Gates: Anti-trust will cripple Windows OS

WASHINGTON -- For the first time in Microsoft's four-year antitrust battle, Bill Gates took the witness stand yesterday and personally chastised states for seeking penalties he said would cripple the American software giant. \nWith a mix of computer slide shows and short, calm answers, Gates sought to rebut the arguments of nine states that have asked a court to further punish Microsoft for operating an illegal monopoly that hurt competitors and consumers. \nGates offered no apologies for his company's business practices. Instead, he portrayed Microsoft's flagship Windows software as the epicenter of innovation in America's computer revolution -- a revolution that would be stifled by the states' proposed penalties, hurting consumers and the wider industry. \n"The (remedies) would turn back the clock on Windows development and effectively freeze it there," Gates testified at one point, delivering in person the warnings that Microsoft has made for months in court documents. \nHe said the health of the personal computer "ecosystem depends in substantial part upon the continued health of and improvements to Windows." \nAt one point, he suggested Microsoft might need to lay off half of its 15,000 workers or pull Windows from the marketplace as fallout from the proposed penalties. \n"The practical effect…would be to cripple Microsoft as a technology company," Gates wrote in 150 pages of written testimony that was submitted along with his appearance. \nGates' performance Monday contrasted sharply from his 1998 videotaped testimony that became a key piece of evidence in the first phase of the antitrust trial. Gates was criticized for appearing fidgety, evasive and combative in that tape. \nOn Monday, he spurned his customary casual attire for a traditional blue suit and purple tie and brought his wife to the courtroom. \nUnder intense questioning by states' lawyer Steven Kuney, the Microsoft chairman occasionally chuckled before taking issue with definitions or assumptions. He was to return today for more questioning. \nGates began his testimony with a computer-generated slideshow. He demonstrated how, if the states successfully persuaded a court to force Microsoft to remove the Internet Explorer Web browser, essential components of Windows would stop working. \n"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. \nIn his written testimony, Gates exhaustively countered every argument the states had made in favor of penalties. During cross examination, the states' lawyers sought to turn his words to their advantage. \nAt 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. \nThe lawyer cited an internal memo in which Gates instructed his employees to stop trying to make sure Microsoft Office documents would work with rival Web browsers. \n"We have to stop putting any effort into this," he said in the December 1998 e-mail. "Anything else is suicide for our platform. This is a case where Office has to avoid doing something to (destroy) Windows." \nConfronted with the memo, Gates said he believed it was inefficient for engineers to spend their time on an effort that was "not making any progress." \nGates appearance came a little over two years after a court concluded his company operated as an illegal monopoly that thwarted competitors and hurt consumers. \nThe Justice Department and nine other states settled the case last fall and their deal with Microsoft is awaiting court approval. The nine states remaining in the case want U.S. District Judge Colleen Kollar-Kotelly to impose tougher penalties than those in the settlement. \nThose penalties include requiring Microsoft to share with competitors technical information and blueprints about how some of its most popular software works and creating a modular version of Windows that could incorporate other software makers' products. \nIn his written testimony, Gates argued such penalties would cause "a massive transfer of Microsoft's intellectual property rights" to competitors, leaving no motivation for Microsoft to continue being innovative. \nAnd he said the consumer would ultimately pay the price. \nGates also argued the penalties would allow competitors to create Windows clones. He named five companies that have assisted the states' lawsuit that he said could create the clones: AOL Time Warner, Sun, Gateway, Novell and Oracle. \nStates 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. \nShares of Microsoft were down $1.61, or 2.8 percent, to close at $55.59 in trading yesterday on the Nasdaq Stock Market, but gained 3 cents in extended trading.