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Inside the MS trial part 2: the Keystone Cops go into action

Both Jobs and Grove eminences gris, apparently...

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The fast move into the trial phase presented the DoJ with a problem; it had expected at least a year before trial, and had no witnesses lined up. Reback told Heilemann after a meeting with Klein: "If I were Joel [Klein], I'd have been pissing my pants right then." Nobody wanted to testify, for fear of retribution.

The first breakthrough was when Mike Hirshland, Senator Orrin Hatch's judiciary committee staffer, told Intuit's CEO Bill Campbell (previously CEO of Microsoft-victim GO) that Microsoft had stopped Compaq from saving GO. That did it, although Intuit's witness did not prove to be very helpful in the event.

Steve McGeady of Intel, something of a maverick, was also recruited through Jim Clark for his knowledge of the occasion when Paul Maritz had spoken of Netscape's impending lack of oxygen. (Frank Gill, who attended the Maritz "air supply" meeting, confirmed to Heilemann that Maritz had uttered the words, although this was bitterly denied at the trial.) Neither the DoJ nor Intel was aware that McGeady had been previously deposed in 1995 by the DoJ, leading to McGeady saying "It was like the Keystone Kops do antitrust".

Jobs and Grove hold back

Meanwhile Reback had called his latest white paper "Knife the baby" (a reference to Microsoft wishing to kill QuickTime), but Klein wanted Jobs to testify. After Jobs asked Klein if the remedy was "going to be dickless", it became wiser for Apple to offer Avie Tevanian as a witness. Andy Grove was approached by the DOJ and Microsoft to testify, but he convinced both sides he would have bad things to say about them, so the idea was dropped. The DoJ did not succeed initially in getting an OEM whistleblower, but they did have a star witness as it turned out: Gates' videotaped deposition made him the DoJ's most useful witness.

There's some useful detail about events at Microsoft at the time. We're told that the Microsoft board had been urging Gates to name Ballmer as president, which finally happened in late July 1998. For the record, Heilemann said that Ballmer was a director of Microsoft at the time of the board meeting at which Gates cried, but for the record, that's not quite true. Ballmer was elevated to CEO in January 2000, and made a director on 27 January 2000 - although he probably did attend the emotional board meeting.

Gates' video foul-ups

Gates went on an extended holiday from in July 1998, but when he appeared for the videotaped interviews in August, Boies found him to be completely different from the Gates he had earlier deposed. Boies triumphantly called Klein after the first day of deposition to tell him that Microsoft would never be able to call Gates after his disastrous performance. Boies confessed he was surprised that Microsoft's lawyers had not stopped the deposition. Neukom, protecting his posterior, told Heilemann that had he realised the tapes would be shown in court, Gates would have been prepared differently.

Boies' view is that Gates expected to be called as a witness by one side or the other, and that he therefore thought that the tapes would not be shown for that reason. Judge Jackson subsequently told the New York Times that "[Gates] testimony is inherently without credibility". Boies said he was uncertain whether Gates had rejected legal advice about the deposition, but certainly Gates had devoted much time to studying antitrust law.

DoJ counsel David Boies told Heilemann that the appeals court decision in June 1998 helped the DoJ, since although the court was clearly on Microsoft's side, it did say that Microsoft was a monopoly, and that if it were not necessary to tie Windows and IE to achieve the benefits, this would violate tying law. Nor did the court suggest that antitrust laws did not apply.

Microsoft's contention in pre-trial motions that the DoJ had broadened the case was denied by Jeff Blattner, the special counsel for information technology - a misleading title since he was a former chief counsel to Ted Kennedy's senate judiciary committee rather than an IT guru, and functioned more like chief of staff and troubleshooter for the case. Blattner said that it was the evidence that had been broadened, not the case. After the first day of the trial, when some very damaging evidence was introduced, Klein told Heilemann: "I am one happy camper. We really kicked their butts."

GRove comes out winner?
Heilemann has an amusing account of Intel's dilemma over McGeady's testimony that demonstrates - if it were needed - Intel's paranoia, although it was true that Intel was itself under investigation for antitrust at the time by the FTC. It also demonstrates the power that Intel had over the DoJ, since it was able to stop a second deposition of McGeady by getting Klein to intervene personally just as it began - by threatening to become hostile to the DoJ's case. At trial, McGeady's testimony included a memo "Sympathy for the devil" in which he noted that "Gates didn't want Intel Architecture Labs 750 engineers interfering with his plans for dominating the PC industry". Boies was afraid that Intel would force McGeady to stop his evidence. Heilemann relates that eventually Grove came to terms with what McGeady had done, telling him: "I vould have done it in a different way. But I guess it worked out OK in the end."

Heilemann interviewed Gates several times about the case, and observed that "Gates seemed increasingly schizophrenic" (although he alludes to other psychological states as well). According to "an (unnamed) old friend", Gates kept saying repeatedly: "I hate my job. I hate my life. I hate this situation. I don't know what to do." Certainly the replies he gave to Heilemann's questions suggested he lived in a non-real world. Boies related: "After a year of withering press and tribulations in the courts, Gates... was flaccid, lifeless; all the piss and vinegar seemed to have been drained out of him."

Greg Maffei, Microsoft's former CFO, opined: "It's all been very hard on Bill - I mean physically; it literally made him sick. I think the reason he's no longer CEO is directly attributable to this experience with the courts and the government." Maffei also admitted that Microsoft had hedged Microsoft's $150 million investment in Apple by simultaneously shorting the stock - which will be of considerable interest to Apple fans who always suspected the worst.

The mediation collapse

As part of his mediation effort, Judge Posner tried to draft a consent decree. He managed to get Gates' signature on Draft 14, but this was still unacceptable to the DoJ. Posner asked Judge Jackson for ten more days at the end of March because he thought a settlement was possible, but the inner circle of Gates, Ballmer, Neukom, Maritz, Allchin, and Muglia could not agree to the DoJ's Draft 18 that called for a price list for Windows, the end of exclusive contracts with ISPs and ICPs, and open APIs - but a volte-face provision allowed browsing to be included with Windows.

Microsoft's Draft 19 was read over the phone by Posner to the DoJ, but the next day - April Fool's Day - the mediation was declared to be a failure. The states were always considered to be a stiffener of the DoJ's resolve, but they had been locked out of the mediation effort, although former Netscape executive Eric Hahn helped them to send Posner some unwelcome and much tougher demands than the DoJ's. The states were surprised that the DoJ had the backbone to propose the breakup of Microsoft, as well as the other remedies. We also now know that the author of the first draft of findings of fact was law clerk Tim Ehrlich - and that he was told to make them unremittingly harsh.

Heilemann's last interview with Gates yielded many predictable comments, but came close to admitting that the .NET strategy was a gamble in response to the DOJ's breakup demand. Gates said, not long after telling Microsoft employees that he would "never allow" Microsoft to be broken up, that: "There's a certain irony to being in a situation where we literally have to bet the company on an unknown business framework and a new set of technologies just to stay in any type of position at all..."

For Heilemann, the revelation of his study was that "Gates was mortal." ®

Inside the MS trial part 1: how they brought Gates to tears

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