U.S. vs. Microsoft
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  Microsoft Chief Deeply Stung by Charges, Associates Say

By Elizabeth Corcoran
Washington Post Staff Writer
Tuesday, December 29, 1998; Page E1

In September, Microsoft Corp. Chairman Bill Gates and his wife, Melinda, took several dozen friends on a vacation train trip across Montana, Wyoming and Colorado. It was, predictably, a first-class affair private rail car, fine food and some of the most beautiful scenery in the country.

During dinner at a restaurant where the party stopped, a couple of strangers who were eating there joined the group and proceeded, to most everyone's amazement, to mercilessly tease the hosts. "Hey, aren't you that computer guy Steve Jobs?" one of them demanded of Gates. In fact, they were actors, brought in as entertainment by Gates and closely coached by him on what to say.

As the world's richest person, Gates is accustomed to controlling many of the events around him. But in the three months since that carefree rail trip, he has found himself unable to blunt the assault that the federal government has launched against his company. Day after day, in the antitrust trial in a Washington courtroom, Justice Department lawyers have been laying out a case for Microsoft as a danger to the U.S. software industry, with Bill Gates as the grand ringleader.

As the trial has progressed, no one has felt the lash of those charges more than Gates. In interviews, close friends and associates paint a portrait of a man deeply stung by the accusations against him and his company, convinced that he has done nothing wrong, and simmering with anger that the government won't accept his explanations and back off.

In contrast to how he has typically run his business life, he is reacting more with his heart than with his head, they say.

Indeed, some of the people closest to Gates worry that his hostility is becoming a liability to the company. In private meetings and chance encounters, some have begun to subtly suggest to him so far without effect that the company, now the world's largest software maker, must act differently than it did as a scrappy start-up.

Friends say that change must begin with Gates, whose personality and drive have shaped Microsoft from the days more than 25 years ago when it was a roomful of kids in ratty T-shirts. He must think of himself as an industry leader responsible for helping the industry grow, rather than as head of a company fighting to stay in business.

"Bill is clearly going from being an underdog to an industry leader and he needs to internalize that," said David F. Marquardt, a member of Microsoft's board of directors. Marquardt was one of the few people willing to speak on the record about Gates, who also declined to be interviewed.

A Microsoft spokesman disagreed. Through the course of the trial, "I've seen him more rational, even more relaxed and a lot more thoughtful about how to react and respond [than at times in the past] and still extremely convinced that what he's done and what we're doing is right," said Greg Shaw, a company spokesman who works closely with Gates.

Gates's reaction to the government's suit echoes the sentiments of another industry leader, the late Thomas J. Watson, who headed International Business Machines Corp. when the Justice Department sued the company in 1969. When he learned of the government's suit, "my own private impulse was to forget the niceties and fight like hell to protect IBM," Watson wrote in his autobiography. "It was like some primitive instinct as though [then-attorney general] Ramsey Clark were threatening my child. This powerful feeling came over me again and again through the years as our antitrust problems unfolded."

When the suit against Microsoft was filed in May, "I think his [Gates's] first reaction was disbelief," said Heidi Roizen, a longtime software entrepreneur who became friends with Gates 15 years ago and occasionally consults for the company. "Like 'How could this be?' And there's a sense of anger and frustration that this could be done and was happening to him."

At first Gates simply lashed out at the government, contending in an electronic-mail reply to questions posed by The Washington Post that the government's attack on Microsoft was tantamount to making the software giant sell "castrated products." Later in the summer, he grew glum, friends say.

The combination of the suit and other job-related pressures on Gates ultimately persuaded him to turn to Steve Ballmer a college friend and 18-year Microsoft veteran for help. Ballmer was hesitant at first about taking on the job of president of Microsoft in July. His goal was to shoulder much of the daily responsibility for running the firm and to free Gates to spend more time doing things he still considered "fun," such as talking with Microsoft's product teams.

Friends say that these days Gates's legendary concentration is rattled. Though he doesn't take part in the frequent conference calls senior executives hold to strategize over the case, he does find his mind wandering to the dispute six or seven times a day. "It's a huge distraction," said one associate.

Press accounts that portray Gates as scheming have also grated on him. "The thing that bothers him is that the press is against him," Marquardt said. He is upset that Netscape Communications Corp. chief James Barksdale, one of the star witnesses against Microsoft, has appeared so favorably in press coverage.

"It bugs him that Barksdale is a hero" while he, Gates, has been demonized, Marquardt said. Gates has devoted his working life to creating software. By contrast, from Gates's vantage point, Barksdale, who spent much of his career at Federal Express, looks like a "mercenary" who joined the software industry less than four years ago and has been rewarded handsomely.

Over and over, associates say Gates still sees Microsoft as a company that must fight to stay alive.

His views of Microsoft were strongly shaped during the 1980s, when Microsoft was a pipsqueak and others such as Lotus Development Corp., WordPerfect Corp. and Novell Inc. held commanding leads.

He watched as those companies become distracted and at times indifferent to emerging technologies and then faltered. As a result, Gates was determined not to let himself or Microsoft become complacent. Any time a competitor releases a new product, Gates analyzes it, and worries. "This thing can kill us" is his frequent lament.

Gates and his colleagues at Microsoft say they truly believe Microsoft hasn't done anything differently than any of their competitors in the industry. "I've been around for a long time," Marquardt said. "This is a tough industry. Bill is no different from the rest. . . . This is like pro football. It's a tough, competitive battle."

As the trial moves into its third month, Gates sees no reason to change his views. "Bill is fundamentally an idealist," said a close associate. "He believes there's a rule of law" and that because Microsoft has played by the same rules as other companies, the courts will ultimately vindicate the firm. "He's had a series of disillusionments, but he clings stubbornly [to his beliefs] like Job," said one friend.

Microsoft insiders who say they're trying to convince Gates that Microsoft must change with the times stumble when they try to explain precisely what the company should do differently. But it appears to boil down to showing a bit more sympathy for other companies, to accepting that Microsoft is secure as a leader and can afford to let other firms prosper as well.

The clearest way to do that would be to have a sign from Gates, one as heartfelt and energetically expressed as the message he sent out in December 1995 declaring that Microsoft had to refocus its work on the Internet.

Throughout the case, Gates has been haunted by the shadow of IBM. The computer company became Microsoft's springboard from the ranks of start-ups into the big leagues when it asked the fledgling software firm to provide the operating system for its first personal computer in 1981. IBM had been heavily scarred by its 12-year antitrust battle with the government, which ended that year when the government dropped its case.

As that case progressed, IBM's staff of lawyers played an expanding role in setting company policies. "IBM ultimately self-destructed because the case made the company more cautious," said Mike Maples, who had spent 23 years at IBM and then served as one of Microsoft's top three executives until he retired in 1995. "That's a lesson that Microsoft is trying not to repeat and is doing so successfully."

Even as IBM later burnished its image as a "corporate statesman," it lost its focus on technology and ultimately its edge in the market. To Gates, companies that view their market position as unassailable are juicy targets for quick-moving, entrepreneurial firms. The best way to guard against such complacency is to stay as jumpy as a start-up.

The need for change, said one friend, is an idea that "has got to seep in. You can't sit him down and tell him. It's a process, not an event."

Others contend that whether Gates changes or not, the company must. "We can accomplish statesmanlike things without Bill changing," said one Microsoft executives. "Microsoft isn't a one-man band. We draw on others to do things that Bill isn't good at."

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