The Tale of the Gates Tapes

By ADAM COHEN

When the Justice Department served Bill Gates with an antitrust complaint that could, in theory, lead to Microsoft's breakup, he didn't bother reading it. At a key point in his war against archrival Sun Microsystems, Gates fired off an e-mail about Microsoft's plans to use Apple Computer to "undermine Sun," but now he can't remember sending the message and has no idea what he could have meant by it. And although Microsoft had two high-level negotiations in June 1995 with Netscape--the company that seemed to pose the greatest threat to Microsoft's dominance--Gates says he learned of them only last spring in an article in the Wall Street Journal.

These were some of the astonishing insights into Gates' management style that the software magnate revealed in federal court last week. Justice Department lawyer David Boies kicked off Week 3 of the decade's most watched antitrust suit by showing two hours of Gates' videotaped deposition. The excerpts, culled from about 20 hours taken last August, made Gates look like he was about the worst CEO in America.

Trouble was, it was a difficult line to swallow. Gates as a fuzzy-headed amnesiac? This is the man revered even by the geniuses who roam Microsoft's Redmond, Wash., campus for his awesome "bandwidth" (geekspeak for intelligence). Gates' memory is so capacious that at age 11, he astounded friends and family by memorizing all 107 verses of the Sermon on the Mount. He's so driven and detail oriented that he favors baths over showers so he can study while he soaks. Besides, it's hard to imagine the lackadaisical Gates of the video taking Microsoft from three employees and $16,005 in revenues in 1975 to a market cap of $263 billion today.

It just didn't compute. If Boies' aim in showing the video was to cast doubt on Gates' credibility, he seems to have hit the mark. (At one point, Judge Thomas Penfield Jackson chuckled over a particularly blatant Gates evasion.) And there is no question that tearing down the defendant company's CEO is shrewd trial strategy. "It's damaging from a legal point of view when you have a judge hear a boss get up and lie," notes D.C. antitrust lawyer Donald Falk. "It may lead the judge to disbelieve the company's other rationalizations."

The video also made a more subtle point: that Gates is just a bit loopy. The Gates in the video--shown to a packed courtroom over three large monitors--paused for 20 seconds or more while formulating some answers. When the going got tough, he rocked back and forth in his chair like a toy dog in a car window. He testily parsed fine distinctions (Microsoft's "deal" with Apple vs. their "relationship") and professed to be nonplussed by common Anglo-Saxon words ("I have no idea what you're talking about when you say 'ask.'"). At times the wiry, high-pitched, tousled-haired billionaire morphed into Woody Allen riffing on Bill Clinton's deposition in the Ken Starr inquiry.

But Justice didn't put Gates on display just to make him look bad. The video set up Boies' third witness, Apple senior vice president Avadis Tevanian. Apple says Microsoft threatened to withhold a key piece of software--Microsoft Office for Macintosh--unless Apple joined Microsoft's war on Netscape's Internet browser. But Gates offered Boies no help on this point. Presented with what seemed to be a smoking gun--an e-mail to Gates from Microsoft executive Don Bradford saying that "Mac Office is the perfect club" to get Apple to take actions that "significantly/materially disadvantage Netscape"--Gates claimed he knew nothing about it.

Justice's own witnesses have been more forthcoming--and have shown far better recall. Tevanian recounted a sinister moment in which an Apple executive, surprised by a Microsoft demand that his company drop a promising software application, asked, "Do you want us to knife the baby?" Yes, the Microsoft executive reportedly replied, "we're talking about knifing the baby." During Tevanian's testimony, Judge Jackson showed his first flash of anger, tearing into a Microsoft lawyer for his overly technical and at times "misleading" questioning style.

A week earlier, America Online senior vice president David Colburn told his own tale of being bullied into dropping Netscape and adopting Microsoft's browser. AOL switched, Colburn said, because it was the only way Microsoft would agree to put the AOL icon on the Windows desktop--a key concession. Microsoft tried to get Colburn to say AOL had switched because Microsoft's browser was technically superior--and he had internal documents suggesting that some AOL employees thought so. But the gruffly sarcastic Colburn, who went to court in cowboy boots and several days' stubble, wouldn't budge.

Justice still has a tough road ahead. Antitrust law isn't particularly pro-government these days, and Microsoft hasn't even begun putting on its witnesses. But a common theme of ruthless--and perhaps illegally anticompetitive--behavior is emerging. The evidence Boies is assembling, brick by brick, suggests that the man on the videotape is at the center of it all.

The rumbling in the courthouse before the tape was shown was that the two sides were engaged in a p.r. struggle over its timing. Justice would have been happy to play the tape at the end of the previous week, when the TV feed would have been fodder for a weekend's worth of chat shows. But Microsoft lawyer John Warden's cross-examination of Colburn proceeded so glacially--sample topic: What is e-mail, Mr. Colburn?--that the video was bumped to the following Monday. Microsoft couldn't have been unhappy that Gates got lost in the clutter of last week's national election-eve coverage. "It's a two-front war," notes George Washington University law professor Bill Kovacic. "This case is being waged inside the courtroom and outside."

Outside, the Microsoft p.r. machine was certainly in overdrive. Flacks buttonholed reporters on the courthouse steps to spin Gates' testimony into a triumph. Gates was excellent. Convincing. Sincere. It's true that lawyers tell witnesses to volunteer nothing and to say they can't recall when they have any doubts at all. But to many who watched Gates' apparent dissembling and self-serving memory lapses, Microsoft's effort at spin had the zany logic of the old Groucho Marx gag: Who are you going to believe, me or your own eyes?