U.S. vs. Microsoft
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Deposition of Bill Gates
August 27, 1998, Page 4

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

	1	What was the significance to you of that fact? 
	2		A	I'm not sure what you mean by that. 
	3		Q	In 1996 at the time that you wrote this
	4	memorandum, what was the significance to you of the
	5	fact that, quote, 
	6				   "At some point financial
	7			minded analysts will begin to
	8			consider how much of a revenue stream
	9			Netscape will be able to generate"? 
10		A	I think it must have referred to the
11	fact that Netscape was at this point a public
12	company. 
13		Q	And can you explain what you mean by
14	that? 
15		A	Well, usually you don't have financial
16	analysts for private companies. 
17		Q	I'm not sure I understand your answer. 
18				In this memorandum you say, 
19				   "At some point financial
20			minded analysts will begin to
21			consider how much of a revenue stream
22			Netscape will be able to generate."
23				What is the significance of that fact
24	to you, or what was the significance of that fact to
25	you in 1996? 
					216 
	1		A	Well, I can't reconstruct my state of
	2	mind in 1996.  But I think it's a fact of almost no
	3	significance at all. 
	4		Q	Why would you have put a fact that you
	5	say has no significance at all? 
	6		A	I didn't say that. 
	7		Q	What did you say? 
	8		A	I said almost. 
	9		Q	Almost no significance at all.  
10			Why would you put a fact that,
11	according to you, had almost no significance at all
12	in what you have described as this longer, more
13	thoughtful memorandum to what looks to me to be like
14	most of the very top executives of your company? 
15		A	I wrote a memo about our products and
16	some of the good things we were doing in our
17	products.  I think you can point to a lot of
18	different sentences in here and try and drill in on
19	it and overstate its -- the significance of an
20	individual sentence. 
21		Q	And I am, as you say, I'm drilling in
22	on this particular sentence.  But what I'm asking you
23	is if this particular sentence has, as you put it,
24	almost no significance at all, why would you put it
25	in this memorandum that you describe as one of the
				217 
	1	longer, more thoughtful type of communications within
	2	your company addressed to the very top executives of
	3	your company? 
	4		A	I write lots of things that we would
	5	call memoranda.  And I'm sure we can pick a lot of
	6	sentences in a lot of my memoranda, and you can say
	7	to me, "Isn't it awful that that sentence doesn't
	8	have more significance," and I'll say, "Fine.  
	9	That -- you know, I don't require that every sentence
10	in every memoranda I write have deep significance."
11		Q	Does that complete your answer to my
12	question? 
13		A	Yes. 
14		Q	In 1996, regardless of what
15	significance you attribute to this particular
16	sentence, was it significant to you how financial
17	analysts viewed Netscape? 
18		A	Well, the thing -- that's not what we
19	thought about when we thought about the competition
20	with Netscape or the emerging demands for Internet
21	capabilities coming from our customers. 
22		Q	My question to you, sir, was:  Did it
23	matter to you what financial analysts thought of
24	Netscape? 
25		A	I'm sure there were people here who
				218 
	1	read what the financial analysts wrote, or some of
	2	them, in order to learn more about Netscape. 
	3		Q	Yes.  I will accept that that is so. 
	4		A	So we would learn from them. 
	5		Q	Was it significant to you what they
	6	thought not for the purpose of learning things from
	7	them, but was it significant to you what they thought
	8	about Netscape?  And just to be clear, because I know
	9	you're very precise with words, was it significant to
10	you what financial analysts thought about Netscape? 
11		A	Well, I'd say the thing -- I'd say if
12	we're trying to say what is -- rank things in terms
13	of significance, I'd say that would be about the most
14	insignificant thing I can think of.  
15		Q	Did you ever tell anybody within
16	Microsoft that you thought it was important what
17	financial analysts thought about Netscape? 
18		A	No.  I don't think I've ever said
19	anything like that. 
20		Q	Not in words or in substance? 
21		A	Well, you keep trying to draw the
22	distinction.  I did think it was important for us to
23	learn about Netscape from different sources, and
24	analysts would have been one of those sources.  And
25	somehow you've -- you've thrown that away, the fact
				219 
	1	that that was a source of learning. 
	2		Q	I didn't mean to throw it away.  I'm
	3	simply focusing on a different issue. 
	4		A	How can you separate out the two
	5	issues? 
	6		Q	Let me try to be clear.  Perhaps my
	7	question has not been clear, and I need to be clearer
	8	about it. 
	9			In 1996, did you want, desire,
10	financial analysts to have a poor or pessimistic or
11	negative view about Netscape? 
12		A	Well, as we, during 1996, were
13	improving our product and demoing our products and
14	talking about what we thought customers were
15	interested in, there were several elements of
16	feedback that we'd get including what customers were
17	saying about our Internet strategy and our Internet
18	products, and the analysts, likewise, were a form of
19	feedback.  And so they were saying -- or customers
20	were saying, jeez, we think your efforts aren't what
21	customers want and we think Netscape or some other
22	company has a strong strategy that matches what they
23	want, that would be a piece of feedback to us to go
24	back and work on aspects of our software products. 
25			So in that sense we were interested
				220 
	1	because it might help us see where we were in terms
	2	of meeting those customer needs. 
	3		Q	Let me try again. 
	4			My question does not relate to what you
	5	wanted to learn from financial analysts, my question
	6	is whether you wanted to affect what financial
	7	analysts thought to make financial analysts think in
	8	a negative or pessimistic way about Netscape.  Did
	9	you want that, sir, in 1996? 
10		A	Well, in order to get feedback from
11	customers and analysts, we would show them our
12	products, demonstrate them or show the ones we were
13	shipping.  And we felt, you know, showing customers
14	or demonstrating what we were doing to them or
15	analysts was a valuable way to benchmark where we
16	were.  And so if their response was, "Wow, that's so
17	incredible, that's the best thing I've seen," then
18	that was a valuable piece of feedback.  Or if they
19	said, "That's quite inferior," that was a valuable
20	piece of feedback.  And so in that sense it was
21	useful. 
22		Q	Let me try to see if I can clarify my
23	question because I may not be being clear. 
24			First, I'm not talking about customers
25	now, I'm talking about financial analysts.  Second,
				221 
	1	I'm not talking about your desire to get feedback
	2	about your products.  What I'm talking about is
	3	whether you wanted to make financial analysts feel
	4	negative or pessimistic about Netscape's business
	5	prospects.  
	6		Did you want that in 1996? 
	7	       A	I don't have any control over what
	8	analysts think.  As far as I know, they -- they take
	9	the facts about the products and they go out and talk
10	to customers and look at what's going on in order to
11	form their opinions.  So it seems like a really
12	bizarre question.  They do their own thinking and
13	form their own opinion.  They might meet with
14	Microsoft to get our view on what we're doing in
15	products and how customers are responding to that. 
16		I personally basically don't meet with
17	financial analysts or talk with financial analysts
18	with the sole exception of the once-a-year analysts
19	day that Microsoft has had.  
20	       Q	My question, sir, is what you wanted to
21	accomplish with financial analysts.  It's not about
22	whether you did it personally or whether Microsoft
23	did it with somebody else.  It is what you wanted to
24	accomplish.  
25		And what I'm asking you is:  Did you
			222 
	1	want to bring about a state of affairs where
	2	financial analysts developed a negative or
	3	pessimistic view about Netscape's business prospects? 
	4		A	Our focus was doing great software
	5	products.  And that focus might have had the indirect
	6	effect of influencing those people's opinion.  But
	7	our focus was building those products and getting
	8	feedback to guide us in doing a good job in building
	9	those products. 
10		Q	Now, my question now is not about what
11	your focus was and it's not about indirect effects,
12	it is about what you wanted, it is about your intent,
13	it is about what you were trying to accomplish.  
14			Were you in 1996 trying to get
15	financial analysts to develop a more negative and
16	more pessimistic view about Netscape's business
17	prospects? 
18		A	Except through the indirect effect of
19	them seeing how customers received our products and
20	our product strategies, that was not a goal. 
21		Q	If that was not a goal, sir, why did
22	you say in substance that the Internet browser would
23	be forever free? 
24		A	That was a statement made so that
25	customers could understand what our intent was in
				223 
	1	terms of that set of technologies and how it would be
	2	a part of Windows and not an extra cost item, and so
	3	people would have that information in making their
	4	decisions about working with us on Windows. 
	5		Q	Now, is it your testimony that when
	6	Microsoft told the world that its browser would be
	7	forever free, that the desire to affect financial
	8	analysts' view of Netscape played no role in that
	9	decision? 
10		A	I can be very clear with you.  The
11	reason we told people that it would be forever free
12	was because that was the truth.  That's why we told
13	them that, because it was the truth. 
14		Q	Now, Mr. Gates, my question to you --
15		A	That's the sole reason we told them. 
16		Q	And my question to you is whether or
17	not the truth was, in part, due to your desire to
18	adversely affect financial analysts' view of
19	Netscape.  Did that play any role, sir? 
20		A	You've been asking me a question
21	several times about why did we say something.  We
22	said it because we thought our customers would want
23	to know and because it was the truth.  And that
24	explains our saying it completely. 
25		Q	And what I'm asking you, sir -- and it
				224 
	1	may be that the answer to my question is, "no, it
	2	played no role."  But if that's your answer, I want
	3	to get it on the record.  And my question --
	4		A	Are you talking about saying it? 
	5		Q	Yes. 
	6		A	Or how we came up with our decision
	7	about how to price our products?  
	8		Q	Let's take it each step at a time, one
	9	step at a time, so that your counsel doesn't say I'm
10	asking you a compound question, okay?  And first
11	let's talk about saying it.  
12			I know you're telling me it was the
13	truth.  In addition to it being the truth, did the
14	fact that this would, in your view, adversely affect
15	the view of financial analysts of Netscape play any
16	role at all in your decision to announce that your
17	browser would be forever free? 
18		A	I actually think that came up in
19	response to some questions that people asked in an
20	event we had on December 7, 1995.  So it wasn't so
21	much a question of our saying, okay, we're going to
22	go make this a headline, but rather, that there were
23	questions that came up during that including our
24	future pricing plans. 
25		Q	This was a meeting on December 7 of
				225 
	1	what year? 
	2		A	1995. 
	3		Q	And was it attended by people outside
	4	Microsoft? 
	5		A	It was a press event. 
	6		Q	And prior to attending that press
	7	event, had you made a decision that it would be
	8	forever free? 
	9		A	Well, if you really want to probe into
10	that, you'll have to get into the different ways that
11	we made Internet technology available.  
12			In terms of what we were doing with
13	Windows 95 and its successors, yes.  In terms of some
14	of the other ways that we offered the Internet
15	technologies, there was some -- there hadn't been a
16	clear decision about that. 
17		Q	When you refer to other ways that you
18	offer Internet technologies, would you explain for
19	the record what you mean? 
20		A	Oh, we created an offering that ran on
21	the Macintosh OS that offered some but not all of the
22	capabilities that we put into Windows and used a
23	common branding for that.  And we came up with a
24	package that ran on a previous version of Windows,
25	Windows 3.1, and made an offering of that. 
				226 
	1	Subsequently I mean, not on that day, but
	2	subsequently. 
	3		Q	And those were charged for; is that
	4	what you're saying? 
	5		A	I'm saying that before the December 7th
	6	event, it was clear to everyone that in the Windows
	7	95 and its successors, that the browser technology
	8	would be free for those users.  But it was unclear to
	9	people what we were going to do with the other ways
10	that we packaged up the technologies. 
11		Q	Would you read the question back,
12	please? 
13			(The following question was read:  
14			   "Q  And those were charged
15		 for; is that what you're saying?") 
16			THE WITNESS:  Well, they weren't
17	available.  So if we're talking about December 7,
18	1995, it's not a meaningful question. 
19			Subsequently those products were made
20	available to the customers without charge.  But I'm
21	saying that there was some lack of clarity inside
22	Microsoft even up to the event itself about what we
23	were going to do with those other ways we were
24	providing Internet Explorer technology. 
25		Q	BY MR. BOIES:  Uncertainty as to
				227 
	1	whether you would charge for them; is that what
	2	you're saying? 
	3		A	That's right. 
	4		Q	Okay. 
	5			Prior to the December 7, 1995 meeting,
	6	had a decision been made to advise the world that not
	7	only would the browser be free, but it would be
	8	forever free? 
	9		A	Well, it's always been the case that
10	when we put a feature into Windows, that it remains
11	part of Windows and doesn't become an extra cost
12	item.  So it would have been kind of a silly thing
13	for anyone to ask including about that particular
14	feature.  And by this time, of course, browsing is
15	shipping with Windows 95. 
16		Q	Exactly sort of the point I wanted to
17	come to, Mr. Gates.  
18			When you put things into the operating
19	system generally, you don't announce that they're
20	going to be forever free, do you? 
21		A	Yes, we do.  If anybody --
22		Q	You do? 
23		A	If anybody asks, that's obviously the
24	answer we give. 
25		Q	Have you finished your answer? 
				228 
	1		A	Yes. 
	2		Q	Okay.  
	3			Could you identify for me the products
	4	other than browsers that Microsoft has announced that
	5	they would be forever free, expressly said, "These
	6	are going to be forever free"?        
	7		A	As I said to you, I think that actually
	8	came up only in response to some questions.  So it's
	9	not proper to ask me and suggest that we announced it
10	like it was some, you know, press release
11	announcement or something of that nature. 
12		Q	Well, let me come back to that aspect
13	of it and just ask you for the present.  What
14	products has Microsoft said publicly, whether in
15	response to a question or otherwise, that these would
16	explicitly be forever free? 
17		A	I've said that about the broad feature
18	set that's in Windows. 
19		Q	When did you say that, sir? 
20		A	I remember an analyst talking to me
21	about that once at an analyst meeting. 
22		Q	When was that? 
23		A	It would have been one of our annual
24	analysts meetings. 
25		Q	When? 
				229 
	1		A	Not this year.  Either last year or the
	2	year before. 
	3		Q	Is there a transcript of that analyst
	4	meeting? 
	5		A	Not with the conversation with that
	6	analyst, no. 
	7		Q	There are transcripts of analysts
	8	meetings, aren't there, Mr. Gates? 
	9		A	Only of the formal Q and A, not of 
10	the -- most of the Q and A, which is where people are
11	mixing around with the press and analysts who come to
12	the event. 
13		Q	And this question that you say happened
14	happened after the transcript stopped being taken; is
15	that what you're saying? 
16		A	That's my recollection, yes. 
17			MR. BOIES:  We'd like to be sure that
18	if those transcripts have not been produced, that
19	they be produced. 
20			MR. HEINER:  Well, serve a document
21	request and we'll respond in the ordinary course.  
22			MR. BOIES:  Okay.  If that's what's
23	required, we'll do that.  We'll see if we can get you
24	a request faxed down.  I would have thought it would
25	have been easier for you to take that under
				230 
	1	advisement, but we'll proceed that way.  
	2			MR. HEINER:  It is a nonsensical
	3	request because the testimony is that it's a cocktail
	4	hour, and at a cocktail hour there's no transcript. 
	5	That's the testimony.  
	6		Q	BY MR. BOIES:  Is that the testimony,
	7	this happened in a cocktail hour? 
	8		A	I'm saying, yeah, in the informal Q and
	9	A, not the formal Q and A.  
10		Q	This was at the cocktail hour? 
11		A	Or a dinner or a lunch.  
12		Q	Well, which was it? 
13		A	I'm certain that it was in the informal
14	part of the Q and A.  Exactly was it on the way to
15	the bathroom or the cookie table or the dinner or the
16	cocktail hour, I can't say.  
17		Q	Sir, sometime on the way to the
18	bathroom or cookie table or the cocktail hour -- 
19		A	Or lunch or dinner.  
20		Q	-- or lunch or dinner, some analyst,
21	whose name you do not recall, asked you a question. 
22	Is that what your testimony is? 
23		A	Yes. 
24		Q	And what was that question? 
25		A	They asked about were there parts of
				231 
	1	Windows that would become separate products and we'd
	2	charge separately for in the future. 
	3		Q	And what did you say? 
	4		A	I said, "No."
	5		Q	Other than this conversation that you
	6	say took place on the way to the bathroom or the
	7	cookie table or a cocktail party or lunch or dinner,
	8	was there ever any other time that Microsoft publicly
	9	explicitly asserted that something would be forever
10	free? 
11		A	I'm sure that if anybody ever asked
12	about an operating system feature, we would have made
13	that clear to them.  I don't -- beyond the one I've
14	talked about, I don't -- I don't recall that. 
15			Then, again, you know, in the case of
16	the browser you have the case where another company
17	had -- it had been free and so, you know, the fact
18	that people were asking about that feature in some
19	ways is not surprising. 
20		Q	Well, you say another company had a
21	browser that had been free.  What company was that,
22	sir? 
23		A	Well, certainly Mosaic was free.  And
24	there are a number of other free browsers.  The
25	Netscape browser in its early days was also free. 
				232 
	1		Q	In 1996 was the Netscape browser free? 
	2		A	I'm not sure of the exact chronology. 
	3	But I'm pretty sure that in 1996 anybody who wanted
	4	to use the Netscape browser could download and use it
	5	in any way they would want without Netscape coming
	6	and asking them to pay them. 
	7		Q	Mr. Gates, in 1996 what was Mosaic's
	8	market share? 
	9		A	I don't know. 
10		Q	Approximately? 
11		A	I really don't know. 
12		Q	Can you give me any estimate or range? 
13		A	By 1996, probably under 10 percent. 
14		Q	Under 5 percent? 
15		A	Well, now you're going to have to
16	answer what the word "Mosaic" means.  For example, if
17	you get low enough, get really low, we're going to
18	get into Internet Explorer.  Internet Explorer, until
19	we shipped IE3, actually had quite a bit of code in
20	it that derived from Mosaic; that is, the code went
21	from University of Illinois to Spyglass to our
22	development team who used some of that code in
23	creating both IE1 and IE2.  So if you get low enough,
24	I'll have to ask you do you consider IE1 or IE2 a
25	form of Mosaic? 
				233 
	1		Q	Not for purposes of this question, if
	2	it will help you. 
	3		A	Okay.  Then you can get down below 5. 
	4		Q	Okay. 
	5			In 1996 Netscape was charging OEMs who
	6	it licensed to distribute its browser; correct, sir? 
	7		A	I don't know that. 
	8		Q	Do you know one way or the other? 
	9		A	I think they were charging some, but
10	I'm not sure they were charging all. 
11		Q	Did you ever try to find out? 
12		A	I know we were always unclear what the
13	nature of those deals were. 
14		Q	Okay.  
15			Did you ever try to find out how much
16	of Netscape's revenue came from charging for the
17	browser? 
18		A	Well, we, from time to time, looked at
19	the revenue of broad sets of competitors.  And so I'm
20	sure at some point when we did -- the people in the
21	company, not me, but when people did analysis of
22	Netscape, that's one of the issues they would have
23	looked at. 
24		Q	Did anyone ever inform you of
25	approximately how much of Netscape's revenue was
				234 
	1	accounted for charging for the browser? 
	2		A	I'm sure I was present in a
	3	presentation where that was one of hundreds of facts
	4	presented to me. 
	5		Q	Do you recall it? 
	6		A	The number?  No. 
	7		Q	Or approximately how much of Netscape's
	8	revenue was accounted for by charging for the
	9	browser. 
10		A	When we say "charge" -- well, I don't
11	remember the number, so I won't plague you with the
12	question that I always have to ask about that, which
13	is:  Which revenue source are you talking about?  But
14	even if you tell me, I won't remember the specific
15	number. 
16		Q	I'm going to ask you whether you
17	remember approximately what the range of the number
18	is.  And to be absolutely clear, what I'm talking
19	about is charging for the browser.  I'm not talking
20	about advertising revenue, you know, or revenue from
21	the Search button or the Home Page. 
22		A	But that's charging for the browser.  I
23	mean, it's like saying NBC has no revenue. 
24		Q	No.  It's not like saying it has no
25	revenue.  It's like saying NBC doesn't charge for its
				235 
	1	programs to the public.  It may charge advertisers,
	2	and I'm not saying that there might not be
	3	advertising revenue.  But what I'm talking about is
	4	charging for the use of the product, charging OEMs or
	5	charging end users who buy it at retail or download
	6	it, although I understand that your position is it's
	7	downloaded for free.  But I'm trying to distinguish
	8	between charging for the product and whatever
	9	advertising revenue they get. 
10		A	Okay. 
11		Q	Now, with respect to charging for the
12	product, charging for the use of the browser, do you
13	have any idea, any approximation or range, of how
14	much of Netscape's revenue was attributed to that? 
15		A	If you give me a time period, I can
16	narrow it down from the zero to 100 percent range. 
17		Q	1996. 
18		A	Around 20 to 50. 
19		Q	Today. 
20		A	Today the advertising revenue from
21	browsers --
22		Q	No, not advertising.  We're talking
23	about the revenue from the use of the browser, not
24	the advertising.  We're just talking about --
25		A	I know, that's right.  But let me
				236 
	1	complete my sentence. 
	2		Q	Okay. 
	3		A	Today the -- what you would call
	4	nonuser revenue sources are very substantial, and,
	5	you know, more than cover what people are doing with
	6	browser.  So that's become the primary revenue source
	7	that you get specifically related to the browser. 
	8		Q	Indeed today the amount of Netscape's
	9	revenue that's attributed to charging people for the
10	use of the browser is zero; right, sir? 
11		A	I don't know that. 
12		Q	Because they don't charge for the
13	browser; right?  You know that, don't you? 
14		A	No, I don't know if, you know, they had
15	some commitment contracts with various people and you
16	can do special things with browsers.  And understand,
17	they -- you know, they do lots of different deals
18	that include various special things.  And so I don't
19	think it's fair for me to sit here and tell you what
20	Netscape's revenue are from a particular source.  
21			If you want to ask me about Microsoft,
22	that would be a different thing.  But I'm not an
23	expert on Netscape revenue. 
24		Q	And so you just don't know, is your
25	answer, as you sit here now? 
				237 
	1		A	Yeah.  It may have dropped down to
	2	zero.  I don't know. 
	3		Q	Okay.  
	4			Was it part of your intent in taking
	5	the actions that Microsoft took to drive that down to
	6	zero? 
	7			MR. HEINER:  Objection. 
	8			THE WITNESS:  We price our product,
	9	Windows.  That's the only thing we do relative to
10	pricing.  The most important thing we do is we create
11	the features of the product including improved
12	versions. 
13		Q	BY MR. BOIES:  Let me be sure my
14	question is clear. 
15			Was any part of Microsoft's actions
16	with respect to its browser or, as you sometimes
17	refer to it, browser technology, motivated by desire
18	to drive Netscape's revenues from users of Netscape's
19	browser down to zero? 
20		A	Well, I think you're getting a little
21	bit psychological there. 
22		Q	No.  I'm asking what you intended. 
23	What was the purpose of what you were doing? 
24		A	My purpose was to make Windows a better
25	product and maintain and increase the popularity of
				238 
	1	Windows. 
	2		Q	Was that the only purpose? 
	3		A	That was the purpose on which the
	4	decision was made. 
	5		Q	I just want to be clear.  
	6			It's your testimony that an intent to
	7	deprive Netscape of revenue played no role in any of
	8	the decisions that Microsoft made with respect to
	9	browsers or browsing technology?  Is that your
10	testimony? 
11		A	Well, our decision to have the browser
12	be a feature of Windows was in no way motivated by
13	something to do with Netscape.  We had chosen that
14	that was a logical evolution of the Windows feature
15	set before Netscape was a factor at all. 
16		Q	Mr. Gates, if your answer is that it
17	played no role, that is your answer.  But I need to
18	get on the record what your answer is.  
19			And my question is whether an intent to
20	deprive Netscape of revenue played any role in any of
21	the decisions that Microsoft made with respect to its
22	browser or browsing technology. 
23		A	We decided that it was a logical
24	improvement of Windows to put the browser into
25	Windows before we had much awareness of there even
				239 
	1	being a Netscape.  So the decision that that would be
	2	a feature -- and as I've said, when we make something
	3	a feature of Windows, that means that it's available
	4	along with all the other features and the license
	5	fee, that decision had been made very early on.  
	6			We also had a very early recognition of
	7	the potential revenue sources from things like the
	8	Search button and the Home Page and that those would
	9	become quite substantial. 
10			MR. HEINER:  Mr. Boies, we're prepared
11	to go right through to 6:00, but we would like to
12	have one more brief break when you come to a logical
13	stopping point.  I'm having trouble seeing when the
14	stopping points are.  But if you could have one come
15	up soon, I'd appreciate it. 
16			MR. BOIES:  Okay.  Let me just try to
17	get this question answered, and then we'll take a
18	break.  
19			Can I have the question back?  
20			(The following question was read:  
21			   "Q  Mr. Gates, if your
22		answer is that it played no role,
23		that is your answer.  But I need to
24		get on the record what your answer
25		is.  
				240 
	1				   "And my question is whether
	2			an intent to deprive Netscape of
	3			revenue played any role in any of the
	4			decisions that Microsoft made with
	5			respect to its browser or browsing
	6			technology.")
	7		Q	BY MR. BOIES:  If your answer's "no,"
	8	we'll simply go on.  If your answer is "yes," then
	9	I'm going to ask what role it was.  But I'm just
10	trying as a predicate to find out whether it played
11	any role in any of your decisions. 
12		A	I don't know what you mean "any of our
13	decisions."  Now, that is the vaguest thing I've ever
14	heard. 
15		Q	Okay.  Any of your decisions with
16	respect to the browser or what you have referred to
17	as your browsing technology. 
18		A	Wait a minute.  Have you completely
19	changed the question? 
20		Q	I don't think so.  But let's go back
21	and reread the question.  
22				And when you read it this time, type it
23	into the record again so it appears so that a reader
24	of the transcript doesn't have to go back and find
25	it. 
					241 
	1			(The following question was read:  
	2			   "Q  Mr. Gates, if your
	3		answer is that it played no role,
	4		that is your answer.  But I need to
	5		get on the record what your answer
	6		is.  
	7			   "And my question is whether
	8		an intent to deprive Netscape of
	9		revenue played any role in any of the
10		decisions that Microsoft made with
11		respect to its browser or browsing
12		technology.")
13			MR. HEINER:  Object to the question as
14	vague and ambiguous on several counts. 
15			THE WITNESS:  Yeah.  It's pretty vague. 
16	Let's say we decide --
17			MR. BOIES:  This is the same question
18	that we've gone through three times.
19			MR. HEINER:  Yeah, I know.  I'm only
20	making the objection now. 
21			MR. BOIES:  Okay. 
22			THE WITNESS:  Let's say we decide to
23	put a new feature in, is that included in what you're
24	asking about? 
25	       Q	BY MR. BOIES:  A new feature in what? 
				242 
	1	       A	In our Internet browser technology. 
	2	       Q	If the purpose is to deprive Netscape
	3	of revenue, if that's why you put it in, yes, it is
	4	included, sir.  
	5		And if you don't understand the
	6	question, if my question is not clear, I will
	7	rephrase it.  You can tell me the answer is "yes,"
	8	you can say the answer is "no," you can say the
	9	answer is "I don't recall," you can say "Your
10	question is so confusing to me, I can't answer it." 
11	But all I'm trying to do is find out what your answer
12	is. 
13		Do you have the question in mind? 
14	       A	I think it's quite a vague question. 
15	Let me just give you a hypothetical to understand. 
16		Let's say we think users want a
17	feature, and it can be a feature that we're doing
18	first or it's a feature that Netscape has done first. 
19	When we decide to put that feature in, our primary
20	goal is to make Windows more popular and build
21	momentum for Windows.  But certainly there is --
22	let's say it's a feature that Netscape's done first,
23	then we are thinking, okay, will users be interested
24	in our browser?  If it's a feature we've done first,
25	we're thinking will users be interested in our
			243 
	1	browser? 
	2		So you can't say that, you know, as you
	3	get into 1996 that we're unaware of Netscape.  And
	4	even though what we're primarily doing is related to
	5	making better experiences for customers and all that,
	6	the fact that we'll be compared with them in terms of
	7	how people chose browsers, we're aware of that. 
	8	       Q	I didn't mean my question to suggest
	9	that you might have been unaware of Netscape in 1996,
10	Mr. Gates.  I assume that you were aware of Netscape
11	in 1996.  
12		My question is whether an intent to
13	deprive Netscape of revenue played any role in any of
14	the decisions that you made about browsers or
15	browsing technology.  I'm not talking about a
16	decision where you say, "I understand this would have
17	an effect on Netscape but I don't care, I'm going to
18	do it anyway."  I'm talking about a situation in
19	which, at least in part, you take an action with the
20	intended purpose of depriving Netscape revenue.  
21		Did you do that? 
22	       A	Well, the original decision to include
23	the browser into Windows as a feature of Windows was
24	not taken in response to some thinking about
25	Netscape.  But once you get out into a period where
			244 
	1	we're looking at Netscape as one of our competitors,
	2	it's very hard to say, you know, did that influence
	3	our decisions or not.  To me that's a very vague
	4	question.  It's one of the facts we are aware of. 
	5	Our primary goal, of course, is to make Windows
	6	better for customers.  And we were doing a lot of
	7	great stuff there and were actually very successful
	8	once we got past a certain point in doing a product
	9	that people did decide to choose. 
10		      But, you know, how can you -- how can
11	you say, you know, when every person at Microsoft
12	makes any decision -- you know, we don't get to run
13	it where there's no thought about Netscape and there
14	is a thought about Netscape.  So you're asking me to
15	reach into people's minds and do something that I
16	think is strange. 
17		      MR. BOIES:  Would you read back my
18	question one more time and again incorporate it?  
19		      (The following question was read:  
20		         "Q  Mr. Gates, if your
21		answer is that it played no role,
22		that is your answer.  But I need to
23		get on the record what your answer
24		is.  
25		         "And my question is whether
			245 
	1			an intent to deprive Netscape of
	2			revenue played any role in any of the
	3			decisions that Microsoft made with
	4			respect to its browser or browsing
	5			technology.")              
	6		Q	BY MR. BOIES:  Have you answered that
	7	question now to the fullest extent that you can, 
	8	Mr. Gates?  Because if you can't, we'll just stop. 
	9		A	I find the question unclear enough,
10	that I'm afraid I won't be able to do any better than
11	I already have. 
12				MR. BOIES:  Okay.  We can take a break
13	now. 
14				THE VIDEOGRAPHER:  The time is 5:22. 
15	We're going off the record. 
16				(Recess.) 
17				THE VIDEOGRAPHER:  The time is 
18	5:36 P.M.  We are going back on the record.
19		Q	BY MR. BOIES:  Mr. Gates, before the
20	break you said that Microsoft recognized early that
21	there would be browser revenue from advertising
22	revenue from the Search button and the Home Page.  
23				Do you recall that? 
24		A	That's right. 
25		Q	When did Microsoft first project what
					246 
	1	its revenue would be from browser advertising from
	2	the Search button and/or Home Page? 
	3	       A	Well, we actually didn't have enough
	4	share with IE1 or IE2 that we built that much value
	5	at all because we just didn't have much traffic. 
	6		When it came to IE3 we had a discussion
	7	about how we would take that asset and what we would
	8	do with that traffic.  And we actually chose at that
	9	stage instead of charging for it, to build some
10	partnerships by working with people who we directed
11	traffic to.  
12		And I don't know if anybody had done --
13	I know there was discussions, I don't know if there's
14	a formal document, but we discussed the notion of
15	licensing that out versus just using it to build
16	partnerships. 
17		In terms of actually having people pay
18	us large amounts of money, that's really gotten big
19	in the last year. 
20		MR. BOIES:  Would you read the question
21	back, please? 
22		(The following question was 
23	read:         
24		   "Q  When did Microsoft first
25	        project what its revenue would be
			247 
	1		 from browser advertising from the
	2		 Search button and/or Home Page?")
	3		Q	BY MR. BOIES:  Do you understand the
	4	question, Mr. Gates? 
	5		A	Yeah.  And the answer is:  Probably as
	6	part of that decision what to do with the IE3 traffic
	7	we would have looked at the choice of charging or
	8	using it in partnerships. 
	9		Q	Could you tell me, just for the record,
10	when you're talking about? 
11		A	Oh, during the planning cycle for IE3. 
12		Q	Which was when? 
13		A	That would have been sometime in '96. 
14		Q	Okay.  
15			So at some time in '96, according to
16	your testimony, Microsoft made a projection of how
17	much money it could expect to receive from browser
18	advertising from the Search button and/or the Home
19	Page; is that what you're saying? 
20		A	Advertising in the very broad sense. 
21			The principle that there would be that
22	revenue predated that.  That was an insight we had
23	quite a bit before that.  
24			But the first time we looked at, okay,
25	what should we do with this traffic would have been
				248 
	1	when we were thinking that IE3 would garner
	2	significant traffic. 
	3	       Q	When you say "the first time we looked
	4	at what we would do about the traffic," I want to be
	5	sure again that the question and answer is meeting
	6	because I know you use words very precisely. 
	7		What my question is is:  When did you
	8	first make a projection, when did Microsoft first
	9	make a projection, of how much money Microsoft would
10	receive from advertising revenue in connection with
11	the browser?  
12		MR. HEINER:  Certainly asked and
13	answered. 
14		MR. BOIES:  You may be right.  But
15	because he keeps changing the language he uses, and I
16	know from prior answers that usually when he changes
17	the words, he means something by it, I need to have
18	it tied down. 
19		MR. HEINER:  Okay.  And I think he does
20	mean something by his use of words.  I'm just saying
21	that you asked the question and you got the answer.
22	       Q	BY MR. BOIES:  Okay.  What's the
23	answer? 
24	       A	We looked at charging as part of the
25	IE3 planning during 1996. 
			249 
	1		Q	I'm not asking when you looked at
	2	charging.  I'm asking when did Microsoft first make
	3	an estimate or projection of how much money it would
	4	receive. 
	5		A	Oh, when we looked at the issue of
	6	whether we -- it was a better idea to charge or not
	7	as part of the IE3 planning. 
	8		Q	And that would have been in 1996; is
	9	that correct? 
10		A	Uh-huh. 
11		Q	You have to say "yes" or "no" for the
12	record. 
13		A	Yes.  
14			You don't get "uh-huh's"?  
15		Q	She does, but it doesn't always come
16	out exactly the way you think. 
17			And who made that estimate or
18	projection? 
19		A	I know there was discussion with Pete
20	Higgins and Peter Neupert and myself about that, and
21	each of us would have hazard some view of the value
22	there. 
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	9			You were asked some questions earlier
10	about a June 21, 1995 meeting with Netscape.  And
11	that's a meeting you did not attend; am I correct? 
12		A	I've never met with Netscape. 
13		Q	And did you know that Microsoft people
14	were meeting with Netscape before they actually met? 
15		A	I don't recall knowing in advance. 
16		Q	You did know after the fact because you
17	got the e-mails that we saw; correct? 
18		A	Yeah.  That's right.  I recall getting
19	those e-mails, at least the Thomas Reardon/Silverberg
20	one.
21			MR. HEINER:  Mr. Boies, it's 6:00 now,
22	it's been a pretty full day.  If this is a relatively
23	short line of questioning, why don't you finish it
24	up, we'll go to about 6:15. 
25			MR. BOIES:  Okay. 
				265 
	1			MR. HEINER:  Okay.
	2		Q	BY MR. BOIES:  You are aware that it
	3	has been asserted that at that meeting there was an
	4	attempt to allocate markets between Netscape and
	5	Microsoft; correct, sir? 
	6		A	My only knowledge of that is that there
	7	was an article in the Wall Street Journal very
	8	recently that said something along those lines. 
	9	Otherwise, no. 
10		Q	Is it your testimony that the first
11	time that you were aware that there was an assertion
12	that there had been a market allocation meeting or an
13	attempt to allocate markets at a meeting between
14	representatives of Microsoft and Netscape was a
15	recent Wall Street Journal article? 
16		A	I'm not sure how to characterize it. 
17	The first I heard anything about that meeting and
18	somebody trying to characterize it in some negative
19	way was an Andreessen quote that was in the Wall
20	Street Journal very recently.  And it surprised me. 
21		Q	Are you aware of any instances in which
22	representatives of Microsoft have met with
23	competitors in an attempt to allocate markets? 
24			MR. HEINER:  Objection. 
25			THE WITNESS:  I'm not aware of any such
				266 
	1	thing.  And I know it's very much against the way we
	2	operate. 
	3		Q	BY MR. BOIES:  It would be against
	4	company policy to do that? 
	5		A	That's right. 
	6		Q	Now, subsequent to being apprised that
	7	Mr. Andreessen, at least, was asserting that this had
	8	happened, did you make any effort to find out what
	9	had actually happened at that meeting? 
10		A	Well, first of all, I don't want to be
11	involved in characterizing what Mr. Andreessen said
12	because I -- I -- all I know is something about a
13	quote about a dead horse head or something like that. 
14	That was what I recall from the Wall Street Journal
15	article.  
16			I did, after the Wall Street Journal
17	article, see some e-mail that Andreessen had sent our
18	people after the meeting saying it was a great
19	meeting, and I did see the Reardon mail that I
20	deleted but somebody gave back to me and some Reardon
21	notes from the meeting.  
22			Now, I think we're talking about the
23	same meeting.  I think there may have been more than
24	one.  But in any case, I think we're talking about
25	the same meeting. 
				267 
	1		Q	I think the record may show that there
	2	was a meeting before the June 21 meeting. 
	3		A	That sounds right. 
	4		Q	But the meeting that I was particularly
	5	asking about was the June 21 meeting.  And I think
	6	that that probably was what was in the Wall Street
	7	Journal. 
	8		A	No.  You can't really say because the
	9	Wall Street Journal talked about a May meeting, and
10	May is not June, not by a long shot. 
11		Q	You're right.  May is not June.  I
12	agree that May is not June.  And maybe there were two
13	such meetings. 
14		A	Well, I'm not aware of any meeting
15	between us and Netscape in May.  So that seems very
16	strange.  And that confused me about that Wall Street
17	Journal article. 
18		Q	Let me ask you:  Did you -- when you
19	saw the Wall Street Journal article that talked about
20	a May meeting in terms of allegedly market dividing
21	conduct, did you try to find out whether there had
22	been a May meeting between representatives of
23	Microsoft and representatives of Netscape? 
24		A	Well, again, I wouldn't characterize
25	the article in that way.  When I read the article,
				268 
	1	what it said interested me enough and concerned me
	2	enough, I did seek to find out if there was a May
	3	meeting.  But I don't think the article is what
	4	you're suggest -- said what you're suggesting.  I
	5	mean, we should get a copy of the article.  I don't
	6	remember it that way.  I remember Andreessen talking
	7	about how he had been in fear that Don Coerleone had
	8	come to see him.  And, you know, once I realized that
	9	there was no meeting in May and that it wasn't -- you
10	know, that he after the meeting said he enjoyed the
11	meeting and that it was, you know, just a group of
12	our guys down there trying to talk about if there was
13	any areas of cooperation, it seemed -- the whole
14	thing seemed very strange to me. 
15		Q	Did you talk to people to find out
16	whether there was a May meeting? 
17		A	Yes. 
18		Q	Who did you talk to? 
19		A	I consulted with my lawyers. 
20		Q	Other than consulting with your
21	lawyers, did you try to find out whether there was a
22	May meeting? 
23		A	Well, my lawyers then talked to all the
24	people that might have met with Netscape, and I made
25	sure they did that pretty broadly. 
				269 
	1		Q	And you were informed that there was no
	2	May meeting; is that your testimony? 
	3		A	That's the understanding I was given,
	4	yes.  And then I was given some of the other
	5	information that I've already mentioned.  
	6		Q	But all that information came from your
	7	lawyers not from nonlawyer employees of Microsoft; is
	8	that what you're saying? 
	9		A	It came to me through my lawyers. 
10		Q	Did you ever have a conversation with
11	anyone in the last 12 months other than your lawyers
12	concerning whether there were meetings in May or June
13	of 1995 with Netscape, and if so, what happened at
14	those meetings? 
15		A	Well, there might have been a point
16	after I got all the data from the lawyers where I
17	said to some of the PR people what an outrageous
18	slander that article had been and how unfair I felt
19	it was.  And so I may have mentioned that to them. 
20		Q	Did you have any conversations in the
21	last 12 months with any person who was dealing with
22	Netscape in 1995 about whether there were May or June
23	meetings and if so, what happened at those meetings? 
24		A	No.  I relied on the lawyers to go and
25	meet with those people and gather the facts and
				270 
	1	educate me about was there a May meeting and what was
	2	the agenda or what was Andreessen's state of mind
	3	after the meeting, what did the notes look like.  But
	4	that's all very recent.  That is after the Journal
	5	article. 
	6		Q	Now, have you ever read the complaint
	7	in this case? 
	8		A	No. 
	9		Q	Have you ever received a summary of the
10	complaint in this case? 
11		A	I wouldn't say I've received a summary,
12	no.  I've talked to my lawyers about the case but not
13	really the complaint. 
14		Q	Do you know whether in the complaint
15	there is an assertion -- I'm not talking about the
16	Wall Street Journal article, I'm talking about the
17	complaint that was filed last May.  
18			Do you know whether in that complaint
19	there are allegations concerning a 1995 meeting
20	between Netscape and Microsoft representatives
21	relating to alleged market division discussions? 
22		A	I haven't read the complaint so I don't
23	know for sure.  But I think somebody said that that
24	is in there. 
25		Q	Did you find that out before or after
				271 
	1	the Wall Street Journal article? 
	2	       A	The first time I knew about these
	3	allegations was the Wall Street Journal article. 
	4	       Q	That is, that article preceded any
	5	knowledge that you had or didn't have related to the
	6	complaint? 
	7	       A	That's right. 
	8		MR. BOIES:  Okay.  That completes that
	9	line of questioning. 
10		MR. HEINER:  Okay. 
11		Pick up tomorrow at 8:30? 
12		MR. BOIES:  That would be good. 
13		THE WITNESS:  Yeah.  The 4:00 deadline
14	tomorrow is unfortunately not a movable deadline. 
15		THE VIDEOGRAPHER:  This is the end of
16	the deposition.  The time is 6:12.  This is the end
17	of Tape 4 of the videotaped deposition of Bill Gates
18	to be continued tomorrow morning at 8:30 A.M. which
19	is August 28th.  
20   
21		          * * *
22   
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24   
25   
			272 
1                I hereby declare, under penalty of
2   perjury, that the foregoing answers are true and
3   correct to the best of my knowledge and belief. 
	4          EXECUTED AT _________________, CALIFORNIA, 
	5   this ______day of _________________, 1998.
	6   
7                              	_________________________
	8	Bill Gates
	9   
10   
11   
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13   
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15   
16   
17   
18   
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		273 


				275 
Released Pursuant to 15 U.S.C. 30

Continued on August 28, Part A, Page 1.

Copyright 1999 The Washington Post Company

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