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Computing

The Microsoft File: The Secret Case Against Bill Gates

Author Wendy Goldman Rohm releases the source notes for her controversial book on Microsoft. Part 2: Chapters 9-17.

October 27, 1998
Web posted at: 2:20 PM EDT

by Wendy Goldman Rohm

From...

(IDG) -- Continued from Part One

Chapter 9

The nomination hearings described on pages 119-120 are based on transcripts of the event as well as interviews with those present.

My account of Bill Gates' obsessing over Noorda's role in the federal investigation is based on my review of actual Microsoft documents and memos written by Gates. The sections I quote and paraphrase on pages 121 and 122 are directly from these documents.

On page 122, the letter cited, signed by Metzenbaum, was publicly available and obtained by me.

Starting on page 123, my account of lobbying going on at the FTC, including meetings between Gates and FTC commissioners, was based on numerous interviews with government officials as well as officials of Novell, Lotus, Borland, Sun, and Taligent.

On page 124, when I quote Commissioner Deborah Owen as saying "A 2-2 vote does not mean a deadlock. It means that a majority did not find reason to pursue a case," I am quoting her from an on-the-record interview I did with her in her FTC office. The descriptions of her arguments with other commissioners and staffers are based on extensive interviews with those who worked with her at the FTC.

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The July 30, 1993, Chicago Tribune article breaking the news about the Microsoft files being transferred to Justice was written by me, and followed by The Washington Post and others after I broke the story. (Chicago Tribune, "Antitrust unit to review case on Microsoft" by Wendy Goldman Rohm, July 30, 1993.) An analyst present at the Gates briefing that same day called me to relate that my article had been brought up at the analysts meeting and had taken Gates and Neukom by surprise. The Microsoft executives gave interviews that day and were quoted in numerous newspaper accounts as blaming Ray Noorda for the continued federal investigations of the company.

I quote Commissioner Dennis Yao on page 125, based on a one-on-one interview I did with him around the time the case was being transferred.


Chapter 10

Details of Robert Litan and Anne Bingaman, their professional relationship, and historical data, are based on extensive interviews with their colleagues at the Justice Department as well as former colleagues at various law firms. Information I present here is also gathered from personal interviews I conducted with Litan and Bingaman.

I also conducted one-on-one interviews with DOJ deputy assistant attorneys general Rich Gilbert, Diane Wood, and Steve Sunshine.

The Lotus letter mentioned on page 132, dated August 11, 1992, was reviewed by me, along with other documents turned over to Justice. The discussion of Lotus' issues is based on extensive interviews with Lotus officials who asked to remain unnamed.

The Las Vegas scene that I portray on page 135, with Bill Gates at a huge Comdex party, is based on my own presence at the event. I stood with Gates and talked with him quietly, at one edge of the crowd. He was wearing the oversized cowboy hat I described. I asked him if he was tired, as he looked extremely weary. "I am tired," he said. He smiled at me and was friendly. He also knew me from previous interviews I had conducted in person with him. I asked him if we could set up some time to talk for background purposes, or on the record, whatever he preferred. He said, "I'm not supposed to talk to you." I again mentioned that we could talk on an informal basis, for background only. "Call me tomorrow in my hotel room at the Hilton," he said. I knew he sometimes booked three hotel rooms when he was in Vegas, and asked if that was the best place to call, and mentioned the other hotels where he also had rooms. He said, "Yes." I said, "Is the room under your real name?" "Yes," he said. "All right, I'll call," I said. The next day I called as instructed, to arrange a time to have an informal discussion about the industry. The room was indeed under Gates' real name, but I got voice mail. I left a message, but did not hear back from him until he began an e-mail correspondence with me in March of 1994.

The account on page 136 of Bingaman's staff meeting with Janet Reno was relayed to me by Justice Department officials.

The anecdotes about Ray Noorda and his wife, and Noorda's poem, are presented based on interviews with both Noorda and his wife, Taylor. The poem itself, as composed by Noorda, is in my possession.


Chapter 11

The discussion of the complaints being filed with the European Commission at the start of the chapter, on page 140, is based on extensive interviews with Novell officials, as well as a review of the documents collected by the EC.

On page 140, my portrayal of Neukom's role in the ending of Reichel's relationship with Gates is based on extensive interviews with Microsoft sources in Germany as well as in the U.S. These sources included intimate confidants of Neukom, Gates, and Reichel.

The account of e-mail, such as on page 141, is based on review of this e-mail. Also, I state on page 141 that Gates saw Reichel in another man's Porsche on Microsoft's campus, and this made him envious. This information, again, is based on the e-mail.

On page 141 I discuss Neukom's staying up all night to write his own press release announcing his promotion. This anecdote is based on extensive interviews with Microsoft sources.

Information about the nondisclosure agreements that were handed out at Microsoft's developer conference was given to me by those who had received them, and were the subject of an investigation by the Justice Department. Justice would soon bar the use of such restrictive contracts in its lawsuit against Microsoft, which resulted in its original consent decree with the software giant. Microsoft pleaded "no contest" to the complaint, which also barred per-processor licensing, as discussed later in the book.

On page 142 I describe Justice Department litigator Sam Miller's suspicions that evidence had been withheld by Microsoft. This information is based on extensive interviews with government sources.

My description of the Department of Justice witness interview, on page 142-143, was based on interviews with federal officials as well as with some of the individuals present, including Schulman.

Other in formation in the chapter, such as on pages 143-147, is based on extensive interviews with numerous government officials.

The quotations of Robert Pitofsky, on page 145, are based on my on-the-record interviews with him. Pitofsky was a former FTC commissioner at the time and a renowned antitrust scholar, and is currently the chairman of the FTC.

On page 146, I quote e-mail from Bill Gates. This e-mail was e-mail he sent to me, in response to questions I had sent him via e-mail. When I state that "Gates knew that a handful of manufacturers represented the lion's share of computer shipments worldwide," and that the largest and most powerful companies were locked into per-processor licenses, these assertions are based on a review of confidential Microsoft documents that were distributed to many executives within the company, including Gates, that specifically showed this to be true. These documents include scores of Microsoft royalty reports marked "secret" by the company.

On page 147, I mention talks about a merger involving WordPerfect and Novell, and follow this up in great detail in a later chapter. This information is based on interviews with numerous high-ranking officials of Novell, Lotus, and WordPerfect, including those who were present during the negotiations.

Starting on page 147, I portray Bill Gates on the witness stand during the Stac vs. Microsoft trial. The detailed description of what took place in the courtroom that day is based on my own presence there when Gates took the stand. Information in this section is also based on my on-the-record interviews with Stac president, Gary Clow, as well as interviews with Morgan Chu, the attorney representing Stac.

Accounts of the Hawaii investigation of arrests of reporters during Gates wedding on the island of Lanaii were based on scores of widely published newspaper reports about this, as well interviews with the Hawaii attorney general's office and videotapes of a reporter (in my possession) being arrested by Gates' security guards during the wedding.

On page 149, I describe how CEOs at scores of companies described Gates as a predator. Indeed, in one document, Gates wrote a letter to Ray Noorda complaining about the latter's habit of comparing him and his executives to Nazi generals.

The e-mail from Gates on page 150 was quoted during the trial, but had been previously under seal. It remained under seal, even though it had been read in the courtroom. Only those present got to partake of some of these documents.

On pages 152, I include quotes from Rich Gilbert on the role of antitrust in high-tech industries. These quotes are based on on-the-record interviews I personally conducted with him.


Chapter 12

At the opening of the chapter, I describe a meeting of telecommunications executives at which Steve Newborn and the DOJ's Rich Rosen gave speeches. My account of this is based on my own presence at the event, held at New York City's Manhattan Club. As the environment in D.C. was shifting, I portray a major earthquake in the works in one major segment of the software industry. My detail of the account in this chapter of the Novell, Lotus, WordPerfect, and Borland merger and acquisitions negotiations is based on numerous interviews with those who were directly involved, including high-ranking officials at all four firms and others who were involved in the negotiations. Background information for this section also comes directly from SEC filings related to these deals, which I reviewed meticulously.

The anecdotes about Connie Chung's interactions with Bill Gates, on the same day that the dramatic Great Room meeting took place back in Utah, are based on my interviews with persons who were involved in the broadcast. Chung's producers had been interviewing me numerous times a week over a period of six months in preparation for their Eye to Eye program about Gates, to get an understanding of the industry and why the federal government was investigating Microsoft. (The program aired on May 19, 1994, and I also appeared on camera.) That day in March, when Gates was being filmed in his office with Chung -- which ended abruptly when she began questioning him about Stac -- I received blow-by-blow accounts of what was going on from the producers involved. After the Chung session, Gates sent me an annoyed e-mail message. (The time and date on the header of the message indicates that he wrote the message after he had stormed out of the Chung interview.) He apparently did not like being confronted about his antitrust problems, and in some cases threatened reporters who reported on these problems that their official access to Microsoft executives and company information would be cut off.

Most recently, during my book tour, a television reporter told a recent account of how Microsoft threatened his access to company executives if he should mention anything about the antitrust case in one of his television reports. The reporter told this tale on the air.

The events of the April ABA meeting attended by Bingaman and numerous other FTC and Justice Department officials, on pages 178-179, is reported based on my presence at these events. I interviewed Bingaman on the record there, as well as numerous other attendees, including Lotus' outside counsel Andrew Berg. Connie Chung's camera crew had shown up and followed me around as I introduced one of the producers to all the key players in the Microsoft investigation.

On pages 179-181, my account of the relationships of Neukom, Reichel, and Gates is based on confidential interviews with confidants of all three, as well as e-mail documents describing some of the events.


Chapter 13

I have described Bill Gates' reaction to the Novell/WordPerfect/Borland acquisitions, on pages 182-186, based on internal Microsoft documents that I was able to review. Some of these were circulated to Gates' executive staff and corporate officers, and the information presented is also based on interviews with those who were familiar these documents.

Kahn's complaints about Microsoft allegedly raiding his company are based on my interviews with him, as well as other Borland officials. This was occurring around the same time many of Gates' competitors had been subjected to Microsoft's restrictive NDA contracts, and that account on pages 187-188, is based on my interviews with several industry executives including David Moon, WordPerfect's chief technology officer. (I quote him based on my one-on-one interview with him.) I also reported these developments in a news story in the Boston Globe, that was then picked up by other major dailies. It also became a bone of contention in the Justice Department's lawsuit against Microsoft, the settlement of which included the elimination of such contracts.

The Financial Times also followed this story, and after my article came out, Louise Kehoe, a reporter for that paper called me because she wanted to cover it as well. She told me a curious anecdote about what happened when she called Microsoft's top publicist, Pam Edstrom, to get Microsoft's response to these allegations. Kehoe had accidentally pushed the "mute" button on her phone instead of the "hold" button, and thereby overheard Edstrom yelling across her office "Get Gates! Get Gates! FT has the story!" Edstrom had only seconds before thrown cold water on the facts Kehoe had presented.

On page 189, I discuss the Justice Department's "Exhibit 17," which to this day is still secret, as are all of Gates' current and previous depositions by the DOJ. My account of what happened during this deposition is based on my interviews with persons familiar with the deposition as well as relevant documents.

My extensive accounts of the Justice Department's wrangling with Microsoft, from informing the company of its intent to sue, to the final drafts of the consent decree, are based on numerous interviews (both on the record and off the record) with government officials, documents filed in federal court, and one-on-one interviews on the record with Bingaman and Litan. The details of these negotiations are also based on Microsoft's filings with the federal court.

IBM's reaction to the consent decree is based on my personal interviews with senior executive John Soyring, who is also currently a witness for the Justice Department in the upcoming trial -- attesting to more recent predatory acts by Microsoft.


Chapter 14

My reporting on the January 20, 1995, hearings in the court of Judge Stanley Sporkin is based on my presence at the hearing, as well as transcripts of the proceedings.

Around the same time, my account of Vobis chief Theo Lieven's frustration with the government's settlement is based on my interviews with him. The letter he sent to Bingaman, which I quote from, is in my possession.

My account of the appeals hearing held on April 24, 1995, is based on my presence in the courtroom. The explanation of the Reback paper, provided to Justice, is based on my thorough review of the document as well as interviews with antitrust experts who were familiar with its theories.

Gates' speech at the Interactive Media Conference, accompanied by Shaquille O'Neal, is reported by me based on my presence at the event.

Microsoft's contingency plan related to MSN's incorporation in Windows 95, as mentioned on page 211, is based on my confidential interviews with Microsoft "replicators," the large companies that mass produce Microsoft's Windows disks and CDs.

The May 8 courtroom scene, where hordes of companies came forward to protest Microsoft's proposed acquisition of Intuit, is based on extensive interviews with those present and transcripts of the proceedings. It is also based on documents filed with the court from a range of companies, including CompuServe, Charles Schwab & Co., NationsBank, U.S. Bancorp, Prodigy Services, Citibank, and others.

Gates' and Neukom's explanation of their dropping the bid for Intuit, on page 216, is based on my presence in the press teleconference they conducted at the time of the announcement.


Chapter 15

My accounts of the meeting between Cannavino and Manzi, and Cannavino's being thrown by his horse, are based on interviews with high-ranking IBM officials.

My detailed accounts of IBM's hostile takeover of Lotus, on pages 218-233, are based on numerous interviews with IBM and Lotus sources who were familiar with the negotiations, interviews with confidants of Manzi and Gerstner, interviews with investment bankers and attorneys familiar with the key events, as well as interviews with Jim Manzi himself.

I also reviewed SEC filings related to the deal, which support my account of the timing of the deal, content of the deal, and why it happened.


Chapter 16

The discussion of Gates' and Microsoft's intentions in the Internet market, and the documents quoted, are based on Justice Department filings with the federal court as well as interviews with Netscape and government officials.

My account on pages 238-239 of Apple's simultaneous charges that Microsoft had infringed on its patents was based on confidential interviews I conducted with Apple officials, as are my accounts of Microsoft's bid to replace the Copland operating system with a version of Windows, as portrayed beginning on page 245.

My accounts of Gates' engagement and wedding parties, including the one at which Neukom bragged that Steve Jobs had secretly helped Microsoft in the copyright suit brought by Apple, was based on the accounts of those in a position to know.

For other information in this chapter, I conducted on-the-record interviews with numerous Apple executives who were directly involved, including Chief Technology Officer Ellen Hancock, subsequent technology officer Avie Tevanian (who is also a current witness for the Justice Department in its upcoming trial), Winston Hendrickson, Kurt Piersol, Doug Solomon, and others.


Chapter 17

My account of antitrust chief Joel Klein's filing of a contempt suit against Microsoft is based on federal court filings. My analysis of the situation is founded on my reporting on the earlier lawsuit and settlement, Klein and Bingaman's participation in the Sporkin hearings (at which I was present), and interviews with numerous federal officials. My report of the midday conference call that Neukom participated in, on page 259, is based on my own participation in that teleconference.

My account of the Caldera antitrust suit against Microsoft, the history of the company and its relationship with Noorda, individual encounters with Gates, details of the personal issues of the attorneys involved, were based on numerous interviews with Caldera sources, Novell sources, as well as Microsoft sources. My account of Gates' unresponsive deposition on pages 263-264 is based on interviews with confidential sources who were close to these events. Information about Sun's antitrust suit against Microsoft, on pages 265-266, is based on interviews with Sun officials as well as a review of documents filed with the court. The events of pages 267-274 are based on court filings, sworn testimony provided to the Justice Department, and a thorough review of the Justice Department lawsuit.

On pages 278-279, my reporting on the activities going on inside the Texas state attorney general's office and its antitrust investigation is based on interviews with government officials. (I was the reporter who broke the first story of the state-level investigations of Microsoft, including the participation of numerous other states, in a series of articles in InformationWeek magazine, in February 1997. My articles were cited by The Wall Street Journal and other newspapers in their subsequent reporting of the story.)

The new competitive environment, as portrayed by the scene in The Donut Wheel, on page 285, is based on my presence there, and interviews with Silicon Valley executives at the place. My brief accounts of "jini" and "javatone" are based on interviews with Sun Microsystems sources. (Microsoft would later announce what it was calling Wintone, which seemed to be its response to Sun's Javatone project.)

The accounts of "reverse bounties" paid by Microsoft to companies in exchange for their commitment to stop doing business with Netscape are based on federal court filings, and were amazingly similar practices to those I uncovered in Microsoft's dealings in Germany with Vobis.

On page 288 I relate Neukom's description of the testimony of witnesses as being insignificant accounts of "junior staffers" at the company based on Microsoft's filings with the court. My statement on page 288 that these executives were the same executives who had masterminded the locking up of the DOS market is based on my review of internal Microsoft documents and communications between these executives.

Also on page 288, statements that Microsoft's legal department had been well aware of certain efforts are based on my review of internal Microsoft documents and interviews with Microsoft sources.

The "motions to compel" issued in the Sun and Caldera cases were done in judges chambers and so were never made public. This information was based on numerous interviews I conducted with sources close to both cases.

On page 288, Neukom's instructions to other Microsoft employees that they not refer to browser software in a way that would make it appear as a separate product, was revealed in Justice Department filings with the court.

On page 290, my statement that Gates had told people he was nervous about what the Department of Justice would discover about his tying of Office to Windows is based on interviews with Gates confidants.

The documents cited in pages 290-294 were included in Justice Department filings with the court.

Copyright Times Business/Random House 1998

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