Janet Reno, IE bugs, and Apple
If you say who are our friends, that might be another way to get a cut
through it. There are our friends in the hardware community. We have Intel,
the OEMs, the IHVs [independent hardware vendors]; we have friends
who help serve large enterprises either with applications, Internet access
and services, or systems integration services. And that's where you get the
people like Digital, British Telecom, Unisys, and HP. It turns out as we've
really gone after business ISVs, there's a lot more ISVs out there than I
guess we even were dreaming about. In small business again, application
developers, small ISPs. Everybody knows their favorite small ISPs. Then
there are a bunch of guys we call VAPs [value-added providers].
There's about 175,000 small companies that provide computer services to
small business. We're actively courting them.
For the consumer market, there are retailers--people like AOL. AOL looks
like a partner to us in terms of at least the browser part of our business
going after the consumer space.
So friends, competitors, technology areas, products, customers, visions...I
think it paints a pretty broad picture, which is simply to state the
affairs of Microsoft today.
One competitor that you didn't mention was the DOJ. Let's get
that out of the way. You characterized Janet Reno as a joke?
Never. I, to my chagrin, said "To heck with Janet Reno" when asked
whether she would try to stop us from shipping Small Business Server
because it's such a wonderfully integrated product. I said, "If she did,
then the heck with her because this is the American way."
No, I don't consider the Justice Department a competitor. I think what
we're doing is right and lawful and moral and proper and competitive. I
might even say it's the American way. We're innovating, we're adding value,
we're driving down prices, we're competing, we're serving our customers,
and we're doing it well. A lot of other companies in the United States are
benefiting because they're building on top of our platform and thriving! So
I might start playing "The Star-Spangled Banner" if I went too long!
So I believe--and I believe in the government and I think it has got to do
its job--that this is a misguided investigation because what we've done is
right, but nonetheless, I would never call the Department of Justice a
competitor. They're trying to do their jobs even if I don't think this is
particularly an area in which they have a case.
Is there a backup plan in case the Justice Department prevails?
No, no backup plan.
Why not? You contribute $2.6 billion in R&D, so it's got to go toward...
Who knows what will happen? Who knows how long it will take to happen?
Who knows, who knows, who knows? Our job has got to be to keep focusing on
the customer and serving the customer and not sort of just wasting people's
time and energy trying to anticipate what a judge might decide someday.
We'll cross that bridge if we come to it.
The follow-up question is, is this your hope or intent that [the DOJ
investigation] is delayed at least until Windows 98 comes out and then
the issue becomes a moot point?
No, I can't say it's my hope or intent. I'm not involved day-to-day in
the legal strategy, but it is our hope and expectation that the judge will
concur with us, that what we've done is right and proper and innovative and
procompetitive because it serves the consumer very well. We hope the judge
will agree with us. We expect the judge to agree with us that we are in
charge of trying to serve our customers and deciding what goes into our
products. Our customers can decide whether to buy them or not buy them as
they see fit. We expect the judge will agree with us that we have a right
to sign contracts with our partners that say they cannot convolute our
product in the distribution process that they can't take pieces of our
When is Windows 98 coming out?
I think we're still saying second quarter of next year.
Is all this bad publicity making customers think of options other than
I think at the end of the day customers say, "What product helps me get
my job done? What product helps me help my company get their job done?
What's going to help me at home?" And they buy what's going to take care of
their need. They read with interest about the DOJ suit, but then they focus
on what serves them best. Our products are still doing a pretty good job of
Why did you ship IE 4 with its level of bugs and performance problems?
[Laughing] "No, I stopped beating my wife!!" We shipped IE when
the IE 4 team--using its best, conscientious, professional
judgement--thought it was ready. Does it have some things that could stand
improvement? Yeah, it has some things that can and are being improved.
There's no doubt about that.
I don't think the team believes now nor believed then that they shipped
prematurely, particularly relative to how they perceived the expectation
set among the leading-edge customers who use their product. In some senses,
you do have different expectation sets for different customer types at
I'm not trying to say there's some excuse that we should ship bugs in
anything ever at any time, but the reality is you're always making a set of
trade-offs about probability of problem, unknown problem, vs. when you
ship. So you're always going to get some problem that occurs after you ship
or some number of problems, and you make your best trade-off. That
trade-off isn't made under some absolute rule set. What is right for the
Age of Empires [a Microsoft game] is not the same as what's right
for IE; it's not the same as what's right for NT Server. I think the guys
think they made a right set of trade-offs and I think they know they're
doing some more work to continue to improve that product. I know they would
argue to this day that they certainly had a least the quality level of
their competition at the time their competition shipped. You might give me
feedback to the contrary...
We'd totally disagree.
You totally disagree?
Yes. Both products have bugs, maybe the same number of bugs, but the
bugs in IE are system-level; bugs in Netscape Navigator are
application-level. So if Netscape crashes, it crashes the app; if IE
crashes, it screws up your install, your Windows install. Big difference.
I will certainly share that feedback and they can think about it and
they may try to rebut.
When you're talking about friends and competitors, one company
that didn't show up on either side was Apple. Where do they fit in?
They're friendly. I wouldn't list them quite at the same level of some
of the guys that I chose to list in the sense of "do they help our business
and do we help their business in the same way we and Digital help each
other in enterprise services." It's not that critical of a relationship
either to Apple or to Microsoft. I'm not saying it's a small thing, but
it's not a day-to-day active thing in quite the way the Digital
So you think that what, the quarter-billion dollars or whatever you make
off Apple sales will continue or is it going to be a smaller business?
It is a business that has been shrinking in size over the last several
years. It has not been a growth business for us.
I also didn't hear you mention any friends or competitors, except
perhaps AOL, in the media space.
Banks are friends. We have a joint venture with First Data Corporation
to provide technology that banks can use for bill payment and bill
presentment. I don't know exactly who we did announce with, but we
announced a couple of banks that will join with us. I think you'll see more
and more banks.
American Express is a great partner for us in the travel business. Reynolds
& Reynolds is a great partner for us in the car business. NBC is obviously
a unique and good partner for us in the news business.
But those businesses are so big. There's so much happening in media and
content and services that I think there's plenty of room for lots of
different players. I don't think anybody is ever going to get 70 percent of
the ad budget of U.S. advertisers. So in some sense, everybody is a
competitor and nobody is a competitor. It's not like operating systems or
mail systems, where I think we can all fairly agree it would be unusual to
see 30, all with great popularity. Those tend to neck down to a couple or
three players much more quickly than some of these other areas.
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