Thank you for sharing!

Your article was successfully shared with the contacts you provided.
“Breaking Windows: How Bill Gates Fumbled the Future of Microsoft” by David Bank The Free Press; 277 pp.; $25 Even with the government’s decision to abandon the breakup of Microsoft Corporation, the antitrust case has created at least one extraordinary benefit for anyone interested in the fate of the American software industry and the Internet itself. The documents Microsoft had to produce in discovery included hundreds of e-mails between the company’s senior executives about the threats their business faced and how they planned to crush them. Combined with the materials generated by the Sun Microsystems Inc., suit against Microsoft for breach of its Java license agreement, they created the most detailed and revealing paper trail about the inner workings of a major American institution since the publication of the Watergate tapes. David Bank, the Wall Street Journal‘s man on the Microsoft beat, has mined these e-mails and internal memos with the forensic zeal of a prosecutor uncovering a conspiracy. But the cover-up he wants to expose doesn’t consist of political crimes, or even antitrust violations, but the capital offense, in the early days of the new economy, of Not Getting It. (Full disclosure: My firm represented Sun in the Java lawsuit, and I worked for The Wall Street Journal many years ago.) The emergence of the commercial Internet in the mid-1990s threatened to decenter the desktop personal computer and undermine the economics of Microsoft’s stranglehold on the desktop operating system and applications markets. The rise of the PC had commoditized processing power, wrecking the businesses of the old vertically integrated mainframe and minicomputer vendors (which made money on hardware and gave away software) and shifting the returns in the industry’s value chain to horizontal suppliers such as Microsoft and Intel Corporation. The rise of the Internet created the possibility of commoditizing Windows itself. That would wreck Microsoft’s monopoly returns by shifting the value in the software platform business away from operating systems and application suites such as Microsoft Office to browsers and Web-based services. The hope of upstarts like Netscape was, in the immortal words of co-founder Marc Andreesen, to reduce Windows to “a partially debugged set of device drivers.” And just as this transformation of Microsoft’s core market began to accelerate, it was confronted by government litigators who wanted to dismember it. Time for the world’s richest and most successful CEO to demonstrate his prowess, right? The smoking gun at the heart of Bank’s Microgate: Bill Gates, the emperor of the desktop, turned out not to be wearing any clothes. He not only failed as a technology visionary and company leader, but badly bungled the job of de facto head lawyer as well. “Gates, for all his genius, badly mishandled the greatest set of crises the company ever faced,” writes Bank. “Microsoft was poorly served by Gates’s intransigence in the face of the company’s legal challenges. But his inability to avert the courtroom bloodbath was only part of his signal failure. He was equally stubborn in the face of the industry’s paradigm shift. When the two realms collided, Microsoft seemed to be pursuing a lose-lose strategy, going down in flames in Judge [Thomas Penfield] Jackson’s courtroom in defense of an outdated technology strategy.” Gates was actually dethroned as CEO, Bank reports, debunking the pitch of company spin doctors who said he had gracefully and gradually relinquished day-to-day responsibilities to Steve Ballmer so that he could focus on longer-term strategic issues: “Allowing Gates more time to lead the company’s technical strategy was the public reason for relieving him of most of his business responsibilities. That was not quite right. Ballmer needed to give Gates enough time to let go so that others could change Microsoft’s strategy.” According to Bank, Gates’ response to the Internet, his 1995 internal memo about the need to address what he called the “Internet Tidal Wave,” was an increasingly out-of-touch insistence on “Windows Everywhere.” Gates’ gospel: All Microsoft products, from Internet Explorer to the electronic wallet and identity management and authentication service now called “Passport,” had to continue to favor Windows and its applications programming interfaces and proprietary formats. In turn, Windows needed to integrate Webcentric functionality such as browsing, e-mail, streaming audio and video, groupware, and instant messaging. Even Gates’ internal critics at Microsoft, Bank insists, saw this as foolhardy. The gospel tried to leverage Windows in the face of two fundamental business and technology shifts that were undercutting its primacy. First, the Web and non-PC-based ways of accessing it (cable TV boxes, PDAs, cell phones, Internet appliances) promised to bypass traditional operating systems altogether as the gateway to the software applications of the new economy — Web sites and the content, goods, and services they provided. Second, the emergence of open standards for encoding and communicating data and “open source” programs such as Linux (whose human-readable, high-level language code bases were freely licensed to all comers as long as all modifications were contributed back to this common pool for further redistribution) promised to free developers from dependence on Microsoft’s closed, proprietary code. On top of that, Gates was the chief architect of Microsoft’s catastrophic legal strategy. “A lawyer’s son, Gates was ferocious in legal debates. Microsoft’s attorneys needed all their self-confidence and legal experience in order to keep up with his ability to instantly understand and apply the law.” But none of them stood up to Gates’ insistence that Microsoft respond to Judge Jackson’s December 1997 order to stop bundling Internet Explorer with Windows. Gates’ plan: strip out all of the Windows code shared by the two programs, and offer equipment manufacturers either a version of Windows 95 that therefore no longer worked, or a 2-year-old version that antedated the integration of Explorer. Jackson’s order was plainly intended to give Windows licensees the simple flexibility to delete the desktop icon for Explorer and promote competing browsers, not require Microsoft to ship a broken product. Gates’ contemptuous literalness was the turning point in the antitrust trial, fatally damaging the company’s credibility with the court: “Microsoft insiders glumly added the legal situation to the list of projects that, under Gates’ close supervision, went dramatically awry.” Bank’s indictment is one of the harshest of an iconic American CEO since Lee Iacocca’s skewering of Henry Ford II in his autobiography nearly 20 years ago. There’s zinger after zinger: � As the Microsoft board investigated the company’s problems in late 1997 and early 1998, it confronted the legacy that “since the founding of Microsoft, Gates had been its single point of integration. Now the board found that he had become the single point of failure. Gates was losing control of Microsoft … . The more deeply Gates was involved, the more likely a project was to fail … . Gates had lost the technical respect of many of Microsoft’s key managers … . For five years or so, he had been largely irrelevant to what Microsoft was doing.” � At a January 1998 board meeting, Gates “launched into a remarkable rambling discourse, alternatively lashing out at his detractors and descending into self-pity. He was drowning, he said. He was having trouble sleeping and his stomach was bothering him … . The weight of expectations, the problems piled on him from inside and outside the company, were overwhelming him. He lost his composure, and it took him several minutes to recover.” � As pressure grew within the company to rethink product strategy, “Gates had held the Internet’s future in his hands and considered the choice between opportunity and fear … . But when forced to chose, he opted for fear. For all his bravado, he wasn’t willing to bet the company … . Rather than rising to the challenges of the new Internet model, he chose to resist them. Rather than embracing the new wave of innovation, he sought to slow it down to preserve Microsoft’s old dominance.” � Gates’ stonewalling and evasiveness in his August 1998 deposition in the antitrust case was the performance of an “insolent schoolboy.” How? “At the critical moment he had failed to stand up for his company or himself. For the founder and chief executive of the company that more than any other defined the rules of the new economy, it was a stunning abdication of leadership.” Here’s part of what makes “Breaking Windows” such a peculiar book. After 250 pages of savaging Gates and his myopic failure of vision, the book’s coda is a bizarre, sycophantic paean to Gates the all-seeing and his ability to triumph in a post-Windows world. It’s as if “All The President’s Men” had ended with a vote of confidence in Nixon and a plea for yet another comeback: “The epic quest to define the primary software interfaces for work, entertainment, and communications will require all of Gates’s strategic abilities … . Gates has been dealt a strong hand. He’s young, visionary, and intellectually honest. He can indeed scale, indeed grow … I say he shoots the moon. I say Gates rises to the new challenge. I say he goes out a winner.” The other flaw in “Breaking Windows” is much more serious. Bank is a superb reporter, but he missed the larger import of the internecine conflict he so admirably documents. Although the book’s real energy is devoted to chronicling Gates’ fall from grace, Bank casts his master narrative in terms of the struggle for Microsoft’s soul between the president’s key men. James Allchin, Gates’ top ally for the “Windows Everywhere” strategy, is the bad angel. A system design purist and fierce defender of the centrality of Windows, Allchin drove the development of Windows NT (a nonconsumer, back-office version of Windows that, unlike Windows 95, wasn’t based on the original DOS operating system Microsoft bought in 1981 and grafted onto the first IBM PC). It was Allchin who headed the effort to create a unified business and consumer version of Windows not crippled by DOS underpinnings, culminating in Windows XP. Brad Silverberg, head of the Windows 95 team and ill-fated leader of Microsoft’s short-lived Internet platform and tools group, is the good angel. Bank casts him as the polar opposite of Allchin, focused on delivering better features to end users and striving to free Microsoft from its wrongheaded dependence on Windows uber alles and to embrace the multiplatform, open-standards world of the Web. Bank’s retelling of their ferocious struggle for mind share and resources within the company is entertaining, but his conclusion that the forces of light have somehow triumphed is baffling. Silverberg left Microsoft after being stripped of most of his responsibilities in 1998, and Allchin stayed on to ship Windows XP. Nonetheless, Bank concludes that Windows XP “represents an increasingly obsolete model of software creation and distribution” and forecasts the emergence of a “loosely coupled network of niche software producers” responsive to specific customers’ needs that will displace the dinosaurs of “high-volume, one size fits all” software such as Windows. And even Microsoft is now riding that wave, Bank contends: “The demand for competition on the merits and a common code of open interfaces is not as radical as it seems. It’s what Microsoft itself advocates for AOL’s instant messaging system; it’s what it has pledged itself with its use of industry-standard XML.” Microsoft “has already taken half-steps toward the new model,” he concludes, by promising to give some of its corporate customers access to Windows 2000 source code. This is nonsense, according to Microsoft’s competitors and government lawyers. It’s as if the Watergate prosecutors had used the Nixon tapes simply to map the maneuvers of Bob Haldeman and John Dean and ignored the cover-up itself. The one thing the antitrust trial and its aftermath have made clear is that Windows XP and its complementary .Net and “HailStorm” suite of tools and services (Web-based services such as Passport, online calendaring, and contact management and content distribution) embody the triumph of Windows Everywhere and Microsoft’s Borg-like drive to assimilate or eliminate every possible alternative to its technology. As the white papers and briefs prepared in connection with the case point out, incorporating standards into Windows has nothing to do with making Windows an open platform. Windows 95 supported TCP/IP, the basic Internet communication protocol, for example, but that hardly made it a level playing field for non-Microsoft applications. And .Net and HailStorm couple all of the key aspects of the Web as destination more tightly than ever to Windows and to proprietary Microsoft extensions of open standards. In his “Internet Tidal Wave” memo of 1995, Bill Gates complained that “browsing the Web, you find almost no Microsoft file formats.” That had to be fixed: “Only when our Office/Windows solution has compatible performance to the Web will our extensions be worthwhile … . We need to give away client code that encourages Windows-specific protocols to be used across the Internet. We need to make sure we output information in both vanilla HTML format and in the extended forms that we promote.” The problem has now been fixed indeed. Windows XP bundles Windows Media Player 8.0, for example, and hence Windows XP users won’t be able to natively process MP3 or Real Networks files, but only content coded in Microsoft’s proprietary streaming audio and video formats. Since the new release of Media Player won’t be sold separately, non-Windows users won’t have access to these formats at all. When Windows XP users boot their machines, they will automatically log in to Passport, which will mediate their access to all Web sites. Since Passport is based on proprietary Microsoft extensions to industry-standard authentication protocols, it won’t work out of the box with UNIX servers. Of course, Windows XP will not contain Java, the current lingua franca of Web applications. If users want to access Java-based Web site features as well as those based on CLR, they will need to download the Java interpreter and install it themselves. And so on, and on, and on. Despite Bank’s fanciful tale of good angels bringing light to Redmond, the Dark Prince (or at least his philosophy) still seems well entrenched. If you believe in a kinder, gentler Gates, there’s a new Nixon I’d like you to tell you about as well. Although Microsoft still faces at least one formidable competitor for the desktop and beyond — AOL Time Warner Inc. — it has hardly changed its ways. To use Bank’s own metaphor, Gates has already shot the moon. Whether he will win the game itself is still in doubt. But there is no doubt how the game will be played. Michael Stern, a former journalist and English professor, is the head of Cooley Godward’s Communications and Technology Transactions group.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.