Microsoft Legal Counsel to Retire
The longtime architect of Microsoft Corp.’s aggressive legal strategy will retire next year and be succeeded by a deputy who has focused on fighting software piracy and dealing with government officials, especially overseas.
Microsoft General Counsel William H. Neukom, 60, said Wednesday that he will turn over day-to-day leadership to Brad Smith early next year and leave the firm in July after 22 years.
Neukom began handling legal work for Microsoft founder Bill Gates in 1979, when he was a partner of Gates’ father in a Seattle law firm. He joined Microsoft in 1985 and oversaw the growth of the company’s law and corporate affairs department, which now has 200 lawyers and 400 other employees.
Neukom worked closely with Gates in fending off suits by Apple Computer Inc. and other firms in the 1980s and in negotiating the 1994 consent decree with the federal government that allowed Microsoft to continue bundling new technologies into its Windows operating systems.
More recently, he directed the effort to settle the Justice Department’s subsequent antitrust lawsuit and class-action lawsuits by consumers.
Both settlements have been seen as relatively painless for Microsoft, which so far has been little damaged by judicial findings that it broke federal antitrust laws.
Smith, 42, has been far less visible in a variety of jobs under Neukom, including head of the company’s legal team in Europe and, most recently, deputy general counsel for worldwide sales and marketing.
A graduate of Princeton University and Columbia Law School, Smith worked on antitrust and intellectual property cases for the Washington, D.C., law firm of Covington & Burling. He joined Microsoft in 1993.
Smith said his top priorities were to ensure that Microsoft abides by the terms of the federal antitrust settlement, to forge closer ties with others in the technology industry, and to work on increasingly important computing issues, including privacy, security and electronic commerce rules.
Smith said he doesn’t plan to reopen talks with the nine state attorneys general who are pressing ahead with their antitrust case against Microsoft.
“Establishing a strong track record of complying with the consent decree” is a crucial task, Smith said.
Smith’s colleagues at Microsoft and Covington & Burling described him as a smart, capable lawyer especially strong at strategic thinking.
“He has a lot of breadth in intellectual property and antitrust,” said Jon Blake, chairman of the management committee at Covington. “One of the distinguishing characteristics is looking at issues that are out on the horizon.”
Smith’s past dealings with regulators in Europe could be useful as the company responds to government inquiries there. The European Commission said Wednesday that it will hold a hearing Dec. 20 and 21 in Brussels to hear Microsoft answer charges that it violated antitrust laws on that continent.
Also on Wednesday, Microsoft shares fell after a Salomon Smith Barney Inc. analyst reduced his rating on the Redmond, Wash., software giant. He called its stock too expensive after forecasts that sales of the Xbox video game and the Windows XP operating system will fall short of expectations.
Microsoft shares dropped $1.35 to $64.05 on Nasdaq after the rating was cut to “neutral” from “outperform.” The stock has been the best performer in the Dow Jones industrial average of 30 companies this year, having risen 48%.
Microsoft might have trouble meeting sales and profit forecasts for the first half of calendar 2002, analyst Richard Gardner said in a note to clients. The company’s sales estimates for that period might be too high, and Windows XP hasn’t significantly boosted sales of personal computers, he said.
Microsoft is expecting $500 million in Xbox sales in the March quarter and $800 million in June, he said. Sales of game consoles in the U.S. typically decline after the holiday season and sales in Japan will face strong competition from Sony Corp. and Nintendo Co., Gardner said.
U.S. retail sales of the new Windows XP operating system, meanwhile, plunged in its second and third weeks on the market, in part because of the slowing economy, an analyst said.
Retailers sold 260,000 copies of XP in the product’s first three days on the market starting Oct. 25. Sales dropped 40% to 155,000 during the next seven days, then 51% more in the week ended Nov. 10, said Steve Koenig, a senior analyst at NPD Intelect.
Although sales typically fall after the introduction of a product such as XP, the decline was quicker and steeper than usual, Koenig said.
