Gates Says Proposal Would 'Greatly Devalue' Microsoft

By Agence France-Presse Microsoft Corp. Chairman Bill Gates told a court hearing April 22 that his Redmond, Wash.-based company would "be greatly devalued" if a proposed antitrust remedy from a group of states were implemented. Gates made a rare court appearance in the hearing before U.S. District Judge Colleen Kollar-Kotelly, who is considering a penalty for the firm's violation of U.S. antitrust laws. "Microsoft would be greatly devalued," Gates said in prepared testimony totaling 156 pages, adding that the plan would "require Microsoft to withdraw Windows from the marketplace." The appearance in the antitrust court case was the first for the founder of the world's biggest software firm. At the original antitrust trial in 1998 his videotaped deposition was introduced into evidence. On Monday, Gates said the company's market capitalization is based on the market's belief that the firm is on track to deliver "breakthrough technologies" that generate new revenues. Gates told the court the pricing provision of the states' plan -- which gives discounts to slimmer versions of Windows -- could possibly bring the price of Windows to nothing and cost his firm $10 billion. "Rather than earn a return on our substantial investment in improving Windows, any improvements could result in a revenue loss to Microsoft. In fact, under the pricing formula set forth [by the proposal], the price of Windows could be zero," he said. And because computer manufacturers would be able to substitute software made by other firms in place of Microsoft-made components of Windows, Microsoft could lose approximately $10 billion in revenue, Gates said. In his testimony, Gates rejected specific provisions of the proposal and said that the states' remedy is too complicated and confusing for the company to clearly understand how it must comply with its intent. Late last year, Microsoft and the Justice Department agreed to settle their 4-year old antitrust dispute, but only half of the 18 states that were suing the company alongside the federal government signed on to that deal. Kollar-Kotelly is holding hearings on two separate tracks in the case -- whether to accept the Justice Department settlement as well as the stricter remedy proposed by the non-settling states. Atop the list of actions the states are seeking is for Kollar-Kotelly to force Microsoft to offer a stripped-down version of Windows that does not include add-on software, known as middleware, thereby giving consumers a choice of vendors for added features to the basic Windows operating system. Gates told the judge that proposal from the states is based on the faulty premise that Windows consists of a small, self-contained and fully functional operating system and a collection of readily identifiable, add-on middleware. "In fact, each version of Windows is designed as a single, integrated product that provides a broad range of functionality," he said. Gates told the court that the requirement of stripped-down Windows would be technically unfeasible for the software giant. "It would be utterly impractical for Microsoft to undertake the level of testing and problem solving described above if the [states' plan] were in place," he said, adding that the states' plan would force the company to create 4,096 different versions of Windows. Copyright Agence France-Presse, 2002