November 8, 1999
MARGARET WARNER: How do you feel -- how does Microsoft feel about this ruling now, three days later?
BOB HERBOLD: Well, it's important to understand and keep in front of us the fact that we're in the third inning of a nine-inning game. We're disappointed with some of the aspects of the findings of fact, in that we don't believe it really reflects the competitive nature of this industry and how productive that is for consumers, and also how much innovation is really occurring at this time and at any time in this industry.
|The case and consumer excitement|
MARGARET WARNER: As you point out, the judge essentially accepted the government's version of the facts. Do you accept the fact that at least for the purposes of this case and how it's going to be resolved, that those are now, for better or worse, the facts on which it'll be decided?
BOB HERBOLD: Well, from a legal standpoint we're not going to comment on the process that will take place, because parties do now get to comment on those findings. But one thing I will comment on is that we don't think a lot of the dialogue in the findings matches the incredible excitement and consumer choice that is occurring in the marketplace. The Internet is having a dramatic impact. If you look on the past four-week basis, 39 percent of households in the last four weeks have used the Internet. If you look at car purchases over the last few months, JD Powers just indicated that on all those purchases, 40 percent of those purchases had the buyer using the Internet to get key information. The capabilities are exploding, and the winner here is the consumer in terms of tremendous innovation.
MARGARET WARNER: All right. So you're not accepting that -- as many of the analysts said -- that just even on the facts that Judge Jackson's decision was virtually bulletproof, that it would be very hard to overturn him on the facts.
BOB HERBOLD: Well, we're not going to comment on the legal aspects of this case, as I mentioned before. What we will comment on is that we're in the third inning of a nine-inning game, as I mentioned before, and secondly, what really needs to be reflected is what's going on in the marketplace with consumers and all the excitement and capability and newfound ways to do things that are driving our economy.
|Talks of settlement?|
MARGARET WARNER: Mr. Herbold, has anything happened since Friday to advance the prospects for a settlement of this?
BOB HERBOLD: Well, as I've mentioned several times over the last few days, we'd love to settle this case. On the other hand, both parties have agreed that, in fact, we won't make comments along those lines.
MARGARET WARNER: Have you had even any --
BOB HERBOLD: The third point that I will make here --
MARGARET WARNER: Let me -- have you and the Justice Department -- have your company and the Justice Department -- had any conversations, just as a factual matter, since Friday that might be considered related to this?
BOB HERBOLD: Both parties have agreed not to comment on those kinds of things. But there is one core principle that is very important to us, and we've been saying it all along, which is that we must protect the ability to innovate our products, to listen to consumers and understand what it is they want, make the modifications and see how the marketplace treats us.
MARGARET WARNER: And how -- what does that really mean in terms of the facts, as Judge Jackson found them? In other words, if you were talking about a settlement -- I don't expect you to negotiate it right here -- but what does it mean that you have to be able to continue to innovate? What could -- what is nonnegotiable or not acceptable to you?
BOB HERBOLD: Well, every company, every organization in this industry and, in fact, in any industry has to have the ability to look at what's going on in the marketplace, judge the trends for their technologies that are impacting that marketplace, and then make the modifications that they think will strengthen their product versus competition in the marketplace. It's called the free enterprise system. We are strong believers in it. And that ability to do that has to be protected.
MARGARET WARNER: Many of the editorials in major newspapers over the weekend -- and columnists as well -- editorialized that Microsoft should -- this is my word -- but eagerly seek a settlement in the interests of the stockholders. David Ignatius, a columnist for the Post, said that if Bill Gates doesn't do so, "Microsoft stockholders could reasonably ask whether their CEO really has their best interests at heart." Do you accept that assessment, that in the interests -- that settlement would be in the best interests of the stockholders?
BOB HERBOLD: From the standpoint of what the stockholders are interested in is products that in fact are strong versus competition, and the only way to make our products strong versus competition is to listen to what consumers want, watch the technology trends, make the modifications, and let the marketplace vote. And we have to have the ability, as well as all the other companies in this industry have to have the ability, to do that on an ongoing basis. That I know is very important to the shareholders, very important to the consumers out there who like all the excitement that these products are now bringing forth.
MARGARET WARNER: Do you think that a failure to go to a settlement will open up Microsoft to more -- to civil lawsuits from competitors, and potentially a more draconian remedy imposed by the court?
BOB HERBOLD: No, we're not going to speculate on any of the legal aspects of the case. We think that is properly done in the court system. But I will point out that this is --We're at one stage in this case, and there are many stages that will occur into the future, and I'm sure all that will get sorted out, and what it does, I'm confident that the conclusion is going to be the same as we saw in the first lawsuit that dealt with Windows 95, namely that the court said, "Hey, the idea of improving your product and the ability to innovate is very important, and we salute Microsoft for that."
MARGARET WARNER: So you're talking about the appellate court having reversed Judge Jackson on an earlier decision?
BOB HERBOLD: Yes.
MARGARET WARNER: What is your reading of the Justice Department's interest in or eagerness for a settlement since Friday?
BOB HERBOLD: We wouldn't comment on that. Both parties have agreed that we're not going to say a word in regard to any aspect of settlement. The only comment that I'll make is we've been saying right from the very beginning that we would love to settle this thing, but that that key principle of the freedom to innovate is worth fighting for.
|Protecting the right to innovate|
MARGARET WARNER: In the past, and I'm going to try this one more time, I know that you and the Justice Department held settlement talks even during the trial. On that point of innovation, because that is the same word the Justice Department uses, is there some place that the two of you just cannot meet? Do you just have a completely different definition of innovation?
BOB HERBOLD: I would love to be able to comment, but I really can't, nor should the Department of Justice, and I know they won't because we've agreed not to talk about any details in regard to any settlement activity at all.
MARGARET WARNER: I guess the bottom line, Mr. Herbold, is Microsoft ready, given Friday's ruling, to make any significant changes in the way it does business?
BOB HERBOLD: Well, again, we're not going to comment on that because
that is part of the legal process that has to be carried out. But one
thing I can assure you is that we're as fired up today about the exciting
things that are going on in this industry to benefit consumers as we
were last week and the week before. You know, if you go back 25 years
to the start of this company, we have seen some incredible things happen.
Bill Gates, you know, when he found that issue of Popular Science
magazine and invited his buddy Paul Allen over to get excited about
these things they called personal computers, and to see what's happened
in the last 25 years, it has been great for consumers.
MARGARET WARNER: On the Microsoft Web site today, there is an area you call an alert, and urge people to look at the -- read the decision, which they can get from a link from your Web site, and then to e-mail their congressman, and you provide them with the e-mail address. Why are you doing that? Do you think that the political system can somehow forestall the court process here?
HERBOLD: No, it's simply a matter of making sure that our users understand
that there are people that ought to hear about these kinds of things,
that in fact we've got a big issue here. The information technology
industry in the United States is the leading industry. It's representing
25 percent of the growth of the GDP. It's now up to 8.4 percent of the
MARGARET WARNER: All right. Well, thank you, Mr. Herbold, very much.
BOB HERBOLD: Thank you.