Microsoft's Six Fatal Errors

If Microsoft had offered to give consumers a choice of browsers and give PC makers more control of software they wished to promote, the government's case might never have been filed. "It would have blunted the case," conceded one government official. Such a settlement would have spared Microsoft the subpoena wars that allowed the government to rifle through more than 3 million company documents and produce one damning e-mail after another. ("This antitrust thing will blow over," Gates purportedly said, according to one of the government's favorite documents.) The hunt only served to broaden the charges against the software giant. "At that point, we were not aware of all the powerful evidence that later would be disclosed," said Connecticut Attorney General Richard Blumenthal, "and that led to heightened demands for stronger remedies."

Candid Camera It was August 1998, and Bill Gates was under oath. In a Redmond conference room filled with leather chairs and a government video camera, Gates sat next to three Microsoft lawyers he apparently didn't think he needed. He refused to answer questions on his own during the 30-hour deposition. Shifting and rocking in his chair, he appeared either petulant, contemptuous or bored. Whether Gates received good coaching from his lawyers or ignored it may never be known. He quibbled over the meaning of the simplest words ("compete" and "ask" were real stumpers). And on the occasions that he remembered e-mails he authored, he denied knowing what he meant by them. The same detail-oriented, driven genius who created the world's most valuable company--and a GDP-size fortune of his own--was seemingly out to lunch.

The video was a turning point for three reasons. First, it indicated that Gates & Co. were more confident than careful. "Nobody realized," admitted one Microsoft insider, "they were going to be able to play the Gates video in trial"--which they did, starting just after the gavel fell on day one. (Microsoft says the judge admitted the video into court after he originally said he wouldn't.) The video also set the stage for a massive credibility attack on the company, casting doubt on the dozen Microsoft witnesses who followed. Any judge weighing conflicting testimony is inclined to accept the more believable witness. And from his first ruling it was clear that none of Microsoft's witnesses convinced the judge of anything. "Credibility, in general and in the abstract," Jackson said last week, "is very important." The video seemed to head off any argument from Microsoft's lawyers that the company's aggressive tactics were the work of rogue employees. Finally, antitrust experts think the video was a blown opportunity to introduce themes for the defense that could be reinforced throughout the trial. The company failed "to use the deposition as a chance to create a commercial," says George Washington University law-school professor William Kovacic. Instead, the government put it on heavy rotation.

The E-Mail Trail By January 1999, as Microsoft began its defense, the credibility attack seemed to be working. Typically, each of the company's witnesses would give no ground in testimony, only to be embarrassed when Boies produced an e-mail that directly refuted his or her version of events. The darkest day of testimony was when Microsoft's lord of Windows, Jim Allchin, took the stand. Far from the stereotype of the rabid Microsoft executive, Allchin is a soft-spoken man whose silver hair and pale complexion suggest he's been weathered by years of hard work. Antitrust experts say Allchin was a perfect example of a missed opportunity to explain the wonders of Windows and how trifling with it would be dangerous. Instead, a videotape intended to demonstrate that Microsoft couldn't separate the browser from the operating system without damaging Windows looked doctored. Icons on the computer screen in the tape mysteriously appeared from one moment to the next. As Boies pointed out inconsistencies, the judge watched, head in hand. "It simply casts doubt on the reliability--the entire reliability--of the video demonstration," Jackson finally intoned. It was as if Microsoft hadn't taken the case seriously enough to make sure everything was Boies-proof.

None of these courtroom gaffes might have mattered; they could have been dismissed as theatrics with no bearing on the law--a point Microsoft made almost every day on the courthouse steps. But in his findings of fact issued last November, the judge's first ruling, Jackson quoted Allchin's e-mail at length and identified him as the mastermind behind the strategy to crush rival Netscape by bolting Internet Explorer to the operating system. It was just the kind of monopoly leveraging--using one monopoly product to enter into a new market--that sets off antitrust alarms. And there it was in Allchin's e-mail: "We must leverage Windows more." To the judge, no courtroom testimony could explain that e-mail away.

By the time Microsoft's final witness took the stand in February 1999, the judge seemed to have had enough of Microsoft's denials. Microsoft's last witness, group vice president Robert Muglia, was trying to explain a piece of Gates's e-mail in which the chairman appeared to be trying to hobble a competitor. After the judge expressed doubt about Muglia's gentler spin, Muglia persisted. Jackson erupted in one of his angriest outbursts. Pointing at Muglia he yelled, "No! Stop!" and then called a recess.