Resolve and Fortitude : Microsoft's ''SECRET POWER BROKER'' breaks his silence (31 page)

Assuming I would join the exodus in progress was not far-fetched. Early employees like me had created enough wealth to explore other venues or simply retire. As the stock price drifted further and further south and stock option packages became less valuable, a lot of talent left, absence felt; there were ghosts in the hallways. Paul Maritz grabbed me one day and, looked straight into my eyes, imploring, “I am not sure why the two of us are still around!” He departed before I did.

As Steve detailed his ideas further, he expressed his desire to build a team of executives in their late thirties or early forties. Why mention age? Did experience not count any longer? Was loyal service and years of stellar performance no longer rewarded, honored, or appreciated? He made me think harder with several not-so-off-the-cuff remarks. I had not made up my mind completely, but I had a capable person in my division to take over for me. Owning the conviction that age and performance are not necessarily correlated, I ignored his anti-age comments and carried on—yet I felt freshly motivated to seriously consider my life after MS.

In a follow-up meeting, I told him I would be happy to stick around until the end of FY ’01
44
before wanting to move on, suiting my remaining stock option vesting schedule. After thinking it over, he agreed to my proposal, and from then on, we were both actively on the lookout for a successor. Knowing that my time was coming to an end had no impact on my group’s all-star performance. Steve, writing a personal note on my bonus notification in August of ’99, saying, “JK, another huge year. Superb!” must have had the same impression.

JUSTICE ON THE BLOCK

TRIAL SETUP AND STRATEGIES

The MS antitrust trial of ’98 shook the IT industry at its foundation and was soon dubbed the trial of the century. Attempting to bring down the most influential software and largest capitalized company in the world, the Feds caused lusting minions to circle like vultures above the veld. Not far behind, the press venally manipulated the truth to drive an appetite for extra copy, sell more newspapers, or attract a larger TV audience.

My research shows at least 150-plus voluminous white papers or books have been published to postanalyze that historic event. Why write another long chapter following the path of no return. In its place, I will share with you how I experienced the trial as a participant and observer and reveal my own feelings on where justice, finally, came to reside within the process—focused mainly on my OEM business. Its practices were inarguably its centerpiece, and my chronicling stage lights will therefore track and illuminate and scrutinize those facets, without neglecting to capture the emotions of the key players as I witnessed them from the inside out.

After Anne Bingaman’s departure as chief of antitrust enforcement, Joel Klein took over. Skeptical of winning the ongoing consent-decree-violation complaint, he hired Jeffrey Blattner, the talented but rough-hewn former chief counsel for the Senate Judiciary Committee, to covertly broaden the never-halted investigation. His true role was a well-kept secret: to dig deeper into the documents already in the DOJ’s possession and to distill and condense e-mail snippets and other evidence into a deadly antitrust Molotov cocktail. Just in case Jackson’s ruling wouldn’t survive the appellate court. Somebody was thinking ahead.

Blattner was assisted by top-notch gunslinger David Boies. The DOJ, engaging him first as legal consultant and after hiring him fulltime, made him chief prosecutor in the newly filed case. Boies came loaded with marquee credentials as a most celebrated and successful trial lawyer. In 2000,
Time
magazine dubbed him lawyer of the year, stating, “Mr. Boies’s memory is one of the first things when people discuss his strengths. What’s most impressive about that gift—focused as it may be by the intensified concentration that his dyslexia demands—is Boies’ uncanny ability to recall a key fact, legal citation or piece of contradictory testimony at moments of the most intense pressure.” He had garnered firsthand experience with antitrust laws when defending IBM against the Feds. The historic trial lasted from 1969 to ’92, and Mr. Boies had ever since been recognized for devising IBM’s winning strategy.

A victory coinciding with an all-new Regan Republican administration noted for having the least active antitrust enforcement, motive, and record in modern history. Yes, politics do play a dreadfully active role in antitrust cases. By now we were under Bill Clinton’s rule—his administration certainly not known for welcoming or practicing Reagan-friendly enterprise policies as we were experiencing firsthand.

In the spring of ’98, the joint Blattner/Boies mining operation burrowed deeper and deeper into the never-receding cordillera of documents. Digging for the mother lode and carefully considering the latest appellate court ruling, they waxed confident of having their case wrapped up. Soon thereafter, the Reno DOJ filed the aforementioned sweeping shock-and-awe antitrust suit, accusing us of having illegally obtained and maintained a monopoly in violation of the infamous Sherman Act. A bloody and protracted battle was guaranteed. The gist of the accusations was still based on tying IE features illegally into Windows. A lot of others, variations to the theme of anticompetitive behavior, had been added. Twenty states had joined forces, with every single one of their AGs dreaming of headlines and inaugural balls in the governor’s mansion. They were coming at us in droves—sabers raised. Success surely breeds contempt! Political activists were milling and murmuring in the restless night, pitchforks in hand and torches ablaze. The home state of MS, Washington, declined to join them.

Judge Jackson’s top priority for the upcoming trial was to avoid a prolonged battle and complete the proceedings before the Clinton era drew to its close. According to later-revealed interviews, the judge claimed he was still open-minded toward MS despite our earlier eye-poking performance. He made no secret whatsoever of having been hurt and humiliated by the harsh ruling of the appellate court. A bad omen? I heard the phrase “Humiliation is a license to hate”; let’s see how humiliated he felt.

Jackson had a lot of discretion and elbow room conducting the trial. He used it boldly by fast-tracking the trial for September of ’98—curtailing our prep time and slightly advantaging the Feds. Next he limited the number of main trial witnesses to just twelve and a scant three for the rebuttal phase. As a multifaceted company with the action of one branch of MS not necessarily reflecting the company as a whole, we felt straight jacketed. Hostile or not, the company’s legal forces went into overdrive. The Feds kept adding to their workload by requesting ever more information, further pinching valuable prep time.

Total documents delivered: approximately three million, barely fitting inside two 18-wheelers. To capture them, our attorneys, on behalf of the Feds, raided employees’ offices with no warning and regardless of whether you were in or out. Whatever they deemed relevant got shipped off. They harassed everybody, and many took the intrusions personally. A pest and a nagging distraction from running the day-to-day business for sure!

As the Feds began conducting depositions, we, in return, deposed government witnesses and collaborators. Another time-intensive task for our extraordinarily committed but equally stretched and overworked legal team as the clock approached deadline. In the end, Jackson relented and agreed to delay the trial until October 19, 1998. My friends on the legal staff, totally exhausted, were barely ready.

I was named one of the twelve main MS witnesses. No surprise—this was all about my business. Paul Maritz and most of his direct reports found themselves on the same list, while Steve’s and Bill’s names were absent. MS employees were shocked, recognizing that the top two honchos we had worked and sacrificed for, followed, trusted, and obeyed were dodging the trial. The news spread like wildfire on campus. People were dismayed and in stunned disbelief.

Upon questioning Bill Neukom, he explained that Bill had indeed volunteered to defend the company, but our legal team had deemed him a bad client. With all his hyperintellectual smartness and word-mincing abilities, he apparently lacked the coachability required to transform him into a sensibly forthcoming, judge-placating witness. Or, as the NY Bar Association defines one aspect of a bad client, “He has tunnel vision about the matter and does not want to listen to new ideas, is not interested in other options, or can’t face reality about his role in creating the situation.” Not privy to how Bill N. had concluded this, I concurred after watching a video snippet of Bill’s own deposition. Churlish, thin-skinned, and agitated, he reminded me of President Clinton’s depositions in the Paula Jones and Monica Lewinsky cases, where he questioned the meaning of the word
is
.

Our policies and actions were the direct and accretive result of Bill’s and Steve’s visions, plans, and business acumens. Like Siamese twins, they were joined at the hips as they outlined key strategies and instilled a take-no-prisoner operating style into everybody. Then and now, they were the architects of the MS house of cards, which could collapse anytime from the pressure the DOJ was putting on it. Them baling out compares to refusing to be at the hospital the day your wife has your baby.

I suffered through a lot of explanations with my people and, against my belief, excused our leadership. I never talked with Bill about the vacuum he created, one we all felt, but I mentioned it to Steve, who just confirmed he had left the witness selection solely to the lawyers.
I harbored profound reservations on the appropriateness of such a delegation but dug no deeper into the man whose enduring passion was rallying and rousing his troops. Not being selected to be on his beloved stage this time needed no further insult. How he could maintain his proud, upright bearing and justify his no-show to himself was inexplicable to me!

Decision made, my life went in a different direction. I was not eager but certainly proud to be a witness and defend our profoundly successful actions, well-considered policies, and our people’s tireless work. Emphatically, they all wished me good luck. I thanked them for their support with all my heart! I would need it!

In September of ’98, I spent one week with our attorneys scrutinizing documents. I was extremely thankful for their in-depth preparations for yet another deposition and hoped my former experience would help me to get through this one with flying colors.

Mr. Malone, the prosecutor in the earlier contempt case, deposed me, and no smoking gun was revealed. Compared to the first DOJ attorney I experienced back in the early ’90s, he was well organized and understood the vagaries of the OEM business reasonably well. He was cordial, polite, and stayed on his agenda. I was forthcoming enough in my answers, but once in a while, I had to resort to the worn-out Oliver North phrase employed during his public grilling by congress: “I do not recall.” Small wonder, as several events he questioned me about had happened six and seven years earlier. He focused on the OEM business along with relevant e-mail exchanges or documents I had written or received. His style was diligent and persistent but not gratuitously mean. As experienced before, he tried to trick me by asking what other people had meant when they wrote their opinions down. When I told him “Ask them,” he countered by asking me what I had understood as the receiver. Several years later, who can truly remember all connotations? So we struggled along, Malone laboring by means of inference and innuendo to prove evil intent of the authors or the recipients and me grappling to deny him that same pleasure.

OEM pricing was a central issue he pursued. He failed to appreciate a number of my answers as he pushed hard to contrive how we were overcharging customers. He relished hearing how we had arrived at our royalty prices. Whatever the method, he always implied we had pricing power. He was loath to accept the truth of having only scant competitive information to base them on. As a hired skeptic and deputized enforcer of the law, he therefore cavalierly concluded that he had found yet another way to prove our alleged monopoly power—not accepting an obvious information gap. He confronted me with the letter Hewlett-Packard’s VP Romano had sent me, decrying Windows as the only game in town. I pointed out other options close to what I have explained earlier here. For Malone, the opinion of the Hewlett-Packard guy neatly trumped my own deep experience and considered logic.

Last but not least, in one of my e-mails to Bill, I had mentioned an application barrier of entry for our competitors when competing with Windows. I reasoned that the Windows standard we had created luckily protected us—until now—while pointing out our luck could run out soon. For Malone, the barrier he had in mind was absolute, as his economists had told him, enabling us to defend our alleged monopoly forever. The trial was casting a shadow.

I should mention one last item that had captured the Feds’ attention. In a separate mail to Bill back in ’94, I suggested sending IBM a hit team in case they failed to comply with one of our requests. An ill-chosen word for sure. But in any high-powered sales organization,
hit team
is a colloquialism implying no physical harm, meaning “Let’s be sure to send the highest-caliber, toughest negotiators possible.” For Mr. Malone, it expressed that we had power to harass and coerce customers. As long as I could remember, IBM never seemed intimidated by us. But for a government attorney like Mr. Malone, such language was not permissible and proved malignant intent or harm punishable by law.

Naturally, his other interest regarded the by-now-famous Windows boot-sequence restrictions we had imposed on our OEM customers. Again probing for anticompetitive behavior, his main line of questioning was about the reasoning for our regulations. Why did we restrict OEMs from removing our icons from the Windows desktop? He for sure did not like my answers, but our copyright existed, and our restrictions defended it. After two days of intense cross-examination, he left—not terribly satisfied. My attorneys praised me for a reasonable performance. I had survived another day.