It seems it takes a Senate committee to get straight answers out of computer industry executives these days – although we do our best when given the opportunity. But stripped of their protective shield of PR minders and spin doctors, four of the industry’s most influential bosses sat on front of the Senate Judiciary Committee’s hearing into the effects of monopolies in the US software industry for up to four hours, and gave mostly straight answers to some tough questions. Microsoft Corp chairman and chief executive Bill Gates – returning to the place where he spent a few months in 1972 as a House page – was the focus of most of the questioning at the hearing, which was titled Market Power and Structural Change in the Software Industry, however, he was getting very little assistance from Michael Dell or venture capitalist and journalist Stewart Alsop, both brought in to supposedly provide some balance to Sun Microsystems Inc’s Scott McNealy and Netscape’s Jim Barksdale. Great Plains Software CEO Douglas Burgum was brought in to also add weight to Microsoft’s case, which he did well enough. Gates was stubborn and raised the ire of committee members on a number of occasions, but faced far more demanding questions than any other panel member and held his ground fairly well. McNealy was his usual quote-worthy boisterous self, who pulled out his catalog of analogies, drawing comparisons between Windows and what it would be like if Redmond controlled the car industry, many of which have been heard before. But he also stood, in his words, as the only company competing against Microsoft’s operating system dominance, given Silicon Graphics Inc’s recent conversion to Windows NT.
By Nick Patience
Barksdale had a fairly easy ride and it appeared as if committee members felt rather sorry for him, trying to compete against Microsoft with only a small fraction of the resources. Alsop was brought in without a particular axe to grind and managed to straddle both sides of the fence without getting splinters. But Michael Dell, it has to be said, had a nightmare. Following his opening prepared statement – each panel member had five minutes – which was little more than a commercial for the company, in which he even thought it necessary to give out the Dell URL, he was made to look like a Microsoft stooge, especially when committee members took glee in reading out transcripts from phone calls placed to Dell sales staff on Monday asking if they could have a PC with Netscape Navigator pre-installed. Dell insisted they could, but the transcripts said the opposite. Dell said the company’s agreement with Microsoft did not prevent it from offering Navigator bundled with PCs. But the sales people offered up reasons why the opposite was the case: we can’t sell you Netscape Navigator because of Microsoft, or because we’re an R&D partner with Microsoft. One of them even revealed that he thought Navigator a better product and only wished he was able to offer it. After spending so much time going on about consumer choice an exasperated committee member demanded of Dell: How do you know what your customers want if you don’t offer them a choice? Dell conceded eventually that large customers can have Navigator is they demand it, after which he was metaphorically made to stand in the corner of the classroom by the committee, and little else was heard from him through the rest of the hearing. As the hearing passed through the two hour mark and McNealy, then Dell had to leave for prior engagement, Gates was the focus of most of the committee’s attention, in particular the chairman, Utah Republican Orrin Hatch, an outspoken critic of the company of many occasions. Having raked over the company’s recent concession to European ISPs, enabling them to actively promote either Internet Explorer or Navigator, Hatch asked Gates if he could get a guarantee that the company would also drop restrictions on partners on the company’s Active Channel windows on IE 4.0. Currently Microsoft restricts its Active Channel partners from promoting Netscape on the Active Channel guide, but are free to do so anywhere else. They are also restricted from joining Netscape’s rival Channel program for a limited period after signing with Microsoft. Gates would not concede that at the hearing, but California Democratic Senator Dianne Feinstein reminded Gates that he had promised to do just that when speaking to her in her office on Monday. Feinstein, no doubt emboldened by her success in blowing Gates’ cover, tried to get him to concede that Microsoft’s preferred application developers get preferential information about public betas of Windows 98, but Gates would not concede that one. However, he was caught out one more time when Hatch asked him what the company’s revenues were last year, which he remembered, and its profits, which he could not. However, Gates could recall the company’s margin last year – 24% – which led Hatch to conclude that you have quite a bit of margin to work with. If your industry was competitive your prices would be a lot lower and your shares would probably go down, he noted, referring to both Microsoft’s stock and Gates’ share of it. Gates recall to Washington is likely to occur lot sooner than he would like.
