Behind Bill's gates

The Microsoft case: Revealing views from two books

In this story: The browser war 'Everything is personal' Better judgment RELATED SITES

By Todd Leopold
CNN.com Entertainment Editor

(CNN) -- The Microsoft antitrust case may eventually go Microsoft's way, despite federal Judge Thomas Penfield Jackson's decision last year that the software giant violated U.S. antitrust laws and should be broken into two parts.

SPECIAL United States v. Microsoft   MESSAGE BOARD The Microsoft case    The Ken Auletta file Book: "World War 3.0" Background: A longtime New Yorker writer, Auletta has followed the Microsoft case from the beginning. He is known for his access with people such as Microsoft head Bill Gates, TCI founder John Malone and other types who attend meetings like the World Economic Forum in Davos, Switzerland. Other books include: "Three Blind Mice" (1991), about the TV networks; "Greed and Glory on Wall Street" (1986), about the fall of the House of Lehman.  The John Heilemann file Book: "Pride Before the Fall" Background: Heilemann, a writer for Wired magazine, added to a 50,000-word piece he wrote for that magazine's November 2000 issue. He is well connected to Silicon Valley's power structure. Interestingly, he also used to work for the New Yorker. Other books include: "Pride Before the Fall" is Heilemann's first book.

An appeals court, set to hold hearings today and Tuesday, could overturn Jackson's decision and leave things as they were. Microsoft would remain one company, dominant in the fields of personal computer operating systems (with Windows), Web browsers (Explorer) and office software (Microsoft Office).

But, as explained by two new books -- Ken Auletta's "World War 3.0" (Random House) and John Heilemann's "Pride Before the Fall" (HarperCollins) -- the computer industry never stays as it was. That fact is what has led to Microsoft's incredible, perhaps monopolistic, success -- and its embroilment in the antitrust case in the first place. And its performance during the trial, symbolized by the truculent testimony of company co-founder Bill Gates, lost it many supporters.

Microsoft's behavior was rooted in the government's prosecution of IBM in the '60s and '70s, notes Heilemann, a writer for Wired magazine. "Microsoft behaved that way because Gates thought if Microsoft didn't react aggressively to threats it could end up like IBM," which was severely weakened by fighting its cases. "He felt it should continue acting like a startup. But startups have different laws than monopolies."

The browser war

The basics of the antitrust case boil down to the browser war. In 1994 the newly founded Netscape Communications, inventor of an easy-to-use Internet browser, Navigator, became an overnight success. World Wide Web usage mushroomed, and Navigator soon controlled 80 percent of the market.

Microsoft has always been "very good at what's going on in the industry," says Heilemann. "They could figure out where the industry is going and then turn the company around on a dime."

Despite growing fat on the success of its operating systems, MS-DOS and its successor, Windows, Gates realized that the Web could end Microsoft's dominance and threaten its very existence.

Personal computers wouldn't need to rely on self-contained systems. They could be networked, and the Web could provide everything. And whatever company controlled the browser market controlled the desktops of millions of computers. So Microsoft created its own browser, Explorer, and incorporated it into Windows, which runs nearly 90 percent of PCs.

Government prosecutor David Boies "ran rings around Microsoft's lawyers," says Auletta. "He told stories. ... Microsoft got bollixed up in facts"

Navigator's market share quickly fell. Meanwhile, competitors accused Microsoft of arm-twisting to guarantee Explorer's success. (For example, Microsoft threatened computer makers with the loss of their licenses to install Windows if they installed Netscape on their products.)

The government and Microsoft signed a consent decree in 1994 to dismiss a previous antitrust action, but the company's actions prompted the Department of Justice in 1997 to charge Microsoft had violated the decree.

Microsoft reacted poorly. It claimed it was "losing market share," says Auletta, a writer for The New Yorker magazine, that "we're weak." And about tactics? Auletta notes it pointed the finger back at its competitors: "Sure we play rough, they said, but look what others do to us."

'Everything is personal'

At the center of both books is Bill Gates, the high-tech mogul who became the richest man in the world by driving one of the most profitable companies in the world.

Ever since Microsoft established itself with the rights to (and royalties from) the PC's operating system, it has shrewdly used its resources to outflank rivals and keep itself on top of the mountain.

Once WordPerfect dominated the word processing market; now most people use Word. Once Netscape was on top of the browser business; now Explorer is used by the majority of Internet users.

Microsoft's competitors accuse it of being unoriginal, better at marketing than writing code, but it has never been complacent.

And the major reason for Microsoft's success is William Henry Gates III.

The two books paint a colorful -- and often uncompromising -- picture of the software titan. Gates' nerdy looks have usually belied an intense competitiveness, a trait bred into him by his family, which turned every game -- from trivia to athletics -- into a must-win contest.

"Even today, he's obsessed by winning," says Heilemann. "And not just winning, but decimating the opposition."

Microsoft's early public relations people downplayed Gates' competitiveness, portraying him as a "bespectacled geek, a visionary to bring technology to the masses," observes Heilemann. Then, after becoming the world's richest man, he was repositioned as a captain of industry.

The trial changed all that, the writer says. "He's just a businessman [now]," Heilemann says, adding that comparisons to the cutthroat Carnegies and Rockefellers of the late Gilded Age are not inappropriate: "He's very much like a lot of the industrialists of the early part of the century."

Still, it's no crime in business to be competitive and driven to win. What makes Gates different, says Auletta, is his outlook.

"With most businesspeople, business is business. It's not personal," he says. "With Gates, everything's personal. ... He thinks of himself as a victim, and that creates odd behavior."

Better judgment

The books' personalities are somewhat different. Auletta immerses readers in the nuts and bolts of the case, providing details on everything from Silicon Valley feuds to Judge Jackson's post-trial thoughts, as revealed by an interview with the jurist.

Heilemann has a breezier style, but his portraits of Microsoft co-founder Bill Gates, government prosecutor David Boies, and computer industry titans such as Sun's Scott McNealy and Intel's Andrew Grove are revealing.

Auletta lined up a series of plum interviews with Judge Jackson, a fact Microsoft is attempting to use to indicate the judge's bias. But Auletta notes that the judge isn't a man whose integrity should be taken lightly.

"He's an interesting character," Auletta says. The judge identifies himself as a right-wing conservative and once worked for Richard Nixon, but the Watergate scandal and Nixon's resignation taught him "that prominent people sometimes lie," the judge told the author.

Though Jackson trusts in the marketplace, he also thinks that Microsoft broke the law. "He's an old-fashioned American, but he believes Microsoft committed violence to the free-enterprise system," says Auletta.

Part of the problem with Microsoft, say both authors, was that its managers were victims of denial -- or hubris. The plain-speaking Boies "ran rings around Microsoft's lawyers," says Auletta. "He told stories. ... Microsoft got bollixed up in facts."

And though he stayed out of the courtroom, Gates essentially ran Microsoft's show. The government wanted to settle; Gates decided the charges wouldn't hold water, and "he'd always outfoxed the government before," says Heilemann. "That was a mistake."

Even with a high-priced and high-powered legal team at hand, Microsoft head Bill Gates essentially ran the company's show

Both authors make no predictions on how the appeals court will rule. The government won on three counts, at least two of which -- illegal tying and an illegal attempt to monopolize the browser market -- are considered vulnerable. But the third count, that the company engaged in monopoly maintenance, is strong, says Heilemann.

Moreover, it's not just the Department of Justice on the prosecution end; 19 states are party to the suit, and any one could keep going even if the company settles with the federal government.

But, regardless of what happens, it's a different world now, says Auletta.

"The world is moving away from a Microsoft-centric PC to other devices, like Palm Pilots and cell phones," he says. "There's no reason for Microsoft to cry decimation. They're strong. But they feel they are being wronged."

Microsoft
U.S. Department of Justice
Wired magazine
The New Yorker
Random House
HarperCollins
Contentville: Ken Auletta and Bill Gates e-mail exchange

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