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  Gates Escalates PR War Outside Court

By Rajiv Chandrasekaran
Washington Post Staff Writer
Tuesday, December 8, 1998; Page B01

Microsoft Corp. Chairman Bill Gates went to the court of public opinion yesterday to escalate his attack on the government's antitrust lawsuit, defending the answers he gave in a controversial pretrial deposition and saying the case is driven by a government lawyer "really out to destroy" the company.

Gates's comments, delivered via a satellite link to a gaggle of reporters in Washington, were his most vigorous since the suit went to trial seven weeks ago. They reflect a new effort by the software giant -- stung by the public release of the deposition's most unflattering moments -- to make its case outside the courtroom.

With the trial in recess yesterday, Gates and Microsoft's lawyers also used the news conference to crow about a fracture in the government's ranks: South Carolina Attorney General Charlie Condon said he was withdrawing from the lawsuit because the case has been "about Internet competitors, not about consumers." His decision leaves allied against the company 19 states and the District of Columbia, as well as the U.S. Department of Justice. [Related story, Page B3.]

Condon, a Republican, attributed his decision to America Online Inc.'s recent announcement that it intends to acquire Internet browser pioneer Netscape Communications Corp. for $4.2 billion. Condon said in a statement that this "proves the forces of competition are working."

Microsoft's general counsel, William H. Neukom, said the company was pleased with Condon's decision and hopes "other plaintiff states will pause to reconsider the wisdom of pursuing this litigation." A spokesman for New York Attorney General Dennis C. Vacco, who is spearheading the states' effort, called Condon's decision a "nonevent" for the government's case.

A Microsoft official said the company gave $20,000 to the South Carolina Republican Party in the latest election cycle, although the company asked that the money not be used to promote Condon, who was reelected to a four-year term last month.

The company gave similar donations to political parties in several states this year, the official said.

A spokesman for Condon did not return phone calls yesterday.

News of South Carolina's withdrawal and Gates's comments helped send Microsoft shares to an all-time high yesterday, rising $6.18 3/4 a share to close at $133.56 1/4.

Government lawyers contend that Microsoft has engaged in a broad pattern of anti-competitive behavior -- specifically adding an Internet "browser" to its Windows operating system -- to maintain its monopoly with Windows in the operating system market. The company maintains that it is simply adding to Windows Internet-related features that con sumers want.

It is a strategy first announced by Gates three years ago yesterday, when, he said, "a lot of people were writing our obituary" because the company had not embraced the Internet quickly enough. In the following months and years, Microsoft played catch-up at hyper-speed, moving aggressively to develop Internet browsers, World Wide Web sites and related technology.

"I guess someone thinks we did too well," said Gates, whose electronic appearance on two television screens at the National Press Club evoked shades of his videotaped deposition, which is played on television screens in the courtroom. But unlike the squirming, combative executive slouched in a dimly lighted conference room answering lawyers' questions, Gates yesterday sat upright, illuminated by kleig lights, with a ficus, a bookshelf and a fireplace in the background.

Microsoft's more vocal posture ignited new sparring yesterday between the company and the Justice Department, with both sides trying to claim the PR high ground. A Microsoft lawyer accused the government of presenting evidence at the trial in "an attempt to influence public opinion against Microsoft." A Justice official, in turn, called "Microsoft's latest press statements . . . another public relations effort to distract from the overwhelming evidence introduced in court showing that Microsoft has illegally used its market dominance to block competition."

Most of Gates's comments yesterday -- his defense of his company's conduct and his attacks on the government's trial tactics -- weren't new. He first raised those points at the annual meeting of Microsoft shareholders last month and reiterated them in an e-mail message to his executives last week as well as in recent interviews with the Associated Press and Newsweek.

But on most topics, he went a little further than he has in previous venues. He admitted that he could have appeared more telegenic during his deposition, which, he said, he did not believe would be played in the courtroom.

"Could I have smiled for the camera a little bit?" he said. "Absolutely."

But, he said, "Justice is not about that camera-looking quality."

At the same time, Gates defended some of his legalistic responses in the deposition, which featured him quibbling over the meaning of such words as "concerned" and "ask." Clad in a dark suit and yellow tie, Gates hunched over and read aloud the portion of the deposition that featured him questioning the definition of the word "compete."

"I think my question there was . . . an absolutely legitimate question which anybody in that situation . . . would have asked," he said. Gates called many of the questions posed to him in the deposition "strange," a word he is fond of using.

Although it was billed as a news conference, Gates initially offered to answer only two questions from the assembled reporters. When a collective groan filled the room, he agreed to take just one more. All three of the questions were about the deposition.

Gates said that he answered "truthfully every single question that was put to me." He accused the government's lead attorney, David Boies, who conducted the deposition, of being "really out to destroy Microsoft" and "really out to take all the good work we've done and make us look very bad."

A government official involved in the case said: "The government is not trying to destroy Microsoft, it's simply seeking to compel Microsoft to obey the law. It's quite revealing that Mr. Gates equates the two."

Gates said that he believes the 12 witnesses the company plans to call -- many of them are Microsoft executives, but Gates is not on the list -- will rebut all the government's allegations, suggesting that it would not be necessary for him to testify. He did, however, goad the government to call him as a witness, saying that "if they choose to call me . . . I will be there."

In light of the proposed AOL-Netscape deal, Microsoft yesterday asked the federal judge overseeing the antitrust trial for permission to subpoena documents about the transaction from the two firms -- as well as from Sun Microsystems Inc., which has entered into a related business alliance with AOL.

Gates argued that the proposed deal "shows the high-tech market [is] changing more quickly than any other industry on earth."

"Three of our biggest competitors have banded together to compete against Microsoft, and yet amazingly, the government is still trying to slow Microsoft down," he said.

Staff writer Elizabeth Corcoran contributed to this report.

© Copyright The Washington Post Company

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