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Paul Allen’s New Book Blasts Bill Gates

March 31, 2011

Microsoft co-founder Paul Allen blasted his former business partner Bill Gates in his new book, accusing the billionaire philanthropist of plotting to take away Allen’s stake in the software giant before he left in 1983.

Gates, the second wealthiest man in the world with a $56 billion fortune, was described by Allen as a brilliant schemer who tried to control the firm from its early days. He detailed Gates 1982 scheme to “rip me off” in excerpts from his new memoir “Idea Man,” published Wednesday by Vanity Fair magazine.

The book is Allen’s take on the company’s early history and confirms the tensions that have existed between the two former partners for decades.

The two decided to form ‘Micro-Soft’ in 1975 after a test on an early Altair microcomputer proved their BASIC program. Allen said he had always assumed the company was a 50-50 venture.

“But Bill had another idea,” Allen wrote, adding that Gates saw a 60 percent share for himself, claiming that he had put more into the programming. Allen said he reluctantly agreed to the division, but after they had licensed BASIC to NCR Corp, Gates demanded a 64 percent stake.

Allen again agreed with reluctance. “I might have haggled … but my heart wasn’t in it,” he wrote.

He then pondered at a later date how Gates came to his 64 percent stake.

“I tried to put myself in his shoes and reconstruct his thinking, and I concluded that it was just this simple: What’s the most I can get? I think Bill knew that I would balk at a two-to-one split, and that 64 percent was as far as he could go,” he wrote.

“I’d been taught that a deal was a deal and your word was your bond. Bill was more flexible; he felt free to renegotiate agreements until they were signed and sealed,” wrote Allen.

Steve Ballmer, who became chief executive of Microsoft in 2000, was hired by the rapidly growing software company in 1980.

Then in 1982, Allen came down with Hodgkin’s lymphoma. While receiving radiation treatment, he and Gates clashed over a major business decision, and he contemplated leaving the company.

Allen, who now runs a Seattle-based investment firm and philanthropic foundation, said he overheard a heated conversation between Gates and now Chief Executive Steve Ballmer in December 1982, shortly after he made his announcement that he may be leaving the company.

He wrote that “It was easy to get the gist of the conversation.” They heard them discussing “how they might dilute my Microsoft equity by issuing options to themselves and other shareholders.”

“It was clear that they’d been thinking about this for some time,” he wrote.

“I burst in on them and shouted, ‘This is unbelievable! It shows your true character, once and for all.’” he recalled. “I was speaking to both of them, but staring straight at Bill.”

“I helped start the company and was still an active member of management, though limited by my illness, and now my partner and my colleague were scheming to rip me off. It was mercenary opportunism, plain and simple.”

Allen said he later received written apologies from both Gates and Ballmer over the incident. Despite their sincerity, Allen was still planning on leaving the company.

He said Gates then made one last-ditch effort to try to buy out Allen’s stake in the company: at a “low-ball offer” of $5.00 per share. Gates rejected Allen’s $10 counter, and Allen now says he had no regrets of his decisions to hold on to his shares.

By holding on to his Microsoft shares, Allen now ranks 57th on the Forbes global list of billionaires, with $13 billion to his name.

“As it turned out, Bill’s conservatism worked to my advantage. If he’d been willing to offer something close to my asking price, I would have sold way too soon,” Allen says in his book.

Gates did not contest Allen’s account of what transpired, but also sought to downplay friction between the two former partners.

“While my recollection of many of these events may differ from Paul’s, I value his friendship and the important contributions he made to the world of technology and at Microsoft,” Gates told Reuters in an emailed statement.

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