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Gates lashes out
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May 5, 1998: 6:22 p.m. ET
Microsoft chief calls injunction serious threat; stumps for innovation
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NEW YORK (CNNfn) - Microsoft Corp. Chairman Bill Gates Tuesday compared government attempts to delay the release of Windows 98 to "telling General Motors they can't come out with new cars this fall."
Flanked by chief executives from a number of leading technology companies, Gates also said he's very concerned the government will try to block the release of Windows 98.
"This is a very serious situation. I wouldn't give the probability, (of an injunction) but we read every day that there is a very good chance that somebody might do this. It is under serious consideration," he said.
The Justice Department is currently investigating Microsoft's business practices with regard to whether the software giant is using its dominance in the operating system market to force personal computer makers to use other Microsoft products, such as Internet Explorer.
Last year, the agency filed a lawsuit against Microsoft claiming the company was trying to drive competitors out of business by forcing PC makers to bundle Internet Explorer with current copies of Windows 95. Microsoft is appealing the charges.
Meanwhile, officials from at least 13 states are mulling whether to file their own lawsuit against Microsoft to prevent the company from shipping copies of Windows 98 to PC makers later this month.
Gates claims delay would cost jobs
Gates, who has repeatedly denied the antitrust allegations, said delaying Windows 98 would cost American jobs, hurt the economy and stall innovation.
While walking a fine line so as to not upset regulators, Gates disputed the government's main argument in its latest investigation into Windows 98.
Gates said suggestions that Microsoft should be able to unlink Windows 98 with its Internet Explorer Web browser are unworkable since that would involve going through and changing parts of 4 million lines of code. Gates also said it would be impossible to give customers choices in Web browsers and other components because of the high number of possible combinations.
Delay would throw sand on progress
Other computer industry executives, many of which rely heavily on Microsoft products, seemed to agree with Gates.
"Windows 98 is the kind of information enabler that our customers are asking for and is a catalyst in the development of PC hardware and software," Compaq Computer Corp. Chief Executive Officer Eckhard Pfeiffer said.
"Any delay in Windows 98 would undermine our ability to meet demand when students are returning to school and for the Christmas season. I don't we should deprive our customers of value that we are ready to ship," he said.
Another supporter called on by the software giant was Gregory Mankiw, professor of economics at Harvard University, who said the government's attempt to delay Windows 98 "would throw sand into the gears of human progress."
"As technology evolves, some companies rise and others fade away by consumers are better served," he said.
Mankiw said government regulators should have the same purpose as physicians which is to "do no harm."
Gates even went as far as to say a delay could allow overseas companies to get a foothold in one of America's biggest export markets.
Gates' fears downplayed
Lou Mazzuchelli, technology analyst at Gerard Klauer Mattison, downplayed Gates' concerns.
"If you're a software company that's built a new product around Windows 98's features and it's not shipping and you can't ship your product, then that has a grave effect.
"There might be 100 or more companies that have penned their hopes on it. If you total up all the revenue for those companies, you might get a big number, but not one that's going to be a material percentage of the GDP," he said.
Mazzuchelli said one of the reasons Microsoft held Tuesday's rally was recognition that the probability of a legal challenge is growing.
"I don't know that [a legal challenge is] necessarily a bad thing. It will cause all the contested issues to come out and be visible to the public. When you have that kind of disclosure, you learn what's real and what's not."
Mazzuchelli said a delay in Windows 98 wouldn't have a dramatic effect on the company's fortunes because people or businesses still planning to buy PCs would be unlikely to postpone those plans if the release is delayed.
"[The question is] do I not buy a computer because I can't get Windows 98 today? Most people are just going to buy the computer. I think the concern may be a bit overblown," he said.
But Gates said the government is trying to stifle Microsoft's ability to upgrade its products and keep its customers happy.
"The government's argument boils down to a claim that we are putting too much Internet support into our products," Gates said. "This is a turnaround from what everyone was saying a few years ago."
Had the government made the same arguments three years ago and been successful, Gates said Microsoft would have never been allowed to ship Windows 95.
"We stand here today united in our belief that a delay in Windows 98 would be a setback for the industry and consumers," he added. "Progress is [achieving] growth for America," he said.
Still, Gates acknowledged that "the government has an important role to play in ensuring markets are open to competition. However, he said opponents should not be swayed by competitors like Netscape who are only hoping to get government help in their efforts to take business away from Microsoft.
Critics say Microsoft is a bully
However, critics blasted Microsoft's rally, saying the company is trying to bully the government into backing down.
"Today's public relations extravaganza is an attempt to bully policymakers and legal authorities into backing off an important antitrust investigation," Mike Pettit, executive director for The Project to Promote Competition and Innovation in the Digital Age, a group of Microsoft competitors and other companies including Netscape Communications Corp., Oracle Corp., American Airlines, and the Air Transport Association.
"The picture Microsoft is painting is one that we've seen before -- 'what's good for Microsoft is good for America.' That idea didn't fly for General Motors in 1952, and it won't fly for Microsoft today," he said.
Microsoft shares closed at 87-3/4, down 5/16.
--by staff writer Cyrus Afzali
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