CONVERSATION: AULETTA
February 26, 2001

Microsoft is appealing a lower court decision that could break up the software giant. Margaret Warner talks about the case with Ken Auletta, author of "World War 3.0: Microsoft and Its Enemies."

 

Online NewsHour Special Report: The Microsoft Case June 12, 2000: Microsoft CEO Steve Ballmer on the case against his company. June 8, 2000: Assistant attorney general, Joel Klein, talks about the ruling to break up Microsoft. June 7, 2000: Press conferences by Attorney General Reno and Antitrust Chief Klein May 10, 2000: Microsoft proposes plan to counter the government's breakup solution. May 1, 2000: The Justice Dept. asks a federal court to split Microsoft into two companies. April 28, 2000: Government and 19 states suing Microsoft explanation of the government's proposal April 3, 2000: Judge rules against Microsoft April 3, 2000: Analysis of the court's decision against Microsoft Nov. 8, 1999: Microsoft's Bob Herbold responds to the decision that Microsoft is a monopoly. Nov. 5, 1999: Two legal experts analyze the court's findings in Microsoft antitrust case. April 1, 1999: Efforts to settle Microsoft case failed. Nov. 12, 1998: A discussion on each side's arguments in the antitrust case. May 18, 1998: Justice Department and 20 states launch antitrust actions. May 18, 1998: Technology experts discuss how the Microsoft case will shape the industry. April 14, 1998: Did Microsoft try to stifle competition? Jan. 13, 1998: The Justice Department files a complaint against Microsoft. Oct. 21, 1997: The Justice Department charges Microsoft with monopolistic practices. Browse the NewsHour's coverage of cyberspace and law.   Microsoft Netscape United States Department of Justice U.S. v. Microsoft antitrust filings Software and Information Industry Association	MARGARET WARNER: Before, during and after the trial, writer Ken Auletta was there, talking to the major players, covering the courtroom action and the negotiations behind the scenes. Parts of his reporting have appeared in the New Yorker Magazine, but it's all told in his new book "World War 3.0." Ken Auletta joins us now. Welcome back to the program. KEN AULETTA: Nice to be here.
	Courtroom drama and a good cast of characters
	MARGARET WARNER: Ken, most people wouldn't think of an antitrust case as being the stuff of great courtroom drama. Why do you think this would be a great tale and make a great book? KEN AULETTA: Well, you didn't know at first whether it would be. I have went down there for the New Yorker saying I hope it will be, and I thought it might be an interesting window to profile Gates and the warrior culture at Microsoft. In fact when I got there I realized you had this vivid cast of characters from David Boies who is now famous for having represented Al Gore, but also had once represented IBM, but he was a prosecutor for the government. And you had Gates obviously but the lawyers from Sullivan and Cromwell who got $100 million to represent Microsoft; Judge Thomas Penfield Jackson, a classic conservative who ultimately would rule against Microsoft and the position that they thought was kind of a left liberal activist position. So you had some vivid characters. So as I got there and I was reporting for the New Yorker I said, wait, this is a book. MARGARET WARNER: It's interesting in the early parts of the book the way you sketch it out that two of the players, judge Jackson, and also the government official at the Justice Department Joel Klein who spearheaded this whole thing neither of them started out wanting to break up this company. KEN AULETTA: Microsoft doesn't believe this. They believe that right from day one that Joel Klein was a rabid anti-Microsoft basher and Jackson exhibited a bias. The truth is that Klein was reluctant to prosecute and had hoped to reach a settlement; and that Judge Jackson, who had written classically conservative opinions, in fact, was Ronald Reagan's fist appointee to that court, was certainly against breaking up Microsoft, as he told me in a series of interviews he granted me during and after the trial. But Microsoft's behavior, he became convinced, was so recalcitrant that only a imposed remedy would work, he thought. MARGARET WARNER: So you're talking about Microsoft's behavior both in its business but also in the trial itself. KEN AULETTA: Judge Jackson sat there, Microsoft was... and from Bill Gates down was offended that this trial was taking place. They thought they were being wronged. And the world's richest man, Bill Gates, thought he was a victim and honestly believed the government was wrong. I think it clouded... this passionate belief that Gates had clouded his normal tough-minded business judgment. So he was not going to broker a compromise. He was going to fight them. When they deposed Bill Gates in August of 1998 in a series of videotapes that ran throughout this trial, David Boies cleverly trickled this stuff out and what you saw in demeanor was Bill Gates sitting there rocking back and forth, not looking at David Boies who was asking the questions and basically conveying an attitude, why are you questioning me? Why are you bothering me with this stuff? I've got important things to do -- and the judge sitting there watching this testimony-- and of course Gates' testimony framed the testimony of all the other Microsoft witnesses. They couldn't contradict Bill Gates. And so the judge watching this and he showed me the notes he took during the trial, he just said, you know, these people are just arrogant. I don't believe what they're saying today. MARGARET WARNER: This came off the notes he had sort of written to himself. KEN AULETTA: He had a big green book that he took into court everyday under his arm. He sat down on a throne as the judge does, and he would take these notes. In the course of the interviews I was doing with them, the condition he imposed upon me, I couldn't write anything until the book. It would only be for the book. I asked him what did you write when you saw Gates in this deposition on this day? He said, well, I wrote and he pulled and he showed me what he wrote. What he's saying today contradicts what he wrote and e-mailed at the time. One of the problems -- this was like a mob trial in the following way. Microsoft was accused of thuggish behavior but it was like it in the following sense. In a mob trial you have wire taps. In this trial there were no wire taps because in Microsoft they don't talk on the phone. It's all e-mail but you had all of their e-mail. David Boies and the government was just able to show what Gates wrote in May of '95, '94, whatever, and when Gates said I don't know what you're talking about, they would pull out the e-mails he wrote. So it was devastating.
	Bill Gates and the Great Gatsby?
	MARGARET WARNER: Tell us a little bit more about what you concluded about Bill Gates. You have some fascinating tales, a couple where he blows up at you and also blows up at another reporter in public, in oddly public situations. He has this fascination with the Great Gatsby. Just give us a flavor of this. What do you think it's all about? KEN AULETTA: I'm not a psychologist -- I ought to start by saying that. I think Bill Gates in many ways... he's a brilliant businessman and he's a brilliant man and he's built a great company. But in many ways he's a child. He's asocial. And he behaved, he behaves like a child sometimes does when they're upset. They have a tantrum. He has tantrums. I think despite the fact that he's this tough-minded businessman, he basically had a tantrum because he should have solved this case and settled it before it went to trial, before people like me wrote books and before he got into all this trouble. He could have for chump change. And he didn't, I think, because he was being childish. The Gatsby thing, Gates is a man who identifies with Jay Gatsby. He has inscriptions in his house from Fitzgerald. And actually I end the book by talking about, you know, how they got in trouble, Daisy and Tom Buchanan, because they were basically careless children. I think in some ways, in this case, Bill Gates was careless -- in allowing Microsoft to do some of the blatant things it did do. MARGARET WARNER: One of the great pieces of behind the scenes reporting in your book was this mediation effort after Judge Jackson had found the facts, i.e., that Microsoft had broken the law, he ordered this federal judge or ask the federal judge in Chicago to take it on as a mediation. There it suddenly it appears that Gates and Microsoft were much more open to a deal and Gates got very involved. KEN AULETTA: It was a total flip flop. It was one of the things that was very stunning for me and I had to be sure was right. The Gates of last winter, the winter of 2000 is very different than the Gates we saw in the early stages, may of '98 when the Justice Department brought its charges, and what you saw was that Gates was now eager and Microsoft was eager to settle and walk that extra mile. In fact, the government now had its... had trouble getting its act together. There was a division between the 19 state attorneys general and Joel Klein's justice division. And I think Microsoft tried hard and honestly tried to settle this case and probably would have succeeded in settling the case if there wasn't such a level of mistrust between the government and them, and if, in fact, the states were part of the same negotiating stance as Joel Klein was. MARGARET WARNER: Were you surprised that Gates... you said a couple of times he was on the phone for two-and-a-half hours with Judge Posner. KEN AULETTA: I was surprised. In fact, one of the things that caused me consternation -- I was getting spun by both sides. I said I really need... The only other person in the room, it was all secret - was Judge Posner, so I tried desperately to get to him. In the end I succeeded. And the deal I made with him is, Judge Posner, I will send you a draft of the mediation chapter from my book that I have written. You don't control it but I'd like you to comment if any facts are wrong. And he said no commitment, Mr. Auletta, but I will look at it. That night he e-mailed me the first of two e-mails where he corrected facts. Essentially he said this is what happened. From that, I basically was certified in my belief Microsoft really did try to settle it. They ran out of time. MARGARET WARNER: Why do you think then they had changed their mine mind? KEN AULETTA: Because I think it was a disaster for Bill Gates and Microsoft. MARGARET WARNER: But he finally realized it. KEN AULETTA: I think he realized it. He had to put this behind him. This was very harmful to the company. They were losing good people. Their stock price was slipping. Their ability to reward people with appreciating shares was slipping. Competitors were emboldened to challenge them. The government was in its rear view mirror. It was a disaster.
	The final chapter
	MARGARET WARNER: Your final chapter in fact is called even if Microsoft wins it loses. KEN AULETTA: I think Microsoft is a great company and will continue to be a great company but it will no longer be a dominant company the way it has been in the past. We're moving from a world where they dominate the PC to a world of other devices that use the Internet where Microsoft is not dominant. In addition to that, you have other software that's coming out that are using the Internet, which is challenging Microsoft. Their ability to attract good people is lessened because of this trial. Their brand name is harmed. They're diverted in attention because of the government pressure on them. I think that they have a hard time avoiding the IBM pitfall. Gates is fixated on avoiding that IBM pitfall and maybe he'll succeed. But in my judgment, the company will never be as dominant in the future. MARGARET WARNER: Ken Auletta, thanks so much. KEN AULETTA: Thank you.