U.S. vs. Microsoft
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Deposition of Bill Gates
August 27, 1998, Page 3

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

	1		A	Do you want me to read this thing? 
	2		Q	Just answer my question, if you can. 
	3	You don't have to read the whole thing to answer my
	4	question, and I'll point you to one particular page
	5	that I want to ask you about. 
	6		A	I haven't seen the document before, but
	7	it appears to be a specific case where some
	8	information is gathered about what the document seems
	9	to call web professionals.  I don't know what they
10	mean by that term. 
11		Q	That wasn't my question.  
12			You have no understanding of what's
13	meant by "web professionals," sir? 
14		A	In the context of this document I
15	don't.  I can give you many possible definitions for
16	the term. 
17		Q	Okay. 
18			Do you have any understanding as to the
19	type of web professionals that were surveyed here? 
20		A	If I studied the document, I could
21	learn something about that.  I haven't read it. 
22		Q	Do you have any reason to believe this
23	document was not sent to you on or about September 8,
24	1997? 
25		A	No. 
	1		Q	Okay. 
	2			Do you recall receiving information in
	3	or about April 1997 that many users did not want to
	4	have a browser integrated into the operating system? 
	5		A	No. 
	6		Q	I'd like to mark as Exhibit 362 --
	7			MR. HEINER:  That's the way to do it. 
	8	Don't even hazard a guess.  
	9			MR. HOUCK:  I'd like to mark as Exhibit
10	362 an April 25, 1997 e-mail or memo from Randy
11	Trower to Chris Jones, Joe Belfiore and others
12	including Mr. Gates?  
13			THE WITNESS:  That's Tandy. 
14			MR. HOUCK:  Tandy Trower.  I'm sorry, I
15	misspoke.  
16			(The document referred to was marked by
17	the court reporter as Government's Exhibit 362 for
18	identification and is attached hereto.)
19		Q	BY MR. HOUCK:  Who's Tandy Trower? 
20		A	That's hard to answer.  He's an
21	employee of Microsoft who often looks at user
22	interface issues and a number of job roles he's had
23	over the years. 
24		Q	Back on -- strike that. 
25			Do you recall receiving this
	1	memorandum? 
	2		A	I think I do. 
	3		Q	Back on Bates stamp page 130 under the
	4	heading "Desktop/Web Integration."
	5		A	Yep. 
	6		Q	The memo states:  
	7				   "The concept of unifying the
	8			user's desktop and web experience
	9			sounds good and reasonable, but it's
10			not clear that this is what users
11			want and certainly is not what they
12			expect."
13				Do you know the basis of the statement
14	made here? 
15		A	He's talking about how to refine the
16	Desktop/Win integration. 
17				It says we need to do a better job. 
18	And then he talks about how to do the integration and
19	what he thinks is a different, better way. 
20		Q	Do you know the source of the
21	information he reports here to you? 
22		A	I'm sorry? 
23		Q	Do you know what the source of his
24	information was that he's reporting to you here? 
25		A	No. 
	1		Q	He says in the next line, quote, 
	2				   "Many users expect to just
	3			get browser improvements with IE4,
	4			and I've heard many a remark from
	5			users that they don't want to view
	6			their folders to look like web
	7			pages."
	8				Do you know where he
obtained that 9 information? 10 A No. 11 Q Would you agree that it's fair to 12 describe Windows 98 as not a vital upgrade for PC 13 users? 14 MR. HEINER: Objection. 15 THE WITNESS: I'm not sure what you 16 mean by "vital." I mean, it -- 17 Q BY MR. HOUCK: I'd like to mark as 18 Exhibit 363 an e-mail from Brad Chase to Walt 19 Mossberg and Mr. Gates dated May 15, 1998. The last 20 portion of this document, Mr. Gates, purports to be 21 an e-mail from yourself to Mr. Mossberg of the Wall 22 Street Journal where you say -- referring to Windows 23 98 -- "You are right that it is not a vital upgrade." 24 Do you see that? 25 A I see the paragraph there. 151 1 Q Do you recall sending this e-mail to 2 Mr. Mossberg of The Wall Street Journal? 3 A It looks like the e-mail I sent him. 4 (The document referred to was marked by 5 the court reporter as Government's Exhibit 363 for 6 identification and is attached hereto.) 7 MR. HOUCK: At this time I'm going to 8 turn the examination over to Mr. Boies. 9 Why don't we go off the record while we 10 change places. 11 THE VIDEOGRAPHER: The time is 2:52. 12 We're going off the record. 13 (Off the record.) 14 THE VIDEOGRAPHER: The time is 2:54. 15 We're going back on the record. 16 17 EXAMINATION 18 BY MR. BOIES: 19 Q Good afternoon, Mr. Gates. 20 I'd like to begin by following up with 21 Exhibit 356 and Exhibit 355 that I think you have in 22 front of you. 23 First, with respect to Exhibit 356, 24 which is a 1996 Business Week article. I understand 25 your testimony to be that you do not recall giving an 152 1 interview to the reporter who wrote this. But do you 2 recall saying the statement attributed to you, 3 whether you said it to that reporter or to someone 4 else? And the statement I'm referring to is the 5 statement at the end of the article in which you are 6 quoted as saying: 7 "'One thing to remember 8 about Microsoft,' says Chairman 9 William H. Gates III, 'We do not need 10 to make any revenue from Internet 11 software.'" 12 A I don't remember saying that. 13 Q Did you say it, sir? 14 MR. HEINER: Objection. Asked and 15 answered. 16 THE WITNESS: I don't remember saying 17 it. 18 Q BY MR. BOIES: That wasn't my question, 19 sir. 20 Did you say it? 21 MR. HEINER: Objection. Harassing the 22 witness. 23 MR. BOIES: I'm not harassing the 24 witness. I want to know whether he had a 25 recollection of -- he may not know whether he said 153 1 it, he may think he didn't say it. I'm trying to 2 clarify what the witness's testimony is. 3 MR. HEINER: Can I have the first of 4 those two questions of those read back? 5 (The following record was read: 6 "Q First, with respect to 7 Exhibit 356, which is a 1996 Business 8 Week article. I understand your 9 testimony to be that you do not 10 recall giving an interview to the 11 reporter who wrote this. But do you 12 recall saying the statement 13 attributed to you, whether you said 14 it to that reporter or to someone 15 else? And the statement I'm 16 referring to is the statement at the 17 end of the article in which you are 18 quoted as saying, 19 "'One thing to remember 20 about Microsoft,' says Chairman 21 William H. Gates III, 'We do not need 22 to make any revenue from Internet 23 software.' 24 "A I don't remember saying 25 that. 154 1 "Q Did you say it, sir? 2 "MR. HEINER: Objection. 3 Asked and answered. 4 "THE WITNESS: I don't 5 remember saying it.") 6 MR. HEINER: The witness doesn't 7 remember saying it. 8 Q BY MR. BOIES: Do you doubt that you 9 said it, sir? 10 A Same answer. 11 Q Well, my question, sir, is whether you 12 doubt it. And I'd like the best answer you can give 13 to me on that question, whether you doubt saying 14 this. I understand -- 15 A Given that I don't have a recollection 16 of saying it, you're sort of asking me to make some 17 kind of a guess. 18 Q Move to strike the answer as 19 nonresponsive. 20 A And I have -- 21 MR. HEINER: There's likely to be 22 testimony during the rest of the afternoon that you 23 may not like from time to time. You'll probably have 24 to accept that as part of the examination. 25 MR. BOIES: Absolutely. And if it's 155 1 responsive, it will be his testimony. But if it is 2 not responsive, I intend to preserve the record and 3 move to strike it as nonresponsive. 4 MR. HEINER: And you should continue to 5 answer the questions as best you can responding to 6 the questions posed. 7 Q BY MR. BOIES: Do you have any reason 8 to believe that Business Week would make this quote 9 up, sir? 10 A They had made mistakes, but I'm not 11 suggesting that I know that they did in this case. 12 Q Do you recall saying publicly the 13 substance of what is attributed to you here? Perhaps 14 not the words but the substance of, "One thing to 15 remember about Microsoft, we don't need to make any 16 revenue from Internet software"? 17 A I feel quite sure I never gave a speech 18 or made a statement along those lines. I may have, 19 in response to reporters suggesting that Microsoft 20 was on the verge of doom, talked about the fact that 21 we were doing a lot of work and that we thought we 22 had a good opportunity on the Internet. 23 Q Now, at the time that, according to 24 you, reporters were suggesting that Microsoft was on 25 the edge of doom, Microsoft had profits of over $2 156 1 billion dollars in aftertax profits; is that correct? 2 A Well, I think it mischaracterizes what 3 I said completely to say that I'm just suggesting it. 4 That's really quite a misstatement. 5 MR. BOIES:
Could I have the question 6 reread and the answer reread? 7 (The following record was read: 8 "Q Now, at the time that, 9 according to you, reporters were 10 suggesting that Microsoft was on the 11 edge of doom, Microsoft had profits 12 of over $2 billion dollars in 13 aftertax profits; is that correct? 14 "A Well, I think it 15 mischaracterizes what I said 16 completely to say that I'm just 17 suggesting it. That's really quite a 18 misstatement." 19 Q BY MR. BOIES: Having heard the 20 question, do you want to change your answer? 21 A I'll add to it if you want. 22 Q No. Do you want to change your answer? 23 A I'll be glad to add to it. 24 Q My question, sir, is: Do you want to 25 change your answer? You can say "yes" or "no." 157 1 A I don't see any reason to change it. 2 I'll be glad to add to it. 3 Q Were reporters suggesting to you in 4 1996 that Microsoft was on the edge of doom, as you 5 have used that phrase? 6 A Many reporters suggested that, yes. 7 Q And in 1996 what were Microsoft's 8 revenues compared to Netscape's revenues? 9 A I don't know Netscape's revenues. 10 Q Approximately, sir? 11 A Approximately what? 12 Q Approximately what were Netscape's 13 revenues compared to Microsoft's revenues? 14 A You want me to guess at Netscape's 15 revenues? 16 Q I want you to give me your best 17 judgment and estimate as a chairman and CEO of 18 Microsoft, sir. If you call it guessing, you can 19 call it whatever you want. What I want is your best 20 estimate under oath as you sit here. 21 A I know that Microsoft's revenues would 22 be dramatically higher than Netscape's, but I -- I 23 really won't want to hazard a guess at Netscape's 24 revenue in particular. 25 Q As you sit here now, can you give me 158 1 any estimate or range at all of what Netscape's 2 revenues were in 1996? 3 A Zero to 200 million. 4 Q As you sit here now, can you tell me 5 any estimate or range of what Netscape's revenues are 6 today? 7 A I think zero to 500 million. 8 Q Can you be any more specific than that; 9 that is, can you narrow the range at all? 10 A Yeah. 200 million to 500 million. 11 Q Can you narrow the 1996 range at all? 12 The 1996 range you gave me was zero to 200 million. 13 A 30 million to 200 million. 14 Q Is that the best you can do as you sit 15 here now? 16 A Well, the chance of my being wrong goes 17 up as I narrow the range. 18 Q You've given me the very best estimate 19 that you can? That's your testimony? 20 A Well, it's all about probability. I 21 think it's highly probable that their revenue fell 22 into the range I gave you. 23 Q Did you make any effort in 1996 to find 24 out what Netscape's revenues actually were? 25 A Personally? 159 1 Q Either personally or through some of 2 the many employees of Microsoft? 3 A Oh, I'm sure there were people at 4 Microsoft who looked at Netscape's revenues during 5 that year. 6 Q Did they communicate with you as to 7 what those revenues were at all? 8 A Among the thousands and thousands of 9 e-mail messages I get, I'm sure there were some that 10 had for certain periods of time information about 11 that. 12 Q Did you request any information 13 concerning Netscape's revenues in 1996? 14 A I'm sure I was in meetings where the 15 information was presented, but I don't think I was 16 the one who specifically asked for the presentation. 17 Q Whether you specifically asked for a 18 presentation in a meeting or not, did you ask people 19 to provide you with information concerning Netscape's 20 revenues in 1996? 21 A I may have asked some questions about 22 their revenue. 23 Q Do you recall doing that, sir? 24 A No. 25 Q Did you receive any answers to your 160 1 questions about Netscape's revenues? 2 A Although I don't specifically recall 3 it, I'm sure that in most cases I did. 4 Q It would be usual within Microsoft that 5 if you asked a question, you would receive an answer; 6 is that fair, sir? 7 A No. There's no -- there's lots of 8 questions I ask I don't get answers to. But well 9 over 50 percent I do. 10 Q When you say that there are lots of 11 questions that you ask people of Microsoft that you 12 don't get answers to, do you mean you don't get any 13 answer at all, they just ignore it? 14 A That happens. 15 Q Does it happen from people with a 16 sustained career within your company, sir? 17 A If they're busy enough on priorities 18 that I set for them, then yes. 19 Q You're the chief executive officer of 20 Microsoft. 21 Does Microsoft have a president? 22 A Depends on the time period that you're 23 asking about. Some time periods, yes; some time 24 periods, no. 25 Q Does it have one? 161 1 A Today, yes. 2 Q Who is that? 3 A Steven Ballmer. 4 Q How long has Mr. Ballmer been 5 president? 6 A About 30 days. 7 Q What was his position before that? 8 A Executive vice president. 9 Q How long had he held that position? 10 A That's a good question. 11 There's been an increase in the grand 12 nature of titles over a period of time. Steve has 13 been a very high level executive for a long time. 14 But I don't think I came up with the use of the term 15 "executive vice president" until something -- no -- 16 I'm not sure when I started using that term -- when 17 we used that term for his position. 18 Q Is it fair to say that Mr. Ballmer has 19 been a very high executive, to use your phrase, 20 within Microsoft for several years? 21 A Yes. 22 Q Did you ever ask Mr. Ballmer to provide 23 you with information concerning Netscape's revenues? 24 A No. I don't remember doing that. It 25 would be a very unusual thing for me to ask Steve. 162 1 He's -- as we discussed, he's a fairly 2 high level executive, so he doesn't generally go out 3 and work on my behalf gathering numbers. 4 Q Let me ask you to look at Exhibit 355 5 and, in particular, the second paragraph of the third 6 page which reads, quote, 7 "'Our business model works 8 even if all Internet software is 9 free,' close quote, says 10 Mr. Gates. Quote, 'We are still 11 selling operating systems,' close 12 quote. Netscape, in contrast, is 13 dependent on its Internet software 14 for profits, he points out." 15 You've testified as to the context in 16 which this statement was made. Did you understand at 17 the time that these words were used, that the 18 publication of these words might well affect 19 Netscape's business? 20 MR. HEINER: Asked and answered. 21 MR. BOIES: Don't think so. 22 THE WITNESS: In this interview I was 23 defending Microsoft in the work we were doing to the 24 reporter. And she was the one who was bringing up 25 Netscape in several of the questions. 163 1 The -- you know, the last part there 2 doesn't even seem to be a quote, so I'm not sure what 3 I said, actually. 4 Q BY MR. BOIES: When you were talking to 5 the reporter you knew that it was likely that the 6 reporter would publish at least some of what you told 7 the reporter; correct, sir? 8 A Yes. 9 Q When you used the words with this 10 reporter that are set forth here, did you understand 11 that if those words were published it might well 12 affect Netscape's business? 13 A I've already testified I don't remember 14 using those words. So trying to reconstruct my state 15 of mind around using those words when I don't 16 remember using those words is not going to be 17 possible. 18 Q Let me be sure I understand your 19 testimony. 20 It's your testimony that you do not 21 remember making this statement to the reporter? 22 That's your testimony? 23 A That's right. 24 Q Do you have any reason to doubt that 25 you made this statement to the reporter? 164 1 A Well, it seems like we're going over 2 this again and again. 3 I think there were a series of 4 questions from her about -- you know, that 5 Netscape -- that Microsoft might not have the future 6 because of what was going on in the Internet. And 7 although I don't remember my specific answer, I do 8 remember her asking a lot of questions along those 9 lines. 10 Q My question now, sir, is not what the 11 reporter asked you, my question is whether you have 12 any reason to doubt that you said the words that the 13 reporter attributes to you. 14 A Do you mean the ones in quotes? 15 Q Let's begin with the ones in quotes, 16 sir. 17 Do you have any doubt or any reason to 18 doubt that you told this reporter in words or in 19 substance that Microsoft's business model works even 20 if all Internet software is free because you were 21 still selling operating systems? 22 A I don't remember saying that. 23 Q Do you have any reason to doubt that 24 you said that in words or in substance to this 25 reporter in 1996? 165 1 A I'd want to go back and look at the 2 transcript to find out if I did or not. 3 Q My question is whether sitting here you 4 have any reason to doubt that you said these words. 5 A I don't remember saying those words. 6 Q I know that that's what you've said. 7 Now I'm asking you a different question, which is 8 whether you have any reason to doubt that you said 9 these words. 10 And if you don't understand the 11 question, you can simply tell me you don't understand 12 the question. 13 A I'm not sure what my memory can hold 14 except for knowing whether I remember if I said it or 15 not. I don't remember not saying it. That's kind of 16 unusual memory to have. But I think that's what 17 you're saying: Is there a specific memory in my head 18 when I go look up my memory where it says, "I never 19 said these words." And I don't have a memory of that 20 either. 21 Q Do you have a memory of stating the 22 substance of what is attributed to you even if you 23 don't remember saying the exact words? 24 A No. 25 Q Do you have any reason to doubt that 166 1 you said the substance of what is attributed to you? 2 A I have no recollection of saying what 3 is in the substance of that quote. 4 Q Is what is in the substance of this 5 paragraph inconsistent with what you told people 6 publicly in 1996? 7 A I'm not sure what -- you're asking me 8 to recall everything I said during that year and 9 compare it for consistency with this particular 10 sentence here? 11 MR. BOIES: Move to strike the answer 12 as nonresponsive. 13 MR. HEINER: Well, I had an objection 14 along the same lines. But I guess in this case the 15 witness stated the objection. Vague and ambiguous. 16 MR. BOIES: That's not a reason not to 17 answer the question. 18 MR. HEINER: No, that's fine. I'm just 19 saying -- 20 THE WITNESS: And I did answer, which 21 is -- 22 MR. BOIES: Read the question back, 23 please. 24 (The following question was 25 read: 167 1 "Q Is what is in the 2 substance of this paragraph 3 inconsistent with what you told 4 people publicly in 1996?") 5 THE WITNESS: I think you're asking me 6 for -- to check for consistency with all the 7 statements I gave during that 12-month period, and 8 I'm not able to do that. 9 Q BY MR. BOIES: Is what is stated in 10 this paragraph, the second paragraph on page 3 of 11 Exhibit 355, consistent with what you said publicly 12 in 1996? 13 MR. HEINER: Objection. 14 THE WITNESS: Well, you'd have to 15 understand the context of what her question -- what 16 she defined the word "Internet software" to be when 17 she was asking these questions. And sitting here 18 right now, I don't know when she was asking her 19 questions how she defined "Internet software." I'm 20 sure I would have asked her what she meant by it in 21 order to respond. 22 Q BY MR. BOIES: But you don't remember 23 what you said; is that what your testimony is? 24 A I don't remember what the -- in this 25 context she had -- she had defined what the term 168 1 "Internet software" meant. 2 Q Is it your testimony that at the 3 present time you simply don't know what this 4 paragraph means, it's unclear to you? 5 A I think to understand -- to decide if 6 that sentence taken out of the context of the 7 interview, if it's -- to understand what it means you 8 have to decide what you mean by the term "Internet 9 software." So if you want to tell me a definition of 10 "Internet software," then I can say to you, yes, this 11 seems correct to me or, no, it doesn't seem correct 12 to me. 13 Q My question to you, sir is: As you sit 14 here now, you don't have any knowledge of what is 15 meant by the term "Internet software" in this 16 quotation; is that what you're telling me? 17 A I'm not sure what it was meant 18 during -- what was meant by it during the interview. 19 There are many definitions you could have for that 20 term "Internet software." 21 Q And as you look at this paragraph which 22 says, quote, 23 "'Our business model works 24 even if all Internet software is 25 free,' close quote, says 169 1 Mr. Gates. Quote, "'We are still 2 selling operating systems,' close 3 quote. Netscape, in contrast, is 4 dependent on its Internet software 5 for profits he points out." 6 Now, it's your testimony
that in that 7 context you do not know what is meant by "Internet 8 software"? 9 A Well, to give this statement internal 10 consistency, it must have been in this interview I 11 wasn't including operating systems in the term 12 "Internet software," so the interviewer must have 13 defined it that way, and I was including some 14 products that Netscape was working on in that 15 definition. 16 Q Browsers perhaps, do you think? 17 A Well, if you want to ask me about 18 browser revenue, I'll be glad to. I can't comment on 19 whether browse -- how browsers relate to this 20 interview that I don't remember. I'll be glad to 21 answer any question about browsers. 22 Q Well, let me ask a question about 23 browsers, sir. 24 Do you have any doubt in your mind that 25 the reference to Internet software in this paragraph 170 1 is a reference to browsers? 2 A Internet software -- I can't think of a 3 definition of it that would be specifically just 4 browsers. 5 Q Would it include browsers? 6 A Most definitions of it would, yes. 7 Q Would it be clear to you, sir, that the 8 reference to Internet software here in this paragraph 9 includes browsers? 10 A Well, when you talk about browsers, you 11 have to think of different revenue streams. And it's 12 not clear if in this interview that distinction had 13 been drawn between the different potential revenue 14 streams generated by a browser. 15 Q When you say "this interview," you mean 16 the interview of you? 17 A That's right. 18 Q Right. 19 Let me try to put my question in a way 20 that maybe it will be more understandable. 21 Is it clear to you from the context 22 that's here that when a reference is made to Internet 23 software, that reference includes browsers? 24 A Well, outside of the quotes if you look 25 what the author wrote, she seems to have a very broad 171 1 definition of "Internet software." She seems to be 2 including electronic mail and groupware, perhaps even 3 database -- looks like database is included in her 4 definition. 5 MR. BOIES: Move to strike the answer 6 as nonresponsive. 7 Q Mr. Gates, with respect to the 8 quotation that is attributed to you, do you have any 9 doubt that Internet software, as used there, includes 10 browsers? 11 A If the distinction had been made about 12 the revenue streams, then, yes, it probably does. 13 Q Probably does include browsers? 14 A If the distinction had been made about 15 the different revenue streams. 16 Q If the distinction had been made in 17 this interview of you you're saying? 18 A That's right. 19 Q And it's your testimony that you just 20 don't remember whether or not that distinction was 21 made? Is that your testimony? 22 A That's right. 23 Q Let me ask you to look at another 24 exhibit, the one that I have just marked 364. 25 (The document referred to was marked by 172 1 the court reporter as Government's Exhibit 364 for 2 identification and is attached hereto.) 3 Q BY MR. BOIES: Do you have Exhibit 364 4 in front of you, sir? 5 Exhibit 355 that we were just talking 6 about is a July 3, 1996 Financial Times article. 7 Exhibit 364 is a June 10, 1996 Financial Times 8 article. And I'd like you to look on the fourth 9 page, the first paragraph, and you can read as much 10 of the document as you need to to put this in 11 context. But the paragraph that I'm interested in is 12 at the top of the page, and it says, quote, 13 "'Our business model works 14 even if all Internet software is 15 free,' close quote, says Mr. Gates. 16 Quote, 'We are still selling 17 operating systems. What does 18 Netscape's business model look like 19 if that happens, not very good,'" 20 close quote. 21 Did you say those words to this 22 reporter, Mr. Gates? 23 A Well, just understand we're covering 24 exactly the same ground. I didn't give two 25 interviews. This is all the same reporter, the same 173 1 interview. So we can go through all of that exactly 2 like we did. Louise Kehoe is Louise Kehoe, I gave 3 one interview. 4 Q Of course the June 10, 1996 article is 5 written by two reporters; correct, sir? 6 A And I've never met or given an 7 interview to Hugo Dixon as far as I can recall. 8 Q Well, let's see if looking at this 9 article in any way refreshes your recollection. 10 Did you say to a Financial Times 11 reporter in 1996, quote: 12 "'Our business model works 13 even if all Internet software is 14 free. We are still selling operating 15 systems. What does Netscape's 16 business model look like if that 17 happens? Not very good.'" 18 Did you say those words -- 19 A I don't remember. 20 Q -- to a Financial Times reporter, 21 Mr. Gates? 22 A I said I don't remember. 23 Q Did you communicate the substance of 24 those words to a Financial Times reporter in 1996? 25 MR. HEINER: Asked and answered three 174 1 or four times just in the past 30 minutes. 2 MR. BOIES: This is the first time that 3 we've dealt with this paragraph or this statement. 4 MR. HEINER: The testimony is that it's 5 the same interview and the quotation's an exact quote 6 from the other one. 7 MR. BOIES: It's not an exact quote 8 from the other one. 9 MR. HEINER: Let's compare. They look 10 awfully close. 11 MR. BOIES: They do look very close. 12 And it seems, if you believe these reporters, to be 13 saying very similar things. But they are not the 14 same. 15 THE WITNESS: Where do you see the 16 difference? One just seems to have more words in it. 17 Maybe my reading skills aren't working today. 18 Q BY MR. BOIES: Well, one of things that 19 is different is in the one we're looking at right 20 now, Exhibit 364, it says as part of the 21 quote, "'What does Netscape's business model look 22 like if that happens? Not very good.'" 23 That quotation wasn't in the prior 24 article. 25 Now, maybe you don't remember saying 175 1 that either, Mr. Gates, but I think your counsel will 2 agree that I'm entitled to ask you whether you 3 remember saying that. 4 MR. HEINER: Well, the testimony was he 5 doesn't remember saying these words in this 6 interview. 7 MR. BOIES: And what I then asked him 8 was whether he remembered communicating the substance 9 of what is stated here. 10 THE WITNESS: Even when you add the 11 extra words on there in terms of my recollection of 12 the specifics or the substance, I'd say the same 13 thing I said before when we were talking about the 14 same quote but without those extra words not included 15 in this article. 16 Q BY MR. BOIES: So your testimony today 17 about the quotation in Exhibit 355 would be 18 applicable to what is attributed to you in Exhibit 19 364 as well? 20 A That's correct. 21 Q Okay. 22 Do you have any reason to believe that 23 there would have been any reason for this reporter to 24 have made up these quotations? 25 A Didn't you already ask that? 176 1 Q I asked that with respect to the 2 Business Week reporter. I'm now asking it with 3 respect to The Financial Times reporter. 4 A Same answer. 5 Q You do have to give it for the record, 6 sir. What I'm asking you is whether you have any 7 reason to believe that The Financial Times reporter 8 would have made up or had any reason to make up the 9 quotations that are attributed to you here. 10 A I don't think they're infallible, but I 11 have no reason to suspect in this case that they made 12 it up. 13 Q Okay. 14 Without regard to any particular 15 article, in 1996 did you tell people publicly that 16 Microsoft would do fine if Internet software or 17 browsers were free but that Netscape would not do 18 fine if Internet software or browsers were free? 19 A What do you mean by "Internet 20 software"? 21 Q What I mean is what you refer to as 22 Internet software in these various quotations. 23 A I'm afraid we're not going to be able 24 to know what my state of mind was when I gave that 25 interview. If you want to define it, I'll be glad to 177 1 answer the question. 2 Q Do I take it that your testimony is 3 that you simply have no recollection whatsoever as to 4 what you meant by these words in 1996? 5 A No. It wasn't what I meant. I 6 responded to a reporter's question, and I've already 7 said to you that she must have given me a reason to 8 understand what she meant in her questions in order 9 for me to be able to answer them. 10 Q Do you remember asking her what she 11 meant by those terms? 12 A I feel pretty sure I wouldn't have used 13 the term unless there was some understanding of what 14 she understood the term to mean. 15 Q Why is that, sir? 16 A I'm just saying it's not typical for me 17 to use a term with a reporter where it's a very open 18 unended term that can be used in a lot of different 19 ways without any understanding between myself and the 20 reporter of -- in that context, in that series of 21 questions, what's being referred to. 22 Q Well, I'd like to draw a distinction, 23 if I could, between having any understanding at all, 24 which could come from a variety of sources, and 25 asking the reporter for a definition. 178 1 Did you ask the reporter for a 2 definition of what was meant by "Internet software"? 3 A All I can say, not recalling the 4 specifics in the interview, is that it's very 5 unlikely I would make a statement like that without 6 some common understanding between myself and the 7 reporter of what that term, which out of context is 8 incredibly ambiguous, what it meant in the context of 9 her series of questions. 10 Q And just to be sure I understand it. 11 What you're saying is that you don't 12 remember what the definition was and you don't even 13 remember that there was a definition, but you believe 14 there must have been a definition or you wouldn't 15 have been using these words. 16 Is that fair? 17 A There must have been a common 18 understanding, I wouldn't say a definition. 19 Q How would that common understanding 20 have been arrived at other than through a definition? 21 A Well, somebody can give examples. I'm 22 just saying it doesn't have to be a formal definition 23 for two people to have a context in a conversation of 24 what a word means. That is neither one has to say, 25 "I define the word as follows." So maybe I 179 1 interpreted your use of the word "definition" too 2 strictly. 3 Q Okay. 4 A So if you define "definition" for this 5 conversation in a loose way, then I'll understand 6 what you mean. 7 Q That is, what you need in order to 8 understand the question is to have me define what is 9 meant by "definition"? 10 A At least loosely. 11 Q What I mean by definition is what you 12 meant by definition when you said that you wouldn't 13 have answered this question unless you had a 14 definition of the word. 15 A "Common understanding" -- I used the 16 word "common understanding," and I'll stick with 17 that. 18 Q In 1996 was there a common 19 understanding of what was meant by "Internet 20 software"? 21 A In a context-free sense, absolutely 22 not. 23 Q Was there a common understanding of 24 what was meant by an Internet browser? 25 A The whole notion of what the browser -- 180 1 what features it would contain or what it would mean 2 or all that was very uncertain in 1996. 3 Q Let me ask you a different question. 4 Do you believe that the publication of 5 this article and, in particular, the publication of a 6 statement attributed to you, whether accurately 7 attributed to you or not, that quote, 8 "'Our business model works 9 even if all Internet software is 10 free,' close quote, says Mr. Gates. 11 Quote, 'We are still selling 12 operating systems. What does 13 Netscape's business model look like 14 if that happens? Not very good," 15 close quote. 16 Do you believe that the publication of 17 that statement affected Netscape? 18 A I know when people have been quoted in 19 the press, competitors, saying how -- what trouble 20 Microsoft is in and how much better their products 21 are, that it's rarely had a direct effect on our 22 business. I think somehow people rely on more 23 analytical observers. 24 MR. BOIES: I'll move to strike the 25 answer as nonresponsive. 181 1 Would you read the question again, 2 please? 3 (The following question was read: 4 "Q Do you believe that the 5 publication of that statement 6 affected Netscape?") 7 THE WITNESS: What do you mean 8 "affected Netscape"? 9 Q BY MR. BOIES: Are you telling me that 10 you don't understand the question, sir? 11 A Yes, that's what I'm saying to you. 12 Q Okay. 13 By "affected Netscape," I mean 14 adversely affected Netscape. 15 A Like hurt their feelings, somebody 16 cried, or somebody in reading the article smiled? 17 Q Are you saying that you don't 18 understand what I mean by "adversely affected 19 Netscape"? 20 A No, I don't know what your criteria is. 21 I think it's likely somebody may have read it and 22 disagreed with it. 23 Q Do you think it adversely affected 24 Netscape's business prospects? 25 A I think the general work that we were 182 1 doing to do strong Internet software had an effect on 2 Netscape, but I don't think quotations like that had 3 any direct effect. 4 Q Now, you putting in the word "direct 5 effect," and I know that you're a very precise person 6 from the statement you've already made today. So I'm 7 going to ask you what you mean by the use of the word 8 "direct" there that you put in the answer that wasn't 9 in the question. What do you mean by "direct"? 10 A Well, I said earlier that there are 11 analytical observers like analysts, and they tend to 12 look at technology companies and deliver 13 pronouncements about them. And, you know, some of 14 them will be positive about a company, and some will 15 be negative about a company. 16 It's possible in looking at the general 17 activities of Microsoft, one of those analysts formed 18 a certain conclusion about Netscape and published 19 that conclusion and that that might have had an 20 effect. And so you could say that analysts may have 21 had an effect. And analysts look at what Microsoft 22 does, primarily in the products, not as much what we 23 say is what we do in shipping our products. 24 Q What I'm asking you about, of course, 25 right now is the effect of what you were saying or 183 1 what was attributed to you. And I do want to come to 2 the effect that your products had on Netscape as 3 well. But right now I want to talk about the effect 4 of what was attributed to you. 5 And what I'm asking you is whether you 6 believe that the publication of statements like this 7 attributed to you adversely affected Netscape's 8 business prospects. 9 A I'm not aware of any specific effect. 10 And my general experience is that when competitors 11 have made statements about us, that doesn't have an 12 effect, rather that the people who do analysis or the 13 actual products get shipped are what cause effects on 14 our business. 15 Q Do you think that the effect on 16 Microsoft's business of competitors saying things 17 about Microsoft is comparable to the effect on 18 Netscape's business of Microsoft saying things like 19 this about Netscape? 20 A Are we now talking about what was 21 published or what was said? 22 Q Well, we're talking about what was 23 published here. 24 A Okay. Well, then, stick to that. 25 Q That's what I am, sir, because I 184 1 understand that your testimony is that you just don't 2 remember saying any of these quotations that these 3 publications have attributed to you. 4 A No. 5 Q That's why I'm asking about what is 6 written here because there's no doubt -- you have no 7 doubt that this was actually published, do you, sir? 8 A I believe it was published. 9 Q Okay. So at least we know that The 10 Financial Times published, quote, 11 "'Our business model works 12 even if all Internet software is 13 free,' close quote, says Mr. Gates. 14 Quote, 'We are still selling 15 operating systems. What does 16 Netscape's business model look like 17 if that happens? Not very good,'" 18 close quote. 19 Now, I asked you whether you thought 20 that the publication of that adversely affected 21 Netscape's business prospects. And you then gave me 22 an answer that talked about the effect on Microsoft 23 of criticism of Microsoft. 24 Do you recall that? 25 A Well, that wasn't all that I said. We 185 1 can read back what I said. 2 Q If you would like to have it read back, 3 it's okay with me. I don't need to have it read 4 back. But if -- I've got as much time as I need to 5 finish the examination, sir, and I'm prepared to 6 spend as many days here as I have to to do that. I 7 think the record is quite clear as to what your 8 answer was, and I think it is quite clear that you 9 kept going back to Microsoft's experience, and that's 10 the only point I'm trying to get you to focus on. 11 Now, do you recall that enough to 12 answer the question, or do we need to go back? 13 Either way's okay with me. 14 A Go ahead and ask a question, and then 15 I'll decide. 16 Q Do you think -- because you're the one 17 that brought up the effect on Microsoft criticism. 18 Do you think that the effect on 19 Microsoft of criticism of it is comparable to the 20 effect on Netscape of a publication of statements 21 attributed to you like, quote, 22 "'Our business model works 23 even if all Internet software is 24 free,' close quote, says Mr. Gates. 25 Quote, 'We are still selling 186 1 operating systems. What does 2 Netscape's business model look like 3 if that happens? Not very good,'" 4 close quote. 5 A So you're supposing a case where I 6 personally criticized Microsoft? 7 Q I'm not supposing anything at all, sir. 8 A That's what you suggested. 9 Q No. Sir, let me try to be clear. And 10 perhaps I'm not being clear. 11 A Who's doing the criticism in your 12 hypothetical? 13 Q Well, I think the only person that has 14 mentioned the word "criticism" today is you; that I 15 think it came out of your answer when you were 16 talking about criticism of Microsoft. Now, if I've 17 misremembered your testimony about that, I will stand 18 corrected by the record. 19 But my recollection is that I asked you 20 whether you thought the publication of statements 21 like this would adversely affect Netscape's business 22 prospects. And my recollection is that you gave me 23 an answer, a substantial portion of which included a 24 statement that it had been your experience that 25 criticism of Microsoft didn't really affect your 187 1 business. 2 A No, I didn't say that. I said 3 statements by competitors, whether critical or 4 otherwise, I didn't think explained what happened to 5 our business but, rather, other factors could explain 6 what happened to our business. 7 Q Okay. Let me use "statements." And if 8 I misremembered the word "criticism," I apologize. 9 Do you think that the effect on 10 Microsoft's business of statements about Microsoft by 11 its competitors is comparable to the effect on 12 Netscape's business of the publication of statements 13 like, quote, 14 "'Our business model works 15 even if all Internet software is 16 free,' close quote, says Mr. Gates. 17 Quote, 'We are still selling 18 operating systems. What does 19 Netscape's business model look like 20 if that happens? Not very good,'" 21 close quote. 22 MR. NEUKOM: If you read that one more 23 time -- that's seven times. Come on. 24 MR. BOIES: I wish this question had 25 been answered simply. I think it could have been. 188 1 THE WITNESS: I gave you a very simple 2 answer that I was not aware of any effect on their 3 business by the publication. 4 Q BY MR. BOIES: And that may have 5 answered my question, sir. But because I know that 6 you're a person that uses words very precisely, I 7 need to be sure that we haven't missed something 8 between the question and the answer. My question was 9 whether you believed that this publication affected 10 Netscape's business prospects. 11 You said you didn't know of any effect. 12 And I just wanted to be sure that your answer was 13 meant to apply to the full breadth of my question. 14 A The full breadth of your question? 15 Q Yes, sir. And if that's confusing to 16 you, as I say, I will put the question as many times 17 as I need to to be sure that I get it clear to you. 18 My question -- and unfortunately, I'm 19 going to have to quote it again. 20 MR. HEINER: There's no need. There's 21 really no need. 22 Q BY MR. BOIES: But my question, sir, is 23 whether you believe that the publication of 24 statements like the statement in The Financial Times 25 that, quote, "'Our business model works even if all 189 1 Internet software it free,' close quote, says 2 Mr. Gates. Quote, 'We are still selling operating 3 systems. What does Netscape's business model look 4 like if that happens? Not very good,'" close quote, 5 adversely affects Netscape's business prospects. 6 A I told you, I'm not aware of any 7 effects on Netscape by the publication of that 8 statement. 9 Q Have you finished your answer? 10 A Yes. 11 Q Do you believe that the publication of 12 that statement adversely affects Netscape's business 13 prospects, whether you are aware of precisely what 14 those effects are or not? 15 A Well, I'm not absolutely sure, but I 16 did explain to you that in the analogous situation 17 the effect has not come from that but from other 18 factors. 19 Q And what is the analogous situation 20 that you refer to? 21 A Statements by competitors about 22 Microsoft. 23 Q And do you believe that statements by 24 competitors about Microsoft are analogous in terms of 25 their effect on Microsoft to statements like this 190 1 about Netscape? 2 A I'm not absolutely sure what you mean 3 by "like this," but in general, yes. 4 Q By "like this" I mean the quotation in 5 The Financial Times article. 6 A I don't know what it means to be "like" 7 that. 8 Q Is that because you don't understand 9 the word "like" or because you don't understand what 10 it means to be like something? 11 A Neither. 12 Q What is it then? 13 A I stated in quite a broad way that 14 statements by competitors about us have not been a 15 factor to explain future developments in our business 16 prospect, but rather other factors explain any 17 changes in our business prospects. And I'll say that 18 broadly about competitive statements by competitors. 19 Q Statements by competitors about 20 Microsoft? 21 A That's right. 22 Q Now, what I'm asking about is not 23 statements about Microsoft by competitors. But I'm 24 asking about statements about Netscape. And the 25 question that I most recently asked that I thought 191 1 was simpler than it is turning out to be is whether 2 you believed that statements about Microsoft by its 3 competitors would have an analogous effect on 4 Microsoft to statements like the one published in The 5 Financial Times in 1996 in June that we've been 6 looking at. 7 MR. HEINER: Object to the question. 8 It's just hopelessly vague and ambiguous. 9 Are you referring to other kinds of 10 statements? 11 MR. BOIES: Okay. I'll go back. I was 12 trying to avoid quoting the darn thing again. But if 13 I have to be precise, I'll be precise. 14 MR. HEINER: Mr. Boies, it's the other 15 side of the quote. It's the other kinds of quotes 16 about other companies. 17 MR. BOIES: Okay. Let me try to put it 18 as precisely as I can. 19 MR. HEINER: Before you do the 20 recitation, I would just like to say that we're ready 21 for a break when you come to a logical stopping 22 point. I'm not sure there will be a logical stopping 23 point any time soon since it's been two hours on this 24 point. 25 MR. BOIES: I don't know if it's been 192 1 two hours. I just started 50 minutes ago. 2 MR. HEINER: No. But I'm including 3 Mr. Houck's segment. 4 MR. BOIES: Let me see if I can bring 5 it to a close because I don't think this should be as 6 difficult as it appears to have become. And let me 7 see if I can identify what I think we're in agreement 8 on. 9 Q This statement was published in The 10 Financial Times; correct? 11 A I think it was. 12 Q You have said that statements that have 13 been published about Microsoft by its competitors do 14 not, in your view, adversely affect Microsoft's 15 business; correct? 16 A Yeah. I've said that other factors 17 like what happens with products or other observers 18 less directly involved in my view explain whatever 19 change in our business prospects happen. 20 Q Now, my question is whether you believe 21 that that is true for Netscape as well; that is, that 22 statements about Netscape by its competitors, 23 including Microsoft, do not affect Netscape's 24 business prospects. 25 A Well, I think it's pretty hard -- you 193 1 know, you don't have a world where you can say hold 2 everything else the same: the analysts' comments, 3 what happens with products and just take out one 4 thing. So your whole notion here that I'm supposed 5 to ascribe to you as certain cause-and-effect 6 relationships is really quite absurd. 7 Q Well, let me ask you a question, 8 Mr. Gates: Do you have any doubt that the 9 publication of this statement attributed to you in 10 The Financial Times adversely affected Netscape's 11 business prospects? 12 A In the world I live in people look to 13 unbiased observers to judge things about products and 14 financial prospects and things of that nature. But 15 we're not going to be able to run the experiment of 16 keeping everything the same and having the world with 17 some statement and the world without some statement 18 and determine the ultimate cause and effect. 19 Q Would you read the question back, 20 please. 21 (The following question was read: 22 "Q Do you have any doubt 23 that the publication of this 24 statement attributed to you in The 25 Financial Times adversely affected 194 1 Netscape's business prospects?") 2 Q BY MR. BOIES: May I have an answer to 3 that question, please, sir? 4 A I told you before I'm not aware of any 5 effect on Netscape's business prospects by that 6 statement. 7 Q My question right now is whether you 8 have any doubt that there were such effects; that is, 9 do you have any doubt that regardless of whether you 10 can identify them as you sit here now and tell me 11 what they are, do you have any doubt that your being 12 said to have said these words hurt Netscape's 13 business prospects? 14 A I think while we can't run the 15 experiment that held everything else the same, that 16 is, the comments of analysts, the quality of the 17 products, all those things going on, and didn't have 18 that comment published, that their business prospects 19 would have been the same. That's my belief, but we 20 don't get to run that experiment. 21 Q Do you believe that the publication of 22 statements like this by you or statements like this 23 attributed to you affected what analysts wrote about 24 Netscape? 25 A Analysts do their own thinking and come 195 1 to their own conclusions. They might look at 2 statements in order to consider various hypotheses. 3 But they're particularly good at ignoring statements 4 made about one company who's competing with another 5 company. 6 Q Does that mean that it's your testimony 7 that you believe that analysts analyzing Netscape 8 would have ignored this statement attributed to you? 9 A No. I didn't say that. I said it 10 might get them to consider. I said the opposite. In 11 fact, I said it might get to consider certain 12 hypotheses, but they would do their own thinking and 13 come to their own conclusions based on factors 14 completely independent of that. They're in the 15 business of talking about objective analysis. 16 Q Is one of the objective analysis that 17 they're in the prospect or business of doing -- is 18 figuring out what the effect on Netscape is going to 19 be if certain actions that Microsoft takes? 20 A A financial analyst who's assigned to 21 Netscape would have that as one of the things they 22 would do. 23 Q And did you in 1996 make a conscious 24 effort to try to affect what financial analysts 25 analyzing Netscape did and thought? 196 1 A I personally didn't, no. 2 Q Did Microsoft? 3 A Microsoft, I'm sure, made analysts 4 aware of what we were doing with our products 5 including the innovative work we were doing. And I'm 6 sure that had an effect. 7 Q Did you or others at Microsoft, to your 8 knowledge, do things with the purpose of affecting 9 what analysts analyzing Netscape wrote or thought? 10 A Well, our primary focus is going out 11 and talking about our products and what they do for 12 customers. If the customer or the analyst asks us a 13 question about Netscape or asks for a comparison, 14 it's not unusual to give them an answer. 15 Q Did you or, to your knowledge, others 16 at Microsoft do things for the purpose of affecting 17 what analysts analyzing Netscape wrote or thought? 18 A We certainly let people know about the 19 good work we were doing. The primary purpose of that 20 wasn't to affect Netscape, but certainly one of its 21 effects would have been to affect how they viewed the 22 competition between Microsoft and Netscape. 23 Q In addition to talking about your good 24 works, was one of the purposes of talking about 25 giving away Internet software for free to affect the 197 1 way analysts looked at Netscape? 2 A Well, I doubt you can ascribe too much 3 effect purely to the talking about it. 4 Q I would certainly agree that the fact 5 that you did it and talked about it was a lot more 6 effective than just talking about it. But right now 7 I am focusing on the talking about it. 8 A That's again one of these experiments 9 we can't run where you say what if we refuse to 10 answer all questions about Netscape but we did what 11 we did. My view is that the work and the products 12 and everything, that the talking is not the key 13 element in how our business prospects or other 14 people's involved. 15 Q Now, you knew that giving it away for 16 free was going to adversely affect Netscape's 17 business, didn't you? 18 MR. HEINER: Objection. Objection. 19 THE WITNESS: Well, what are you 20 talking about? Is there -- have you got some 21 antecedent to the word "it"? 22 Q BY MR. BOIES: Is the question unclear 23 to you, sir? 24 A Yes, sir. You never defined what 25 you're talking about. 198 1 Q Okay. If the question is unclear to 2 you, I think that's an answer that I would just as 3 soon have the record have. 4 MR. HEINER: Which it does. Is this a 5 logical stopping point? I objected on that basis, he 6 objected on that basis. So it's crystal clear that 7 the question was unclear because the word "it" was 8 not defined. 9 MR. BOIES: I think what "it" is is 10 pretty well-defined in this litigation. I think the 11 witness knows perfectly well what "it" is. 12 MR. HEINER: No. I would not let a 13 witness answer that question under any circumstances. 14 MR. BOIES: Okay. 15 Q Do you think, Mr. Gates, that 16 Microsoft's giving away of its Internet Explorer 17 browser for free adversely affected Netscape's 18 business? 19 MR. HEINER: Objection. Lack of 20 foundation. 21 THE WITNESS: Well, as I've said 22 earlier, we don't give away all the aspects of the 23 browser. We do let Windows users have the browsing 24 functionality as part of Windows. But we derive 25 significant revenue from things like the Search 199 1 button and the Home Page. 2 Q BY MR. BOIES: Have you told people 3 that Microsoft was going to give the browser away for 4 free and that indeed it would be forever free? 5 A I said that it would be a feature of 6 Windows and available to people who used Windows. In 7 that sense, yes. 8 Q Well, you may have said that. But what 9 I'm now asking you about is whether you also said 10 that Microsoft was going to give the browser away for 11 free and that it would be forever free. 12 Did you say that, sir? 13 A When I was talking about Windows and 14 the future of Windows, I did say that was one of the 15 features that would come in Windows at no extra 16 charge and that it wouldn't become an extra charge 17 feature. 18 Q You may very well have said that, and I 19 accept that you said that. But my question to you, 20 sir, is whether you said that Microsoft was going to 21 give the browser away for free and it would be 22 forever free. 23 Did you say that, sir? 24 MR. HEINER: Asked and answered. 25 THE WITNESS: I don't know why -- what 200 1 distinction you're drawing. 2 Q BY MR. BOIES: I'm talking about the 3 statement. 4 A The word "the browser" when I talked 5 about it being free and forever free was talking 6 about the browser functionality of Windows. 7 Q Okay. 8 But when you talked about it, you used 9 the word "browser" not "browser functionality"; 10 correct, sir? 11 A I don't remember the exact words. It's 12 very possible I used that shorthand. 13 Q And you talked about the browser being 14 forever free, did you not, sir? 15 A Are you asking me about exact words? 16 Q Yes. I'm asking you about the exact 17 words. 18 A Or are you asking me to explain what I 19 said? 20 Q I'm asking you about the exact words. 21 Did you say the exact words that the 22 browser was going to be forever free? 23 A If you're asking me about exact words, 24 I don't recall the exact words that were used. 25 Q Is it your testimony that you do not, 201 1 as you sit here now, recall saying that the browser 2 would be forever free? 3 A Those exact words? 4 Q Those exact words. 5 A I would want to see the context and be 6 reminded about that. I don't remember using those 7 exact words. 8 Q Okay. 9 Do you remember using the words 10 "forever free," those exact words? 11 A Those two words? 12 Q Yes. 13 A I'm sure I used those before I was five 14 years old. 15 Q Really? With respect to what? 16 A Forever free. I wanted to be forever 17 free. 18 Q All right. 19 Did you ever use those with respect to 20 the browser? 21 A If you're asking is there a sentence 22 that if you did a string search would have exactly 23 those words in it, I'm not sure. I did say that we 24 would keep -- I did deliver that intent; that is, 25 that the browsing functionality in Windows was not 202 1 something that we intended at some time in the future 2 to charge extra for. 3 Q And what you're telling me is you don't 4 remember whether you just used the words "forever 5 free"? That's what you're saying? 6 A I may have. 7 Q You may have? 8 A The general notion of the Windows 9 browser functionality staying free in the future was 10 certainly communicated by me. 11 Q Okay. Thank you. 12 MR. HEINER: Let's take a break. 13 THE VIDEOGRAPHER: The time is 4:07. 14 We're going off the record. This is the end of Tape 15 3 of the videotaped deposition of Bill Gates. 16 (Recess.) 17 THE VIDEOGRAPHER: The time is 4:22. 18 We're going back on the record. This is Tape 4 of 19 the videotaped deposition of Bill Gates. 20 Q BY MR. BOIES: Mr. Gates, before the 21 break we were talking about certain statements 22 attributed to you in Exhibits 355, 356, and 364. 23 Did you ever contact any of the 24 publications involved with those exhibits and 25 complain that they had misquoted you in any way? 203 1 A You mean the two quotes? 2 Q Well, I'm actually talking about three 3 quotes. 4 A No. One is a pure subset of the other; 5 right? 6 Q Well, you obviously have a precise view 7 of what you mean by "subset." But let me be 8 absolutely clear of what I'm talking about, okay? 9 And let me go through it chronologically. 10 A Do you want to read it again? 11 Q On June 10, 1996, in a document that 12 had been marked as Exhibit 364, The Financial Times 13 attributed to you a quotation, quote, 14 "'Our business model works 15 even if all Internet software is 16 free,' close quote, says Mr. Gates. 17 'We're still selling operating 18 systems. What does Netscape's 19 business model look like if that 20 happens? Not very good,'" close 21 quote. 22 Did you ever contact either the 23 reporter for The Financial Times who interviewed you 24 or The Financial Times to assert that they had 25 misquoted you in any way? 204 1 A No. 2 Q On July 3, 1996 The Financial Times 3 published what I think you refer to as a subset of 4 that quote: Quote, 5 "'Our business model works 6 even if all Internet software is 7 free,' close quote, says Mr. Gates. 8 Quote, 'We are still selling 9 operating systems,'" close quote. 10 And then added not in quotes the 11 statement, "Netscape in contrast is 12 dependent on its Internet software 13 for profits he points out." 14 Did you ever contact either the 15 reporter or The Financial Times to assert that either 16 they had misquoted you or that the textural assertion 17 about what you said was inaccurate in any way? 18 A No. 19 Q The third is Exhibit 356, which is a 20 Business Week publication dated July 15, 1996, that 21 includes the statement, quote, 22 "'One thing to remember 23 about Microsoft,' close quote, says 24 Chairman William H. Gates III, quote, 25 'We don't need to make any revenue 205 1 from Internet software,'" close 2 quote. 3 Did you ever contact either the 4 reporter, who I recognize you say did not interview 5 you, or Business Week to assert that that quote was 6 in any way inaccurate? 7 A Well, I told you I've never talked to 8 that reporter nor did I contact Business Week. 9 Q In 1996 did you believe that Netscape 10 posed a serious threat to Microsoft? 11 A They were one of our competitors. 12 Q Were they a serious competitor in your 13 view, sir? 14 A Yes. 15 Q Did you believe that Netscape's browser 16 was a serious threat to your -- that is 17 Microsoft's -- operating system's business? 18 A Well, you have to think about what work 19 we were going to do to improve our software and then 20 what Netscape and others were going to do to improve 21 their software. You can't just look at it 22 statically. It's more the work than -- the new 23 things you do than the history. 24 Q Did you believe that by 1996, that 25 Netscape and Netscape's Internet browser was a 206 1 serious alternative platform to the platform 2 represented by Microsoft's Windows operating system? 3 A Well, as was articulated by Marc 4 Andreessen and other people from Netscape, if we 5 didn't do new product work, that was a very likely 6 outcome. 7 Q What was a very likely outcome? 8 A That the value of the Windows platform 9 would be greatly reduced. 10 Q Did you believe that it was in 11 Microsoft's interest to convince financial analysts 12 that Netscape was not going to be financially viable? 13 A I never had a goal to do that, and my 14 only comments about Netscape's business would have 15 come in response to direct questions about that topic 16 from reporters. 17 Q Well, let me ask you to look at what 18 has been previously marked as Exhibit 354, which is a 19 memorandum from you in May of 1996. And the last 20 paragraph begins, quote, 21 "At some point financial 22 minded analysts will begin to 23 consider how much of a revenue stream 24 Netscape will be able to generate," 25 close quote. 207 1 Why was that important to you in this 2 internal memorandum which, obviously, is not 3 something which you're merely responding to a 4 reporter's inquiry, but it is something that is 5 involved in your internal deliberations within 6 Microsoft. 7 A Who said it was important? It doesn't 8 say -- I mean, it's one of many sentences in the 9 memo. 10 Q Is it your testimony that this is an 11 unimportant sentence, sir? 12 A I don't think it's any more important 13 than any of the other sentences in here. 14 Q Is it any less important that any of 15 the other sentences? 16 A Yeah. It's not germane to the primary 17 topic of the memo. 18 Q If it wasn't germane to the primary 19 topic of the memo and if it wasn't particularly 20 important, why did you include it, Mr. Gates? 21 A It's merely an observation that I put 22 into this rather extensive memo that talks about our 23 plans in doing innovative products, and it's tacked 24 on as the last paragraph. And you didn't read the 25 whole paragraph, but it says "at some point." So it 208 1 seems to be a prediction about that. 2 Q Yes, I agree, it seems to be a 3 prediction. And I think I did read the "at some 4 point." 5 But my point to you is this is a 6 memorandum that you were sending to a number of the 7 top executives of Microsoft; correct, sir? 8 A All product people. 9 Q Well, let's see. We have Mr. Ballmer. 10 A It's not to him. 11 Q He's getting a copy? 12 A That's right. 13 Q Okay. 14 And what was Mr. Ballmer's position in 15 May of 1996? 16 A Executive vice president. 17 Q How many executive vice presidents did 18 Microsoft have at that time? 19 A One, two, three, four. 20 Q And who were the others? 21 A Bob Herbold, Pete Higgins and Paul 22 Maritz -- no, no, no. Maybe -- no, I think it's just 23 four. 24 Q So that this memorandum went to all 25 four of the executive vice presidents; correct, sir? 209 1 A It went to Paul Maritz. It was copied 2 to the other people there. 3 Q It was either addressed or copied to 4 all four of the executive vice presidents? 5 A They're among the recipients, yes. 6 Q Let's go through who the other 7 recipients are. 8 It is addressed to executive vice 9 president Paul Maritz. And below you at this time 10 was executive vice president the highest position in 11 the company? 12 A Yes. 13 Q And beneath executive vice presidents, 14 what was the next level? 15 A Senior vice presidents. 16 Q And how many senior vice presidents 17 were there? 18 A I couldn't tell you. I could -- we 19 could do the range thing if you want. 20 Q Okay. That would be good. 21 A About three to nine. 22 Q Okay. 23 Can you be any more -- 24 A I'd say six to nine. 25 Q Okay. Let's go through the people who 210 1 got this memo. It's addressed to executive vice 2 president Paul Maritz. 3 A Actually, his name is misspelled, but 4 yes. 5 Q What was Brad Silverberg's position? 6 A I think he was a senior vice president, 7 but he worked for Paul and did a lot of the 8 development of software that went into Windows. 9 Q And he was one of the addressees of 10 this memo? 11 A That's right. It goes Maritz, and then 12 he's the second person on the "To" line. 13 Q And the third person to whom it's 14 addressed is Jim Allchin; is that correct? 15 A That's right. 16 Q What was his position? 17 A Senior vice president of the core 18 Windows development. 19 Q And the next person to whom it's 20 addressed is Brad Chase. And what is his position? 21 A At that time or at this time? 22 Q At that time. 23 A At that time he worked for Brad 24 Silverberg managing our relationships with ISVs 25 broadly defined and some of the marketing activities. 211 1 Q Did he have a position like vice 2 president? 3 A Oh, I'm sorry. He was a vice 4 president. 5 Q The next person to whom it's addressed 6 is Rich Tong. 7 A He was a vice president with an 8 analogous person to Brad Chase but working for Jim 9 Allchin. 10 Q And the next person is John Ludwig. 11 A He was a -- I'm pretty sure he was a 12 vice president at this time working for Brad 13 Silverberg. 14 Q Now, copies of the memo go to executive 15 vice presidents Ballmer, Herbold and Higgins; is that 16 correct? 17 A If I've got those titles right. 18 Actually, now that I think about it, I think Paul and 19 Pete were actually called group vice presidents. 20 And -- yeah, they're called group vice presidents, 21 which maybe nobody but me knows this, but actually 22 numerically that's one number lower than executive 23 vice president. 24 Q Okay. We'll keep this highly 25 confidential. 212 1 And then it goes to a variety of other 2 people that, I assume, hold at least in the main 3 significant positions in the company; is that fair? 4 A No. 5 Q Okay. Then let's go through them. 6 The copies are Steve Ballmer, he was an 7 executive vice president? 8 A Yeah. If you want, I'll just go 9 through it. 10 Q Okay. That would be great. 11 A Herbold, executive vice president; Jeff 12 Raikes, senior vice president of -- involved in U.S. 13 activities working for Steve; Bernard, who at the 14 time ran some of the sales in Europe working for 15 Steve; Joachim -- 16 Q And if you could just give his title? 17 A Bernard actually had an exciting title. 18 He was the chairman of Europe and also senior vice 19 president. But he liked -- on his card he carried 20 the one that said Chairman of Europe. 21 Joachim Kempin, senior vice president; 22 Pete Higgins, group vice president; Nathan -- 23 Nathan's also a group vice president at this time, I 24 think. Aaron is a -- 25 Q You need to give the full name just for 213 1 the record. 2 A I'm sorry. Aaron Contorer is an 3 assistant; Steve Sinofsky was an assistant. 4 Actually, I don't know which of those was an 5 assistant working for me at the time. And Ben Slivka 6 and Chris Jones were two developers. 7 Q When you say they were assistants, they 8 were assistants to you? 9 A Yeah. 10 Q Is it fair to say that you meant this 11 memorandum to be taken seriously by the people to 12 whom it was sent? 13 A No more seriously than other e-mail and 14 memorandums I sent them, but yes, seriously. 15 Q Well, now, again, because I know that 16 you're very precise in your use of words, you've 17 drawn distinctions before between e-mails and 18 memoranda; correct, sir? 19 A That's right. 20 Q If fact, you did so today several times 21 when you were being questioned; correct, sir? 22 A I drew a distinction between e-mail 23 being called memoranda. 24 Q You didn't like e-mails being called 25 memoranda because you thought e-mails didn't rise to 214 1 the level of memoranda; is that right? 2 A I didn't suggest a hierarchy, I just 3 suggested a distinction. 4 Q Is there a hierarchy in your mind? 5 A No. But there's a distinction. 6 Q Are memoranda more formal and more 7 serious than e-mails? 8 A No. I'd say they're longer and more 9 thoughtful than most e-mail. 10 Q Now, what we're looking at here is one 11 of the longer more thoughtful documents, that is, a 12 memorandum; correct? 13 A Right. 14 Q And in that longer more thoughtful 15 memorandum in the final paragraph you write, 16 "At some point financial 17 minded analysts will begin to 18 consider how much of a revenue stream 19 Netscape will be able to generate." 20 Now, what was the significance of that 21 to you at the time, sir? 22 A It was a fact that I stated in the 23 memo. 24 Q Well, it clearly is a fact that you 25 state in the memo. But my question to you, sir, is: 215

Continued on page 4 of 4

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