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Gates bullied Intel?
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August 26, 1998: 5:56 p.m. ET
Federal and state regulators suspect Microsoft used clout to threaten Intel
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NEW YORK (CNNfn) - The Justice Department has asked several Intel Corp. executives if Microsoft Corp. tried to intimidate the chip maker into keeping its technology "Microsoft friendly."
A source familiar with Intel's legal activities told CNNfn Wednesday that several company officials had given depositions to the Justice Department recently regarding an August 1995 meeting between Microsoft chairman Bill Gates and Intel chairman Andrew Grove, who was the company's chief executive officer at the time.
The Justice Department reportedly is reviewing notes from that meeting that suggest Gates made "vague threats" about backing Intel competitors if Intel brought new technology to the market that superseded or conflicted with Microsoft's software platform.
"We can't speculate on what kinds of new allegations the government may be trying to create in the final days before this case goes to trial," a Microsoft spokesman told CNNfn.
"Microsoft and Intel work together closely to make sure that our technologies work well together for the benefit of the future development of the software industry and the benefit of consumers. It's hard to see where the government is trying to take this case."
Meeting was crucial
Richard Doherty, software analyst and director of research firm The Envisioneering Group, said the August 1995 meeting was a major turning point in the relationship between the two companies.
"Intel had a pretty aggressive roadmap for delivering (multimedia and Internet functions) to consumers starting in '95. Microsoft thought it would take a little longer and should all be done as software," he said.
Allegedly, Intel had been pushing chips and processor innovations that would support multimedia and Internet functionality independent of Microsoft software, but Gates put his foot down.
"The August 1995 timeline really caps bout 18 months of innovation, when Intel really wanted to put features into the silicon at a faster pace than Microsoft would have the software to deliver it," said Doherty.
By insisting that Intel slow its rate of innovation, Doherty said, Gates was not precisely blocking innovation -- a frequent charge made by Microsoft accusers -- but was instead "changing the rate of the clock a little bit to (better) match the Microsoft pace of information rollout."
"Some would say (Microsoft) was throttling Intel back to delivering the pace to others. Others would say it was in the interests of Microsoft to make sure it (Intel) worked with their software upgrade plan."
A spokeswoman for the Justice Department declined to comment on the matter.
The Intel depositions could bolster the government's ongoing antitrust case against Microsoft if evidence suggests a pattern of monopoly power abuse that squelches the innovation of competitive technology.
Intel's microprocessors are widely used in making personal computers. Its market share for microprocessors, in fact, parallels that of Microsoft's Windows operating system so much so that the two companies are often referred to as "Wintel."
The government's antitrust suit, set to go to trial Sept. 23, accuses Microsoft of using its monopoly in computer operating systems to gain unfair advantages in other areas, including the Internet.
Gates will begin his formal deposition to a body of 20 state attorneys-general Thursday at the Microsoft corporate headquarters in Redmond, Wash., a source told CNNfn.
Microsoft (MSFT) shares lost 1/4 to close at 112-9/16 on Wednesday. Intel (INTC) shares slipped 1-13/32 to 83. 
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