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Gates remains defiant
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November 10, 1999: 3:47 p.m. ET
Microsoft chairman tells shareholders firm must be allowed to innovate
By Staff Writer John Frederick Moore
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NEW YORK (CNNfn) - Microsoft Corp. Chairman Bill Gates maintained his defiant stance in the company's federal antitrust battle, telling company shareholders Wednesday that any settlement which requires the company to refrain from adding new features to its products is unacceptable.
Addressing Microsoft (MSFT) shareholders during the company's annual meeting in Bellevue, Wash., Gates said the company is "willing to go a long way to address the government's concerns," but that any resolution must leave Microsoft free to add whatever functions to its products that it wishes.
One shareholder pleaded with Microsoft to settle the case out of court, but Gates maintained his long-standing position that the company cannot capitulate to all the government's terms.
"Under this lawsuit, a software developer would have to ask questions like, 'Is someone else doing something similar?' Because someone might file a lawsuit," Gates said. "This would create a chilling effect on the industry."
Last May, the Justice Department and 19 states sued Microsoft for using its monopoly power in the PC operating systems market to inhibit competition in other markets.
In his findings of fact for the long-running antitrust trial, U.S. District Judge Thomas Penfield handed Microsoft a stinging defeat, declaring the company to possess monopoly power in the PC operating systems market.
Jackson's findings of fact provide a road map for his final decision. The sweeping nature of Jackson's preliminary findings have led to speculation that the government will seek particularly harsh remedies against Microsoft if the judge concludes that the company violated antitrust law.
Some of the remedies said to be under consideration include requiring Microsoft to publish the source code that provides the backbone for the Windows operating system.
A breakup of the company, which seemed unlikely before Jackson's findings, is now a distinct possibility. Some states' attorneys general have already indicated they may seek severe remedies.
Bob Herbold, Microsoft chief operating officer, said he "has seen nothing" in Jackson's findings that would justify breaking up the company.
Stock under pressure
Microsoft officials also have maintained that while investors should view ongoing litigation as a risk, the company's business outlook remains strong and that it does not anticipate the antitrust trial will have any impact on its financial performance.
Nonetheless, Microsoft shares have slumped since Jackson issued his findings last Friday.
Microsoft shares have been in retreat since Judge Jackson issued his findings
While the rest of the technology sector posted strong gains Wednesday, Microsoft shares fell 2 to 86-7/8 in afternoon trade.
Alexander Cheung, portfolio manager of the Monument Internet Fund, said the pressure on Microsoft's stock likely will continue in the short term. Nonetheless, Cheung said he had no plans to change his fund's position on Microsoft.
"The pressure will continue until the lawsuit comes to a resolution," Cheung said. "At the same time, Microsoft has become more of a value stock now. There aren't too many companies that size that can grow 40 percent a year." 
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