Gates vows no repeat of IBM woes Microsoft's troubles resemble Big Blue's earlier predicament

Software

May 19, 1998|By KNIGHT RIDDER/TRIBUNE

A combative Bill Gates vowed at a session with reporters yesterday not to repeat the mistakes International Business Machines Corp. made two decades ago when Big Blue stood where Microsoft Corp. stands today.

With his Windows 98 software under fire by one of the most sweeping antitrust attacks in recent history, Gates, now America's richest man, knows better than anyone just how IBM erred.

He knows, too, just how badly that error hurt yesteryear's 800-pound computing gorilla. It is because of IBM's error while under trustbuster fire that Gates wears the gorilla suit today.

IBM's megabyte miscue in the face of heat from Washington during the late 1970s and early 1980s was to hand over the operating system for IBM's version of the personal computer to outsiders, two young men. Their names were Bill Gates and Paul Allen, and they ran a bush-league computer company in Albuquerque, N.M., named Microsoft.

"It is going to take some leadership to make sure we are not distracted as IBM was, but I don't see why we should be," Gates said hours after the Justice Department and the attorneys general from 20 states filed antitrust lawsuits against Microsoft in vTC federal courts.

The lawsuits demand that Microsoft turn over a substantial part of its control over Internet software to arch-rival Netscape Communications Inc. and allow computer makers to write software that would, in effect, cover up Microsoft's own software when consumers turn on their PCs.

Microsoft's response was that the Justice Department is trying to put Netscape in a position to eclipse Microsoft in the all-important area of Internet software.

Gates testily compared federal demands that Microsoft also provide buyers of Windows 98 with Netscape's Internet software akin "to forcing Coca-Cola to include three cans of Pepsi in every six-pack."

He fumed that barring Microsoft from displaying its software on the boot-up screen when a computer is turned on was akin to telling Coca-Cola not to put its logo on its soda cans.

Yesterday's confrontation between Gates and Joel Klein, the assistant attorney general in charge of the Justice Department's antitrust division, truly was the proverbial deja vu all over again on the American high-technology scene.

Parallels to IBM's crisis two decades ago were plentiful and very much on the minds of Microsoft's inner circle.

The story of how the two computer nerds, Gates and Allen, outsmarted the blue-tie and black-wingtip sophisticates at America's best technology company dates back to 1979, when IBM realized it needed to produce a personal computer to compete with ones being built by upstarts such as Apple Computer Inc., now-defunct Altair, Commodore Computer Inc.'s Pet and even Timex.

IBM executives have since recalled how Big Blue's lawyers and top brass fretted that moving the mainframe giant into the business of building desktop computers to attack these small fry operations would be a red flag. Federal prosecutors already were inflamed over allegations that IBM's business practices were predatory and anti-competitive.

The antitrust case against IBM ran for almost a decade before it was dropped Jan. 8, 1982, after many one-time critics had decided the company had reformed. Most of the conflict focused on issues of how computers and their software get sold, similar to the issues pitting Microsoft against Clinton administration regulators today.

IBM was accused of being predatory in how it forced corporations and even individual consumers to purchase service agreements in addition to IBM hardware.

For Fortune 500 companies, these interlocking agreements pushed on buyers were as complex as requiring exclusive use of IBM software, IBM storage tapes, IBM cleaning equipment and other services.

Prosecutors filed numerous suits, won a variety of restraining orders and otherwise kept pressure on as IBM gradually changed how it operated, until the case ultimately was dropped.

And now, with a federal antitrust probe of Intel just beginning, and with yesterday's flurry of anti-Microsoft lawsuits in the hopper, it is today's leaders rather than IBM on the firing line.

And Gates emphasized repeatedly yesterday that he has studied the past well and has no intention of repeating it.

"We are going to stay very focused on building great products while we fight this in court," he said in a voice that cracked with emotion.

Pub Date: 5/19/98

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