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Tuesday, April 23, 2002 - Page updated at 12:00 AM

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Well-prepped Gates rips states' plan as destructive

Seattle Times Washington bureau

WASHINGTON — After four years of being judged from afar, Bill Gates finally took the stand in the landmark Microsoft antitrust case yesterday, warning that proposals from states seeking tough remedies would "cripple Microsoft as a technology company."

Dressed in a blue suit with a purple tie, the man who founded the world's most dominant software company entered the courtroom shortly after midday, a few strides ahead of his wife, Melinda, and a clutch of Microsoft advisers.

Amid heightened anticipation of what he would say, Gates listened attentively to the standard speech from U.S. District Judge Colleen Kollar-Kotelly about speaking into the microphone and not interrupting his questioner.

Steven Kuney, an attorney for the states, used Gates' own statements to portray Microsoft's protests as gross exaggerations of the states' proposed remedies.

But even as the two haggled over the legal and technical terms of the proposal, there was no sign of the evasive and surly side that Gates displayed during a videotaped deposition shown in court as the trial began in 1998. That performance is widely believed to have cost the company credibility with the judge who preceded Kollar-Kotelly on the case.

Instead, throughout the afternoon, Gates displayed a detailed knowledge of the states' proposals and offered extensive arguments for how they would undermine the work of Microsoft.

If computer manufacturers were able to remove code from Windows, as the states demand, Gates said the operating system "would degrade in the worst possible way."

"The applications would fail. Windows Explorer would fail," he said. "The updates would fail and help would fail."

Kuney also sought to raise doubts about Gates' credibility, placing him at the center of efforts to quash competition by limiting the ability of other products to interact with Microsoft software. He presented a December 1996 e-mail from Gates warning other Microsoft executives against making Microsoft Office documents work too well with browsers other than Microsoft's Internet Explorer.

"Allowing Office documents to be rendered very well by other people's browsers is one of the most destructive things we could do to the company," Gates wrote. "This is a case where Office has to avoid doing something to destroy Windows."

Gates claimed that follow up e-mails would have made clear his primary concern was the development resources devoted to making PowerPoint slides display better on other browsers, a project he said had not made great progress.

"I thought that was not a good use of resources," he said.

Unyielding stance

While he was never combative, Gates frequently parsed Kuney's questions and refused to yield on his dire predictions for the high-tech industry should the states get their way. He seemed confident and spoke clearly. He shared a laugh with a deputy U.S. marshal in the courtroom during a break in the hearing.

Gates' performance could influence how Kollar-Kotelly decides on the demands by California, eight other states and the District of Columbia, which are seeking remedies beyond those that the Justice Department and nine other states accepted in a settlement reached last year.

Kuney chipped away at Gates' contentions that the litigating states' would force Microsoft to reveal source code to rivals, pull Windows from the market and lay off the bulk of its research-and-development staff.

The lawyer countered arguments that rivals would be able to clone Windows, by offering memos showing Microsoft executives, including Gates, considering whether to clone functions of Netscape Navigator and other products.

"Is there something different when Microsoft is not doing it?" Kuney asked.

Gates sought to draw a distinction between violating a company's intellectual property and duplicating some of the functions of its products.

Written testimony

In his written direct testimony, Gates explained how he and Paul Allen founded Microsoft, the role the company played in the birth of the PC industry, and how the "stability and consistency" of the Windows operating system contributed to the computing boom.

The 155-page submission to the judge was part history lesson, part detailed analysis of how harm would occur to the company, the industry and consumers if the states' proposals are implemented.

It also included hints of the resentment Gates has toward earlier court rulings that held his company liable for antitrust actions.

Gates referred skeptically to findings that Microsoft crushed Netscape Navigator and Java software because they "supposedly" posed a threat to the Windows operating system. He said that was "a big 'if' because developing good platform software is hard."

"Netscape never did the hard work needed to become a PC applications platform," Gates said, adding Netscape's new owner, AOL Time Warner, "certainly has the resources to pursue this strategy today."

Mostly, Gates focused on the proposed remedy, walking the judge through a section-by-section critique of the proposals to show how they would harm Microsoft.

He said aspects of the proposals that were "especially alarming" were the breadth of the products covered, "the vagueness and ambiguity" of the provisions and the feasibility of complying with their requirements.

Attorneys for the states are seeking to convince the judge that any remedy must rein in Microsoft's behavior in the markets for handheld computers, Internet servers and other emerging technologies.

Gates said the proposed strictures would hurt competition in those fields, casting Microsoft as the underdog competing with Palm, America Online and other companies.

"Competition would be reduced not only in operating systems, but also in key product categories where Microsoft is the strongest challenger to incumbent leaders," Gates said.

On 'modular' Windows

He also took on the states' premiere proposal, testifying that trying to produce a "modular" version of Windows that would allow computer companies to replace Microsoft products with competitive software, would mean the death of Windows.

One states' expert witness, Princeton University computer-sciences professor Andrew Appel, testified earlier that software code tends to be "modular," and that Microsoft should be able to engineer a version of Windows to meet the states' demand.

"I can say with confidence, based on 20 years' experience overseeing the development of successive versions of Windows, that large parts of the operating system are 'modular' in the sense in which Professor Appel is using that term, and other large parts are not," Gates said. "Removing significant parts of Windows — whether modular or not — will cause other parts of Windows that rely upon those parts to fail."

His presentation focused entirely on the states' proposal, while Kuney occasionally drew comparisons between the proposals and the company's settlement with the Justice Department and nine other states. That agreement would restrict Microsoft's business practices and make it easier for computer makers to offer PCs with rival software products.

Kuney is expected to resume his cross-examination of Gates this morning.

Kevin Galvin can be reached at 206-464-8550 or kgalvin@seattletimes.com.

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