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Bill Gates states Microsoft could be "greatly deva

  1. Gates takes antitrust stand

    23apr02
    MICROSOFT founder and chairman Bill Gates told an antitrust hearing today that his company would "be greatly devalued" if a proposed antitrust remedy from a group of seven US states were implemented. With his wife, Melinda, in the audience, Gates opened his long-awaited courtroom appearance with a computer-generated slide show. He indicated the Windows operating system would stop functioning if components such as the Microsoft Explorer Web browser are removed as the states have proposed.
    "This shows that if you remove this block of code, other functions are degraded in the most extreme way. They no longer work," Gates said, referring to the removal of the Explorer software.

    Dressed in a dark blue suit, Gates took pains to explain the most common technical terms. He occasionally chuckled before taking issue with the definition of terms in some of the questions.

    In a surprise, the states prosecuting Microsoft chose Steven Kuney, an antitrust expert, rather than their chief lawyer, Brendan Sullivan, to cross-examine Gates.

    It was a rare court appearance for Gates in the hearing before US District Judge Colleen Kollar-Kotelly, who is considering a penalty for the firm's violation of US anti-trust laws.

    "Microsoft would be greatly devalued as a company," Gates said in prepared testimony totalling 156 pages, adding that the plan would "require Microsoft to withdraw Windows from the marketplace".

    Gates said the company's market capitalisation is based on the market's belief that the firm is on track to deliver "breakthrough technologies" that generate new revenues.

    Gates told the court the pricing provision of the states plan - which gives discounts to slimmer versions of Windows - could possibly bring the price of Windows to nothing and cost his firm $US10 billion ($18.6 billion).

    "Rather than earn a return on our substantial investment in improving Windows, any improvements could result in a revenue loss to Microsoft. In fact, under the pricing formula set forth (by the proposal), the price of Windows could be zero," he said.

    And because computer makers would be able to substitute software made by other firms in place of Microsoft-made components of Windows for discount, Microsoft could lose approximately $US10 billion in revenue, Gates said.

    In his testimony, Gates rejected specific provisions of the proposal and said the states' remedy was too complicated and confusing for the company to clearly understand how it must comply with its intent.

    "If the final judgement is not clear, we will not know how to build new products that will comply with the judgement," Gates said.

    At one point, Kuney challenged Gates' assertion that Microsoft does all it can to disclose technical information so software developers can write programs that work well with Microsoft products. The lawyer cited an internal memo in which Gates instructed his employees to stop trying to make sure documents created by Microsoft's Office software would work with rival Web browsers.

    "Allowing Office documents to be rendered very well by other people's browsers is one of the most destructive things we can do to the company," Gates wrote in the memo.

    Confronted with the memo, Gates said he believed it was inefficient for engineers to spend their time on the effort since they were "not making any progress on it".

    Gates argued against the states' requirements that the company translate its Office business software and give away Internet Explorer, claiming it would let companies create competing Windows clones.

    Gates named five companies that have helped the states' suit and that he said could create such clones: AOL Time Warner, Sun, Gateway, Novell and Oracle.

    Kuney questioned Gates' reference to Gateway, a company that builds computers, as a viable operating system maker.

    "They're one of the people who would change Windows ... if they had the ability to do so," Gates said.

    In his written testimony submitted after he was sworn in, Gates argued that penalties the states have proposed would give Microsoft's competitors an unfair advantage.

    The penalties include requiring Microsoft to divulge blueprints and technical information about how some of company's products work.

    Such penalties would cause a "a massive transfer of Microsoft's intellectual property rights" to competitors, Gates said.

    The Justice Department and nine other states already have settled the case and their deal with Microsoft is awaiting court approval. The nine states remaining in the case want tougher penalties than those in the settlement.

    Gates said the additional penalties would devalue the Windows operating system, reduce its ability to handle thousands of pieces of computer hardware and software in the marketplace and frustrate Microsoft's incentive to innovate.

    The states' proposals "would undermine all three elements of Microsoft's success, causing great damage to Microsoft, other companies that build upon Microsoft's products, and the businesses and consumers that use PC (personal computer) software", Gates testified.

    The states want US District Judge Colleen Kollar-Kotelly to force Microsoft to create a modular version of Windows that could incorporate competitors' features.

    Gates also echoed arguments by Microsoft chief executive Steve Ballmer that a modular Windows requirement is impossible to engineer and would force the company to pull Windows off the market.

    "I know that Microsoft could not have developed Windows 95, one of the most successful software programs in history, if (the requirement) had been in effect in the early 1990s," Gates said.

    States that rejected the government's settlement with Microsoft and are continuing to pursue the antitrust case are Iowa, Utah, Massachusetts, Connecticut, California, Kansas, Florida, Minnesota and West Virginia, along with the District of Columbia.

    AFP, Associated Press

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