(FORTUNE Magazine) – Three years ago--in other words, 20 years after he and Paul Allen founded the company--Bill Gates decided to open Microsoft's first lobbying office in Washington, D.C. The effort, to say the least, was underwhelming, especially for a company whose annual revenues were $6 billion. Gates didn't exactly follow the standard corporate practice of lodging a gaggle of high-priced talent in fancy digs that lent themselves to fundraisers and cozy tete-a-tetes with influenceable lawmakers. Microsoft chose as its sole staffer Jack Krumholtz, a 33-year-old lawyer with no experience to speak of on any congressional or executive branch staff. Krumholtz didn't rate a secretary. He certainly didn't rate a view of the Capitol. Instead, he was housed in a corner of Microsoft's federal sales office, located across from a suburban shopping mall several miles from downtown Washington. Three years later, Krumholtz has something of a "team" (three people including an administrator). But he hasn't moved any closer to the action.

Once upon a time this kind of indifference might have seemed amusing, in a populist sort of way. But no one's laughing anymore. The recent Justice Department lawsuit demanding that Microsoft unhitch its Internet browser from its Windows operating system makes clear that the company needs a new Washington plan. "They don't want to play the D.C. game, that's clear, and they've gotten away with it to date," says Mark Buse, a senior Republican aide on the Senate Commerce Committee. "The problem is, in the long run they won't be able to."

Gates should know the Beltway better. After all, he once worked on Capitol Hill. In 1972 he was a summer page for then-congressman Brock Adams of Washington State. Adams remembers "Trey" Gates as a diligent 16-year-old who enjoyed Washington, except for its oppressive heat. But the main thing Adams recalls is that after Democratic presidential nominee George McGovern dropped Thomas Eagleton as his running mate, Gates tried to "corner the market" in McGovern-Eagleton campaign buttons. (Gates won't comment on whether he still has any of the buttons he bought as a monopolist-in-training.)

What is clear is that Gates learned little about how to deal with official Washington. Politicians need attention like humans need water, and Gates has scarcely given them time to snap a photo with the richest man in America. He deigns to visit the capital only one day a year, and then in the company of other high-tech CEOs such as Intel's Andy Grove, Adobe's John Warnock, and Novell's Eric Schmidt. In fact, "CEO Day" in June is a metaphor for the misunderstanding that exists between the high-tech world and Washington. The executives schedule themselves so tightly that they must race from meeting to meeting in a bus and eat their brown-bag lunch en route. The execs see themselves as bold risk-takers who should be praised for not riding in limos and for strictly limiting their visit so they can rush back to run their job-creating businesses. Lawmakers see them as arrogant showboaters who are too busy making billions to pay the obeisance that other corporate chieftains routinely offer up. Many nontechie CEOs consider Washington visitations part of their job descriptions and go almost monthly for lengthy sit-downs with lawmakers. Private cars are standard issue, of course.

Gates refuses to play by almost any of Washington's rules. True, Microsoft has grudgingly added some D.C. talent to its roster since 1995; it now has three lobbying firms and a PR outfit on retainer. But that's still paltry compared with other corporations its size. Its campaign contributions are also minuscule--in 1997 its political action committee and other sources laid out just $61,000. And Gates' own limited involvement in politics has managed to rile Congress' Republican majority. Gates gave minor contributions to liberal groups in Washington State that advocated gun-control measures and opposed restrictions on raising taxes.

More often than not Gates is dismissive of his Washington counsel. Microsoft's lobbyists have warned that the overbearing manner its attorneys have adopted in the browser case is losing Microsoft what friends it has; the response from Redmond is that the company's aggressive defense is its only alternative. The lobbyists have begged the company to roll out a long-planned advertising campaign to educate the public about the browser issue--to no avail.

While Microsoft dallies, its enemies organize. Former Sen. Bob Dole and ex-White House press secretary Jody Powell are assembling an anti-Microsoft lobbying coalition. Netscape, Sun Microsystems, and others with a stake in slowing the Gates juggernaut are said to be its backers, though none admit it publicly.

The effort appears to be flourishing. One main reason is Jim Barksdale, the CEO of Netscape who, unlike Gates, frequently visits Congress and has been spotted buttonholing lawmakers in the hallways with the aplomb of a veteran influence peddler. Barksdale, who learned his lobbying as COO of FedEx and CEO of AT&T Wireless, is unusually well connected; he was an acquaintance of Senate Majority Leader Trent Lott at Ole Miss and has become a buddy of other influential Senators, including Montana's Conrad Burns, chairman of the communications subcommittee. Last June 25, Burns authored a letter to the Federal Trade Commission urging an investigation into possible antitrust violations by Microsoft. Five days later Barksdale delivered a keynote speech at the opening of the Burns Telecommunications Center at Montana State University in Bozeman. Another Microsoft foe is Sen. Orrin Hatch of Utah, chairman of the powerful Judiciary Committee, whose constituent companies include Novell, a software maker humbled by head-to-head competition with Microsoft.

True, Barksdale's D.C. know-how is an exception to the rule. For years the gap between techies and politicos has been a chasm. During a meeting on Capitol Hill not long ago between top officials from Silicon Valley and Republican leaders in the Senate, Trent Lott spent considerable time explaining the duties of Sen. Mitch McConnell of Kentucky, who chairs a GOP fundraising operation called the Republican Senatorial Committee. After the meeting, one of the more Washington-savvy execs noted aloud how heavy-handed Lott's appeal for campaign contributions had been. In response, several colleagues looked at him quizzically. They hadn't even realized that they were being dunned.

Conversely, many Washington decision-makers don't know a browser from a floppy disk. The American Electronics Association has opened a special conference center in downtown D.C. to hold technology tutorials for lawmakers and their staff.

Microsoft must learn to bridge this gap, especially as Washington shows stirrings of regulatory activism. The FTC is investigating antitrust allegations about Intel. Meanwhile, the Justice Department is continuing to pursue Microsoft. Says antitrust chief Joel Klein: "We have an ongoing investigation into a variety of practices by Microsoft." Klein recently added to his legal team David Boies, a sharp-elbowed litigator who helped IBM defeat Justice's antitrust attacks years ago.

Microsoft cannot afford to ignore such a highly charged climate. Insiders say the company has begun to finance the research of several Washington think tanks. The company wants to hire a well-known GOP lobbyist, and is considering Haley Barbour, Ken Duberstein, and Robert Walker, president of the Wexler Group. Microsoft executives have even begun to ask lawmakers for advice. Chief operating officer Bob Herbold visited Senate Commerce Committee Chairman John McCain of Arizona, whom many consider the capital's leading Mr. Clean. Herbold asked what Microsoft needed to do to improve its image in the Capitol. McCain says he reluctantly recommended that Microsoft shed its aloofness and get its hands dirty with a vigorous lobbying campaign. It's too early to know whether Microsoft will follow through thoroughly on McCain's advice. Then again, its CEO might get interested if McCain runs for President in 2000. At least there'd be a campaign button.