E-Mails Show Gates, Others Plotting to Thwart OS Rivals
A small software company pursuing a private antitrust suit against Microsoft Corp. submitted a 188-page document in U.S. District Court in Utah on Wednesday that offered dramatic evidence supporting charges that Microsoft has engaged in predatory behavior.
The document contained copies of Microsoft e-mails that showed top company executives, including Chairman Bill Gates, plotting to rig its software to make it incompatible with competing operating systems.
The court filing by Orem, Utah-based Caldera Inc. is a response to a Microsoft motion to dismiss the case, in which Caldera charges that Microsoft deliberately destroyed Caldera’s DR-DOS operating system to protect the near-monopoly position of its own MS-DOS and its successor Windows operating systems.
The specific allegations in the suit predate those in the widely followed federal antitrust case against Microsoft, but the basic charge of abuse of monopoly power is similar and the stakes are potentially as high: If Caldera’s antitrust case is successful, it could cost Microsoft as much as $1.6 billion in damages and open a floodgate of copycat lawsuits.
In response to the Caldera filing, Microsoft spokesman Mark Murray said Wednesday: “It’s nothing more than a 188-page work of pulp fiction. They are trying to hide the fact that they are on shaky legal and factual ground.”
Whatever its legal merits, the document appears to back up charges long made by Microsoft critics that the company uses unfair, predatory practices to undercut competitors.
The case goes back to 1988 when Digital Research’s DR-DOS product was beginning to receive praise as a superior alternative to the Microsoft MS-DOS software that then dominated the personal computer market.
In December 1989, Gates wrote in an e-mail: “DOS remains the backbone . . . of both our software businesses. It is under extreme attack by high-quality clones like DR-DOS.”
Gates speculated that Microsoft could charge 30% to 40% more for its software were it not for DR-DOS.
Gates asked in an ensuing e-mail if there wasn’t a way to make an application “run with MS-DOS and not run DR-DOS.” A Microsoft executive responded that there wasn’t.
Nevertheless, according to another e-mail, Gates ordered Microsoft’s programmers to make it appear as if the company’s software was incompatible with DR-DOS by displaying an error message whenever a user had a machine with DR-DOS running on it.
Jeremy Butler, then head of Microsoft’s international sales, noted in 1989 that “it only takes a couple of reports about non-compatibility to give the kiss of death to a PC.”
The warning sign was used in a variety of Microsoft programs, but the most famous case was when Microsoft embedded the warning in a beta, or preview copy, of Windows 3.1.
“Heh, heh, heh . . . my proposal is to have bambi [a part of Windows 3.1] refuse to run on this alien OS. Comments?” said Phil Barrett, a Microsoft executive, in an e-mail.
Microsoft points out that the warning was removed in the final product and argues it is therefore a moot point.
But Caldera’s document points out the extremes Microsoft went to to undercut public confidence in DR-DOS. Not only did it send out 15,000 beta copies embedded with the false warnings to analysts, reporters and other opinion leaders in the technology world, but it also set out to deliberately mislead reporters about the problems.
Microsoft executive Brad Chase is quoted in an e-mail commenting on the error message: “I think it’s totally rude, reinforces the image that users have of us as the evil ones, etc.”
But the campaign went on. Brad Silverberg, a senior Microsoft executive, is quoted in a 1991 e-mail as saying: “We are engaged in a FUD (fear, uncertainty, doubt) campaign to let the press know about some of the bugs. We’ll provide info a few bugs at a time to stretch it out.”
Another tactic Microsoft used to lock out DR-DOS was its licensing agreements with computer makers. PC makers were given the lowest price if they agreed to pay Microsoft for every computer they shipped, regardless of whether the computers used MS-DOS, a huge disincentive for any computer maker to offer DR-DOS.
Microsoft was prohibited from using that licensing scheme as part of a 1995 consent decree with the Justice Department. And the company continues to insist the practice was not aimed at DR-DOS.
But the Caldera document cites numerous cases in which Microsoft executives credit the licensing agreement with forcing out DR-DOS, then owned by Digital Research. “Another [Digital Research] prospect bites the dust with a per-processor DOS agreement,” said one Microsoft report written at the end of October 1990.
After DR-DOS was acquired by Novell in the summer of 1991, Microsoft intensified its attack on DR-DOS. When Novell complained to the FTC, Gates was furious.
In a 1993 memo, Gates asked who at Microsoft “gets up every morning thinking about how to compete with these guys in the short term--specifically, cut their revenue.” Gates added, “After their behavior in this FTC investigation, I am very keen on this.”
