Fact Sheet On Bill Gates and the Microsoft Corporation
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By Michael Robertson
Q: Can you provide some background on Bill Gates?
A: Bill Gates was born in 1955 and founded the Microsoft Corporation in
1975 with Paul Allen. Mr. Gates was CEO and Chairman of Microsoft until
2000, when he gave up the CEO title to Steve Ballmer. During that time,
Microsoft became the largest and richest software company in the world,
with $46 billion in the bank and adding nearly one billion per month to
that total. It has made Bill Gates the richest man in the world with an
estimated wealth of $54.44 billion dollars or $187 for every man, woman and
child in the United States.
Q: Can you provide a brief history of Microsoft?
A: In the early 1980s, IBM asked Microsoft to produce an operating system
for their upcoming "personal computer." That product became MS DOS and made
billions for Microsoft. Microsoft followed that up with Microsoft Windows
and the components of Microsoft Office (Microsoft Word, Microsoft Excel and
Microsoft PowerPoint).
Q: Doesn't that make Microsoft the most innovative PC software company?
A: Virtually every successful Microsoft product was either purchased from
another company, or a direct copy of an existing company's successful
product. Microsoft's first major success, MS DOS, was purchased from
another company and renamed from QDOS. Microsoft Windows was a copy of
Apple's innovative Macintosh operating system. Microsoft Word (1983) was a
copy of Wordperfect (1982). Microsoft Excel (1985) was a copy of Lotus
1-2-3 (1983). Using revenue from their monopolies, Microsoft purchased
PowerPoint (from Forethought), Frontpage (Vermeer), and Visio (Shapewear).
Q: The history of PC software is made up of companies borrowing ideas from
others, so what is wrong with that?
A: To some degree, almost all technology companies build on existing ideas.
Microsoft, however, has often engaged in wholesale copying without adding
much. With many of the original companies gone or withering, Microsoft is
embarking on a calculated plan to rewrite history and position themselves
as the original innovator. For example, Microsoft now claims that they are
the sole inventor of "windows" and no other company can use that term -- in
spite of the fact that Microsoft Windows was such a close copy of the Apple
Macintosh that it triggered a lawsuit upon its release (See
http://law.richmond.edu/jolt/v1i1/myers.html).
Q: Even if they're not innovative, Microsoft's products are used so widely
that they must be making great products, which makes Microsoft a great
company, right?
A: Normally, when a company enjoys success it's a sign of a good company
serving their customers. While Microsoft employees have surely worked hard,
their success has been tainted by decades of illegal actions by Microsoft's
management to secure, maintain and extend their monopoly position.
After the success of MS DOS, a competing product emerged called DR DOS,
causing MS to lower their prices. Bill Gates wrote in an e-mail, "I believe
people underestimate the impact DR-DOS has had on us in terms of pricing"
(May 18, 1989). So Gates gave orders to executives at Microsoft to
purposely sabotage DR DOS. "Make sure it [DR DOS] has problems running our
software in the future." And where it didn't have problems, programmers
were instructed to create bogus error messages saying that it did. The
tactic worked and DR DOS was forced out of business, leaving the Microsoft
monopoly. Years later, MS paid more than $100 million to settle this case
-- long after DR DOS was no longer a threat
(See www.drdos.com/fullstory/factstat.html).
With the MS DOS monopoly as a foundation, Microsoft continued a series of
illegal actions designed to extend their monopoly to additional products,
including Microsoft Windows and Microsoft Office. For example, they stifled
competition by threatening and extorting computer manufacturers to enter
into licenses agreeing to only carry Microsoft products. By the time the
Justice Department caught up to them and filed two antitrust cases for a
wide range of unfair and anti-competitive actions (1993, 1996), Microsoft
had cemented a massive monopoly which gave them hoards of cash to fight any
company -- or even the government. Microsoft settled the first case,
agreeing to change its illegal marketing practices and was found guilty in
the second case (See
www.washingtonpost.com/wp-srv/business/longterm/microsoft/documents.htm).
Q: Isn't this just a case of the losing companies complaining because they
couldn't compete?
A: Over the last 20 years, it is difficult to find another company which
exhibits such a lengthy pattern of illegal behavior designed to thwart
competition. E-mail from a MS executive said it best, "It seems clear that
it will be very hard to increase browser share on the merits of IE
[Internet Explorer] 4 alone...It will be more important to leverage the OS
asset to make people use IE instead of Navigator" (2/24/97). There have
even been cases where Microsoft has stolen technology which has put
companies out of business, such as San Diego's Stac Electronics. A jury
found MS guilty and ordered them to pay $110 million (See
www.vaxxine.com/lawyers/articles/stac.html).
Q: Where does Microsoft make their money?
A: Microsoft makes money largely from two product lines: operating system
(Microsoft Windows XP) and office suite (Microsoft Office). Virtually every
other venture that Microsoft has embarked upon has not generated a profit
-- including WinCE, Xbox, MSN, WebTV, Sidewalk, MSNBC, etc. (See
http://biz.yahoo.com/e/l/m/msft.html).
Q: If most product lines lose money, how can they generate such large
profits?
A: Through illegal tactics, Microsoft has been able to secure and keep a
monopoly which allows them to charge very high rates for their software.
Enabled by the monopoly, Microsoft's profit margins are 5 times greater
than the average from top 500 US companies. If Microsoft faced meaningful
competition, their profits would be more in line with the rest of corporate
America and software would cost 1/5 what it does today (See
http://research.businessweek.com/scoreboard.asp).
Q: Aren't all of these actions ancient history? Since Microsoft has been
under government scrutiny, haven't we seen improved corporate behavior?
A: Microsoft's massive war chest and unchanged management team means more
corporate wrongdoing. This makes it extraordinarily difficult for
competition to emerge. Just last week, an e-mail was revealed in which
Microsoft executives disclosed a $180 million fund designed to thwart Linux
by giving away Microsoft software and services -- the same successful
strategy they used to put Netscape out of business (See
www.iht.com/articles/96369.html). In another example, over the past year,
Microsoft has spent millions in legal fees in an attempt to shutdown a San
Diego Linux company, Lindows.com (See www.lindows.com/opposition).
Q: But doesn't Microsoft do a lot of good?
A: The charitable giving that Microsoft advertises is usually a business
tactic, where they give away software in an attempt to gain traction in a
market, such as they do with schools. The software costs them just pennies
to reproduce, but they advertise the full retail value for tax and PR
reasons. Microsoft rarely gives actual cash (See:
www.nytimes.com/2003/05/26/technology/26SOFT.html).
Q: Hasn't Mr. Gates given away billions of dollars?
A: Nearly 20 years after starting Microsoft and only after antitrust issues
emerged, Mr. Gates created a foundation and moved billions of dollars of
stock, tax free, into this new organization, which he controls as the sole
trustee. Mr. Gates' PR folks have convinced major publications to carry as
many as 5 stories in 3 days about the multi-billion dollar foundation in an
attempt to bolster Mr. Gates' image (See
http://theregister.co.uk/content/4/28039.html). By repeatedly trumpeting
the formation of the foundation, then announcing individual initiatives and
finally announcing individual grants, readers are left with the impression
that billions of dollars are routinely dispersed, but that is simply not
true. In 2001, the Gates Foundation collected more money in interest from
their holdings than they dispersed in grants (See: www.fdncenter.org).
More troublesome, Mr. Gates has used monies from the foundation he
controls, in concert with Microsoft's corporate goals. In an attempt to
sway Cox Communications to use Microsoft software, Microsoft agreed to
financially back them in November, 2001. Two months later Mr. Gates
purchased $500 million dollars of Cox stock using $200 million of funds
from his non-profit foundation (See
www.eureka-boston.org/readings/gates_foundation.htm). In another example,
MS gave hundreds of millions to thwart Linux growth in the Indian
government, while also making funds available from the Gates foundation to
Indian government initiatives (See
http://news.com.com/2100-1001-965378.html).
Q: What can we expect Mr. Gates to talk about at UCSD?
A: Mr. Gates will likely spend some time speaking about the importance of
innovation and open standards. However those are just platitudes, since
their actions achieve exactly the opposite. Their monopoly is built upon
proprietary formats that they have no intention of publishing (e.g.
Microsoft Office file format specifications), because that would allow
competition. Furthermore, they have attempted to squash any standard which
they believe threatens their stranglehold -- such as MP3, HTML and Java. An
internal MS document entitled "Strategic Objective" had this to say about
Java: "[Lets] Kill cross-platform Java by growing the polluted Java market."
In spite of the conciliatory comments Mr. Gates conveyed, Microsoft will
continue to use their monopoly powers to destroy other companies - which
limits competition and innovation and keeps software prices high. "Do we
have a clear plan on what we want Apple to do to undermine Sun?" (Bill
Gates e-mail 8/8/97) A series of recent leaked internal memos reveal an
ongoing attempt by Microsoft to discredit and derail the latest perceived
threat - Linux. (See www.opensource.org/halloween/)
dgk
>
>By Michael Robertson
>
>Q: Can you provide some background on Bill Gates?
>A: Bill Gates was born in 1955 and founded the Microsoft Corporation in
>1975 with Paul Allen. Mr. Gates was CEO and Chairman of Microsoft until
Microsoft's main problem was not bribing politicians before being
charged with their "crimes", unlike Sun and the others that had them
all bought. I my opinion it makes perfect sense to bundle a browser
with the OS. Once MS started making "campaign contibutions", the case
was quickly settled.
MS did borrow the concept of a GUI, but not from the Mac. Both stole
it from Xerox.