Gates meets with Justice; no state action this week

With further government action against his company looming, Microsoft CEO Bill Gates met with US Department of Justice officials on Tuesday night, hours after holding a rally promoting Windows 98. Meanwhile, the handful of states' attorneys general investigating Microsoft's alleged anticompetitive business practices will not file suit against the company this week, as they had planned, a source close to one of those investigations says.

With further government action against his company looming, Microsoft CEO Bill Gates met with US Department of Justice officials on Tuesday night, hours after holding a rally promoting Windows 98.

Meanwhile, the handful of states' attorneys general investigating Microsoft's alleged anticompetitive business practices will not file suit against the company this week, as they had planned, a source close to one of those investigations says.

Along with Microsoft's top lawyer, William Neukom, and other company officials, Gates met with Assistant US Attorney Joel Klein and other Justice Department representatives for about two hours in Washington.

"It was a good opportunity, while Bill was on the East Coast, for him to share his perspectives on the industry," said Microsoft spokesman Jim Cullinan, who would not divulge details of the meeting. "We were pleased with the opportunity to talk to the DOJ."

A source in one of 13 states considering filing an antitrust suit against the software giant said yesterday that no action would be forthcoming this week. Attorneys general in those states -- and, possibly, the Justice Department -- want to file broader actions before Windows 98 is released to manufacturing, an event targeted for mid-May.

"The attorneys' general are open to hearing from Gates before they file," the source said, referring to the meeting between Gates and the Justice Department.

Earlier on Tuesday, Gates hosted a cadre of industry executives who urged the federal government, as well as several states that are planning to file antitrust suits against Microsoft, not to block the release of Windows 98.

Windows 98 is scheduled to be sent to manufacturing by May 15, in time for a June 25 release.

The rally served to raise as many questions as it answered.

One of Microsoft's chief arguments against charges that it holds an operating system monopoly is that it does not dominate the software industry, and that Windows is one of many available operating systems on the market. Yet speakers continually claimed that the industry's economy -- as well as the nation's -- would be severely harmed by a Windows 98 delay.

"It may be more accurate to say that two companies control the industry, Microsoft and Intel," said Rob Enderle, senior analyst at Giga Information Group, in Santa Clara, California. "There is room for competition, as you can see with Microsoft [partnering with Intel rival] Digital, and Intel working with Sun. That's the problem I have with the government crippling one of them -- then you would have a real problem with the other one."

Some observers called the event a shameless pep rally, while others -- pointing to the smooth demonstration of Windows 98 -- saw it as a marketing ploy by Microsoft. Compared to the high-profile release of Windows 95 three years ago, the company has not devoted as much resources to selling Windows 98.

"What a great marketing event this was for Windows 98," said Dwight Davis, a Kirkland, Washington-based analyst at Summit Strategies. "Here you've had this product lackadaisically moving toward launch, and at this forum all these important people are singing the praises of Windows 98. I can actually see that one event driving more end-users toward Windows 98 than any advertising."

To bolster its argument against government intervention, Microsoft released a poll it commissioned indicating that a large majority of the public believes the states should not attempt to block Windows 98's release.

The survey, conducted April 29-30 by the Washington firm of Hart-Teeter Research, also found that 68% of the 1,002 people polled thought "that it's a base use of taxpayers dollars for attorneys general to bring a lawsuit that blocks Microsoft from releasing Windows 98." By the same margin, they said Microsoft should not be forced to remove Internet capabilities from Windows 98.

The poll, which had a margin of error of plus or minus 3.2 percentage points, was publicised by Edelman Public Relations, the firm that has been under fire for the past few weeks in the wake of a Los Angeles Times report that indicating that Edelman planned to organize and sponsor a "grassroots" show of support for Microsoft.

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