Microsoft's intention to include Internet Explorer in
10	the full product known as Windows 95?
11	       A.	The product that didn't include
12	Internet Explorer is called the Windows 95 Upgrade. 
13	Windows 95, the full product, did include Internet
14	Explorer.
15	       Q.	I understood -- strike that.  
16		I understand that when it was marketed,
17	it included Internet Explorer.  The question is, is
18	it your recollection that back in February of 1995,
19	it was Microsoft's intention not to include Internet
20	Explorer in Windows 95 but to market it instead as
21	part of the package known as Frosting?  
22		MR. HEINER:  You're talking about the
23	OEM channels in that question?  I'm wondering, for
24	the record.  
25		MR. HOUCK:  The question is complete as
	1	it stands.
	2		Q.	Can you answer the question, sir?
	3		A.	I'm confused about what you're asking
	4	me because you have to differentiate the retail
	5	channel, which is the Windows 95 Upgrade and the Plus
	6	Pack from Windows 95, the whole product.  Windows 95,
	7	the whole product, we wanted to include a lot of
	8	features.  We don't know for sure which features are
	9	going to get done in time until really the product is
10	done.  So certainly our intention to do it and
11	working hard on doing it, that plan had existed for a
12	long time.  We weren't certain for any future on
13	Windows 95 exactly what we would decide to get in or
14	not get in.  We did, in fact, get the Internet
15	Explorer 1.0 into the Windows 95 full product.
16		Q.	Do you recall that in or about
17	February, 1995, it was Microsoft's intention to ship
18	O'Hare as part of Frosting?
19		A.	The thing that was code named O'Hare
20	ended up in the Windows 95 full product as one place
21	it came.  And another place was in the Plus Pack.
22		Q.	Let me ask it one more time.  
23			Was it Microsoft's plan as of February,
24	1995, to ship Internet Explorer solely in the
25	Frosting package and not in the initial full 
	1	Windows 95 package that was to be marketed?
	2		A.	No.  Our plan was to get it into the
	3	Windows 95 full package if possible.
	4		Q.	Do you recall that in or about
	5	February, 1995, it was felt at Microsoft that it was
	6	not possible to include O'Hare in the Windows 95
	7	package?
	8		A.	We had a plan to include it if at all
	9	possible.  In the world of software development
10	there's always skeptics, so you can name any feature
11	of Windows 95 and you can find somebody who would
12	have been skeptical about whether it would get done
13	or not in time for the shipment of the product. 
14	Certainly the people involved in doing the
15	development were working hard and, in fact, they
16	succeeded in achieving our plan, which was as best we
17	could to include it in the product.  And we did.
18		Q.	Do you recall what the -- strike that.  
19			Do you recall when Microsoft first
20	determined that it would be possible to include IE in
21	Windows 95 that shipped in 1995?
22		A.	Well, as I've said, until the minute
23	you actually ship a product, you can always change
24	your mind about what's going to be in it and what's
25	not going to be in it.  And so there wasn't absolute
	1	certainty for the different features until we
	2	actually froze the bits.
	3		Q.	Who was responsible back in 1995 for
	4	determining what went into Windows and what didn't?
	5		A.	That's a decision that I would have the
	6	final say on.
	7		Q.	Who were your senior executives
	8	responsible for assisting in that decision?
	9		A.	Maritz.  
10			MR. HOUCK:  I think our videotape
11	operator wants to change the videotape, so why don't
12	we take a short break.  
13			VIDEOTAPE OPERATOR:  The time is 11:15. 
14	We're going off the record.  
15			(Recess.) 
16			VIDEOTAPE OPERATOR:  The time is 11:24. 
17	We're going back on the record.  
18			MR. HOUCK:  I'd like to mark as
19	Government Exhibit 344 a series of e-mails, first one
20	being from Paul Maritz dated April 12, 1995.  
21			(The document referred to was marked
22	by the court reporter as Government Exhibit 344 for
23	identification and is attached hereto.) 
24		Q.	BY MR. HOUCK:  Exhibit 344, Mr. Gates,
25	is a series of e-mails and the initial questions will
	1	be about the very last one, which is an e-mail from
	2	you to Craig Mundie dated April 10, 1995.  
	3			What were Mr. Mundie's responsibilities
	4	back in April of 1995?
	5		A.	He was doing the broadband online
	6	service work, which was sometimes referred to as
	7	Interactive TV.
	8		Q.	In the first paragraph you say, "Given
	9	that we are looking at the Internet destroying our
10	position as a setter of standards in APIs, do you see
11	things we should be doing to use ACT assets to avoid
12	this?"  
13			What was your reference to ACT assets?
14		A.	ACT, A-C-T.  That's Craig Mundie's
15	group.
16		Q.	Your e-mail goes on to state, "I admit
17	I find it hard to focus lots of resources on trials
18	and things when the Internet is taking away our power
19	every day."  
20			In what sense did you mean the Internet
21	was taking away Microsoft's power every day?
22		A.	I meant that -- this is copied to
23	people involved in the online service activity,
24	Nathan, Rick and Russ, and not to the Windows people
25	at all.  It looks like at 3:00 a.m. that morning I
	1	was thinking about the fact that our ambitions for
	2	online service in the narrow band field, we needed to
	3	think of some of the broadband work that Craig was
	4	doing to come in and be helpful to that, particularly
	5	given that the Internet was changing the framework.
	6		Q.	What was Mr. Rick Rashid's position in
	7	Microsoft back in April of '95?
	8		A.	He was -- he had actually two jobs at
	9	the time.  He was involved in research, but mostly he
10	had moved over to help out with the ACT work, which
11	is the Interactive TV activities.
12			MR. HOUCK:  I'd like to mark as 
13	Exhibit 345 a memorandum from Mr. Gates to his
14	executive staff and direct reports entitled 
15	"The Internet Tidal Wave."  
16			(The document referred to was marked
17	by the court reporter as Government Exhibit 345 for
18	identification and is attached hereto.) 
19		Q.	BY MR. HOUCK:  Do you recall authoring
20	this memorandum, Mr. Gates?
21		A.	Yes.
22		Q.	To whom did you send it?
23		A.	It appears it was sent to executive
24	staff and direct reports.
25		Q.	What does executive staff refer to?

Continued on page 2 of 4

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