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,
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
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
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
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
8 Do you know where he
10 A No.
11 Q Would you agree that it's fair to
12 describe Windows 98 as not a vital upgrade for PC
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.
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.
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
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
12 A I don't remember saying that.
13 Q Did you say it, sir?
14 MR. HEINER: Objection. Asked and
16 THE WITNESS: I don't remember saying
18 Q BY MR. BOIES: That wasn't my question,
20 Did you say it?
21 MR. HEINER: Objection. Harassing the
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
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
24 "A I don't remember saying
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
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
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
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
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."
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
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
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
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?
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
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
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
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?
1 A Today, yes.
2 Q Who is that?
3 A Steven Ballmer.
4 Q How long has Mr. Ballmer been
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.
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.
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
18 Q Let me be sure I understand your
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?
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
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,
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?
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
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
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,
24 (The following question was
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
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
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
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
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
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
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
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
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
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
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
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
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
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
25 Now, maybe you don't remember saying
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
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?
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
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
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.
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
1 interpreted your use of the word "definition" too
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
18 Q In 1996 was there a common
19 understanding of what was meant by "Internet
21 A In a context-free sense, absolutely
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 --
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.
1 Would you read the question again,
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
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
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
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
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
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
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
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
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.
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
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
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
19 Q And what is the analogous situation
20 that you refer to?
21 A Statements by competitors about
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
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"
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
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
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
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
25 MR. BOIES: I don't know if it's been
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
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
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,
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
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
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
25 A Analysts do their own thinking and come
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
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?
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
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.
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
19 MR. HEINER: Objection. Lack of
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
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
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
1 distinction you're drawing.
2 Q BY MR. BOIES: I'm talking about the
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
18 A Or are you asking me to explain what I
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,
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
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
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.
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?
1 A You mean the two quotes?
2 Q Well, I'm actually talking about three
4 A No. One is a pure subset of the other;
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
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?
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
1 from Internet software,'" close
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
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
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.
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
7 A Who said it was important? It doesn't
8 say -- I mean, it's one of many sentences in the
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
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
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
24 Q So that this memorandum went to all
25 four of the executive vice presidents; correct, sir?
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
1 got this memo. It's addressed to executive vice
2 president Paul Maritz.
3 A Actually, his name is misspelled, but
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.
1 Q Did he have a position like vice
3 A Oh, I'm sorry. He was a vice
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
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
14 Q Now, copies of the memo go to executive
15 vice presidents Ballmer, Herbold and Higgins; is that
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
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
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
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
24 Q Well, it clearly is a fact that you
25 state in the memo. But my question to you, sir, is:
Continued on page 4 of 4
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