Gates TV: Killer apps and hit teams remembered, sort of

In yesterday's video Bill Gates was confronted by one of his own emails referring to browsers as applications - as, in fact, "the latest confirmed killer apps." We also saw mail from Joachim Kempin, VP of OEM sales, showing a tough and legally interesting approach to IBM when IBM decided to sell Notes. He wrote in an email to Gates that "the OEM relationship should be used to apply some pressure". (Microsoft's 'hit team' to get IBM into line) Kempin also referred to setting up a WW hit team to attack IBM, which of course just meant an unarmed salesperson operating worldwide. Microsoft complained as in the past that only video excerpts were shown, and bluffed it should be all or nothing (and desperately hoping it would not be all). Since Microsoft is allowed to choose extracts as well, this charge of perhaps missing the context is unjustified. What is being left out are the really boring bits. Our transcript notes do not contain the number of pages of testimony omitted on this occasion, as the released .PDF file was badly scanned by the DoJ and the page numbers are mostly missing. We do however indicate all the breaks in the testimony. Microsoft defended Gates for not saying "Good Morning" to the lawyer who was deposing him each day. "A public relations attack," Microsoft shrieked. It's certainly a bizarre thing to be arguing about. Microsoft is also now saying that "Bill is right in many of these disagreements"(over syntax and definitions), which is an interesting departure, since it implicitly admits Gates was wrong at times. Steven Houck, lead counsel for the states asked many of the questions, with the remainder being by David Boies, the DoJ special trial counsel. It was not expected that the 45-minute video would have been shown yesterday, but Microsoft's abrupt termination of its cross-examination of Edward Felten created a gap. Eight other video extracts were shown. Houck: I'd like you to look at Trial Exhibit 336, Mr. Gates, right here in front of you. This is a memorandum that purports to be from you to your executive staff dated May 22, 1996, and it attaches, for want of a better word, an essay entitled "The Internet PC" dated April 10, 1996. Do you recall writing that essay? Gates: It looks like this is an email, not a memorandum. Houck: Do you recall writing the essay dated April 10, 1996 entitled "The Internet PC"? Gates: Well, it looks like an essay I wrote. I don't remember specifically, but it does look like something I wrote. Houck: The portion I refer you to is at the bottom of the first page under the heading called "The Latest Killer App." Do you see that? Gates: I see a heading. Houck: First paragraph under that heading reads as follows: "Our industry is always looking for the next 'killer application'-- for a category of software that, by its utility and intelligent design, becomes indispensable to millions of people. Word processors and spreadsheets were the killer applications for business PCs starting in 1981." And the next sentence reads, "The latest confirmed 'killer app' is the Web browser." Do you recall writing that, sir? Gates: No. Houck: Do you have any reason to believe you didn't write it? Gates: No. Houck: Can you explain what you meant here by describing the Web browser as a "killer app"? Gates: I just meant that browsing would be, in our view, a popular thing, not necessarily on the web but just browsing in general would be a popular activity. Houck: Is a killer application an application that drives sales of other products like operating systems and hardware? Gates: No. Houck: Do you have a definition in your own mind of killer application? Gates: It means a popular application. Houck: Let me resort again to the Microsoft computer dictionary, and I'll read you what that says about killer applications. You may disagree with it, and if so, you can tell me. The Microsoft computer dictionary, 1997 edition, defines killer app as follows, and it gives two definitions. And I'll be very complete this time, Mr. Gates. The first definition is, "An application of such popularity and widespread standardisation that fuels sales of the hardware platform or operating system for which it was written. (End of segment) Houck: The second definition is, "An application that supplants its competition." Let me go back and read you the first definition again, now that you've heard both of them. The first definition reads as follows: "An application of such popularity and widespread standardisation that fuels sales of the hardware platform or operating system for which it was written." Gates: I already told you that my definition of killer app is a very popular application. (End of segment) Houck: What about a relationship to an operating system? Gates: Usually they're just talking about it being a very popular application. I certainly know of things that have been referred to as killer applications that haven't driven hardware sales or operating system sales. Houck: What other applications would you identify as being killer applications? Gates: Applied [Surely "Flight" - ed] simulator. (End of segment) Houck: Does Microsoft endeavour to track its market share with respect to operating systems on personal computers? Gates: There's not some unified effort to do that. Houck: Is there anybody in Microsoft responsible for trying to determine what Microsoft's market share is with respect to PC operating systems? Gates: No. Houck: Have you seen any figures indicating what Microsoft's market share is with respect to operating systems on personal computers? Gates: From time to time people doing marketing analysis may pull together some figures like that. And depending on, you know, what the context is, they will be different numbers. (End of segment) Houck: I'd like you to turn to the page of this document that ends in 022. And the heading reads "x86 OS Analysis for Fiscal Year '96." Gates: Okay. Houck: On the page that is titled "x86 OS Analysis for Fiscal Year '96" appears a statement, "All other competitive licenses, less than 5%" Do you have any understanding that in or about early 1996 Microsoft's share of the market with respect to operating systems sold for x86 computers was in the vicinity of 95 percent? Gates: No. Houck: What is your understanding of what the Microsoft market share was at that time? Gates: I wouldn't know. Houck: Do you have any idea, as you sit here today, what Microsoft's market share is with respect to operating systems sold for x86 architecture computers? Gates: Well, piracy alone is greater than 5 percent. But no, I don't know the number. Houck: What other companies besides Microsoft sell operating systems for x86 architecture computers? Gates: There's a great number. Houck: Can you identify them? Gates: Santa Cruz. Red Brick. Caldera. IBM in many different products. Sun Microsystems. Microware. Wind River. Those are all I can think of right now. Houck: Do you have any estimate as to what the collective market share of those companies is with respect to operating systems sold for x86 architecture PCs? Gates: No Houck: Is it under 10 percent? Gates: Well, I've said to you I don't know the numbers. (End of segment) Houck: Would you take a look at Exhibit 339, Mr. Gates. Exhibit 339 contains a number of emails, and I want to ask you a couple questions about one on the first page from Russell Siegelman to yourself and others re MCI as an access provider dated October 13, 1994. Do you recall receiving this email? Gates: No. Houck: Do you have any reason to believe you didn't get it? Gates: No. Houck: What was Mr. Siegelman's position in October of '94? Gates: He was involved with looking at Marvel. Houck: And what was Marvel? Gates: It was a code name for what we would do in terms of Internet sites or online service activity. Houck: Do you understand that in this email here Mr. Siegelman is opposing a proposal to give MCI a position on the Windows 95 desktop as an Internet service provider? Gates: I don't remember anything about MCI. This talks about how we'll have a Mosaic client in Windows 95. I don't see anything in here about the desktop. Houck: It references in this email the Windows box. What do you understand the Windows box to mean? Gates: Well, the Windows box is certainly not the Windows desktop. The Windows box is a piece of cardboard. Houck: Is it your understanding that when he uses "Windows box" here, he means a piece of cardboard? Gates: Well, he is probably talking about the stuff that's inside. He is saying access to the windows box. He is talking about the bits that are on the -- (End of segment) (Record read.) Gates: This is electronic mail and Russ is suggesting that he disagrees with doing a deal with MCI under these particular terms. Houck: In the email he refers to Windows distribution as a unique and valuable asset, more specifically as "our one unique and valuable asset." Do you see that? Gates: I see a sentence that has those words in it. Houck: Do you have an understanding as to what he meant? Gates: Well, the Marvel people were having a hard time coming up with a strategy, and in retrospect we can look back and say they didn't come up with a good strategy. And they were looking at, you know, what could they do that would be attractive to a lot of users. And sometimes their goals and the goals of the Windows group were different. And in retrospect it's clear they weren't able to attract a lot of users. (End of segment) Houck: Do you have any understanding as to what Mr. Siegelman meant here by his reference to Windows distribution being "our one unique and valuable asset"? Gates: Was that the question I was asked -- Houck: Yes, sir. Gates: Can you read me back the previous question? (The record was read as follows) "Houck: In the email he refers to Windows distribution as a unique and valuable asset, more specifically as 'our one unique and valuable asset.' Do you see that?" Gates: I see a sentence that has those words in it. Houck: Do you have an understanding as to what he meant?" Gates: Well, maybe there is some understanding -- you said do I understand what he meant. I thought you were asking about his email as a whole. Houck: Let me re-ask it for the third time and see if I can get an answer. Do you have any understanding what Mr. Siegelman meant when he referred to Windows distribution as our one unique and valuable asset? Heiner: This is a line of questioning about the mail that Mr. Gates does not recall reading; is that right? Houck: The question has been put. Gates: I think the Marvel group in their search for what they could do to get millions of users at this particular point in time was thinking about making it easy to sign up to the Windows box being something that would be helpful to them and therefore an asset for the Marvel group in what they were doing. Houck: Do you understand that Mr. Siegelman in his reference had in mind the large market share that Microsoft has with respect to operating systems? Gates: I don't see anything about that in here. Houck: That's not your understanding? Gates: Remember, Russ isn't involved with the Windows business, he is involved with the Marvel business. Houck: Do you consider Windows distribution a unique asset of Microsoft? Gates: I know that the inclusion of what Marvel became didn't lead to its being popular. Houck: Again, let me ask the question, Mr. Gates. I wasn't asking about Marvel. I was asking about Windows distribution. Gates: Well, Marvel was a thing that was put into the Windows box and so, in fact, if the question is putting things in there, is that valuable in the sense that it creates popularity for those things, there are many good examples that we know where it obviously does not create popularity. So in terms of how much of a value that is, it's very instructive to look at Marvel and what subsequently happened to that because we did include it in the Windows box as one of the things that the user had on the desktop. (End of segment) Houck: Let me put the question again without reference to this document. Mr. Gates, do you believe that Windows distribution is a unique asset that Microsoft has? Heiner: Objection. Form. Foundation. Defined terms. Gates: What do you mean when you say "Windows distribution" there? Houck: Do you have an understanding what Mr. Siegelman meant by the phrase "Windows distribution" in his email that he wrote to you? Gates: He means -- I think he means, I don't know for sure, I think he means including an icon on the desktop for access to Marvel. Houck: And by "the desktop," you mean the Windows desktop? Gates: In this case, yes. (End of segment) Houck: In 1996 was there a common understanding of what was meant by "Internet software"? Gates: In a context-free sense, absolutely not. and for all the… Houck: Was there a common understanding post coverage, of what was meant by an Internet browser? Gates: The whole notion of what the browser -- what features it would contain or what it would mean or all that was very uncertain in 1996. (End of segment) Houck: Good morning, Mr. Gates. Are you going to be a witness at the trial of this matter? Heiner: Objection. Gates: I don't know. (End of segment) Houck: Do you intend to be a witness at trial? Gates: I don't know. (End of segment) Boies: Good morning, Mr. Gates. Do you understand that you are still under oath? Gates: Yes. (End of segment) Boies: Let me ask you to look next at a document marked Trial Exhibit 520. The second email or message here is a message dated April 12, 1995 at 12:54 p.m. from Paul Maritz to you and a number of other people; correct, sir? Gates: That's what it appears to be.. Boies: And the subject is the "3 year plan thoughts - draft;" correct? Gates: That's, yes, the subject. Boies: Did you receive this message on or about April 12, 1995? Gates: I don't remember receiving it, but I have no reason to doubt that I did. Boies: Now, attached here is something that is titled 1 year plan follow-up (draft)." Do you see that? Gates: Yes. Boies: Did you receive this at or about the time indicated of April 12, 1995? Gates: I'm not sure. Boies: Let me ask you to look at the page that bears in the bottom right-hand corner the Microsoft document production stamp ending 7193. And in particular the portion that is under the heading "Shell/Browser." Do you have that? Gates: Yes. Boies: And it says here, "We should get a view as to what will be handled by the 'Win97' Shell, and what will not - and if not, how is the needed extension integrated into the Win97 environment." Do you see that? Gates: Uh-huh. Boies: Were you told in or about April of 1995 that one of the issues in terms of planning that was needed to be decided was what would be handled by the Win97 shell and what would not be? Gates: I'm not sure -- I'm not sure what is meant by Win97 shell here. I don't remember seeing that at the time. Boies: Well, you know what a shell is in this context, do you not, sir? Gates: Yes. Boies: And you recognize Win97 as a reference to what ultimately became Windows 98, do you not, sir? Gates: No. The fact that we use a name like that before we have decided what's in a product doesn't mean that when we used that name back then it references what eventually got into the product. Boies: Let me make sure I understand that last answer. Was Win97 a reference that was used within Microsoft to refer to what ultimately became Windows 98? Gates: It was a term that was used to refer to a project. When it was used, none of us knew either what would be in the project or what it would be called. So any time you see that reference, you can't assume it's a reference to the things that eventually became Windows 98. All you know is they're referring to the next project related to enhancing Windows. Boies: Let me ask the question this way. Was the project that was internally described within Microsoft as Win97 the project that ultimately resulted in Windows 98? Gates: I believe so. (End of segment) Boies: All right, sir. Let me ask you to look at a document that has been marked as Trial Exhibit 333. And this purports to be some questions and answers on "The Use and misuse of Technology" by Bill Gates dated October 24, 1995, copyrighted 1992 to 1995 by the Microsoft Corporation. Boies: Do you recall preparing these questions and answers, sir? Gates: I know I was at a meeting where this was worked on. Boies: And did the statements set forth here reflect your views at the time? Gates: I don't remember specifically these sentences, but I have no reason to doubt this is what was discussed and put into the column. Boies: And you understood that when this was prepared and, as you put it, put into the column, that it was going to be published, did you not, sir? Gates: Yeah, the column is published. Boies: Where is the column published? Gates: A number of newspapers. Boies: Now, when you refer here on the second page, fourth line, to "winning for Microsoft a larger share of the market for Internet browsers," do you see that? Gates: No. Boies: It's on the second page, fourth line -- Gates: Oh, you're on the second page. Let me just read this. Okay, go ahead. Boies: When you refer in here to "winning for Microsoft a larger share of the market for Internet browsers," do you see where you say that? Gates: Yes, it's part of a sentence here. Boies: What did you mean by "the market for Internet browsers," sir? Gates: I assume I meant usage share of browsers on the World-Wide Web. Boies: You then go on in parentheses to say "An Internet browser is software that lets an individual roam the worlds of information available on the Internet. Microsoft's browser is called the Internet Explorer." Do you see that? Gates: Close paren. Yeah. Boies: Close parenthesis and then close quote, since I'm quoting it. Did you believe that was an accurate statement at the time that you made it and published it? Gates: In trying to give an explanation to the broad audience that the column was aimed at, yes, I thought it was a good way of describing it to that audience. (End of segment) Boies: Okay. Let me ask you to look at Trial Exhibit 560. This is a message from you to Mr. Ballmer and Mr. Chase with a copy to Mr. Maritz and some other people also given copies dated August 15, 1997 at 4:07 p.m. on the subject of IBM and Netscape; correct? Gates: Uh-huh Boies: And you type in here Importance: High." Gates: No. Boies: No? Gates: No, I didn't type that. Boies: Who typed in "High"? Gates: A computer. Boies: A computer. Why did the computer type in "High"? Gates: It's an attribute of the email. Boies: And who set the attribute of the email? Gates: Usually the sender sends that attribute. Boies: Who is the sender here, Mt. Gates? Gates: In this case it appears I'm the sender. Boies: Yes. And so you're the one who set the high designation of importance, right, sir? Gates: It appears I did that. I don't remember doing that specifically. Boies: Right. Now, did you send this message on or about August 15, 1997? Gates: I don't remember doing so. Boies: Now, you say that you had a meeting with Jeff Papows; is that correct? Gates: I did have a meeting with Jeff Papows, yes. Boies: And the third paragraph from the bottom you write "He doesn't want anything attributed to me or he will get in trouble, but he says we can just refer to all the rumours on the Web about what kind of deal is being done between Netscape and IBM." Do you see that? Gates: I do. Boies: At this point, that is, in or about August of 1997, were you aware prior to your conversation with Mr. Papows, that there was a prospect of a deal between Netscape and IBM? Gates: There had been rumours of that, so yes. In fact, there had been deals. There was rumours of a new deal. End of segment Boies: This is a message dated February 16, 1998, from Laura Jennings to you and a number of other people, including Mr. Allchin, Mr. Ballmer and Mr. Maritz. Do you see that? Gates: Yes. Boies: Did you receive this email in or about February of 1998, sir? Gates: I don't remember receiving it, but I have no reason to think that I didn't. Boies: Let me take you down to the next to last paragraph on the first page. The first sentence says "One potential concern: Brad mentioned to me late Friday that there may be new concerns about our plan to make Start a requirement for being in the IE referral server, or at least there may be timing issues related to your appearance at Senator Hatch's hearings." Do you see that? Gates: Yes. Boies: Do you recall a discussion of this in or about February of 1998? Gates: Not with Laura. But on the general subject, yes. Boies: Did Microsoft in fact make Start "a requirement for being in the IE referral server"? Gates: No, I don't think we did. Boies: Why not? Gates: I think the PR group thought it would be controversial and we didn't see the benefit as being worth having that controversy. Boies: Let me ask you to look at a document that has been marked as Trial Exhibit 225. The first message here is a message to you and Mr. Ballmer with copies to other people dated March 23, 1994 at 9: a.m. on the subject of "IBM helps Lotus." Boies: Did you receive this message in or about March of 1994, sir? Gates: I don't know. Boies: The message begins by describing how IBM is helping in the selling of Notes. Do you see that? Gates: Yes. Boies: And at the end Mr. Kempin, who is the author of this, says "I am unsure if we need to see this as an organizational issue or an OEM issue." Do you know what he means by that? Gates: What's he talking about? Boies: Do you know what he is talking about? Gates: No. Boies: He then says "I am willing to do whatever it takes to kick them out, but strongly believe we need a WW hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure." Do you see that? Gates: Uh-huh. Boies: You have to say yes for the record. Gates: I see it. Boies: Do you know what Mr. Kempin means when he writes to you about a "WW hit team"? Gates: He means a salesperson. Boies: If he means a salesperson, why doesn't he say salesperson, sir? Gates: It clearly means salesperson. Boies: Are salespeople within Microsoft commonly referred to as WW hit teams? Gates: If they're world-wide and if they're trying to sell to somebody who is a large account, you bet. Boies: And when your salespeople go out to sell large accounts, are they commonly referred to as needing a "WW hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure"? Gates: No. Boies: Did you say no? Gates: I said no. Boies: Do you remember Mr. Kempin telling you in March of 1994 that he was proposing that the OEM relationship with IBM should be used to apply some pressure to stop IBM from promoting the sale of Notes? Gates: No. Boies: Do you recall anyone ever telling you that, sir? Gates: No. Boies: Did you ever respond to Mr. Kempin and tell him that no, you didn't think that Microsoft ought to apply OEM pressure to IBM? Gates: I don't understand your question. Boies: Do you understand that Mr. Kempin is here proposing to you that Microsoft apply OEM pressure to IBM? Gates: It doesn't say OEM pressure. Boies: I didn't say it said it, sir. It says he is proposing that the OEM relationship should be used to apply some pressure on IBM; correct, sir? Gates: You're asking me to read it? Boies: I'm asking you if that's what you understand him to be saying. Gates: What? Boies: That he is proposing that the OEM relationship should be used by Microsoft to apply some pressure on IBM. Gates: No, I don't think he is proposing anything. Boies: You don't think he is proposing anything. When he says that he strongly believes that there needs to be a "WW hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure," you don't think that he is suggesting that Microsoft apply pressure on IBM? Gates: I don't think he is making a proposal. It is one of the things he mentions, but it's not a proposal. Boies: Now, Mr. Kempin's message was a response to a message from you to Mr. Kempin and Mr. Ballmer dated March 20, 1994 at 11:29 p.m., correct? Gates: It appears to be, yes. Boies: And you write him in the first paragraph "This is one topic I really want to try to get to the bottom of. Why does IBM help Lotus so much? Is there anything we can do about this? Should it become an issue in our global relationship with IBM?" Did you send this message to Mr. Kempin and Mr. Ballmer in March, 1994? Gates: It appears I did. I mean that's part of the message I sent, it appears. Boies: Now, when Mr. Kempin replied saying "We need a WW hit team to attack IBM as a large account, whereby the OEM relationship should be used to apply some pressure," did you understand him to be responding to your questions? Gates: I don't remember receiving his mail. ® Complete Register trial coverage