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Microsoft Tries Friendlier Tack With Former San Jose, Calif.-Area Legal Foes

Posted on: Monday, 1 November 2004, 18:00 CST

Oct. 31--Microsoft Chairman Bill Gates got an earful when he spoke to students at the University of California-Berkeley earlier this month.

One student publicly berated him over Microsoft's monopolistic ways.

Afterward, a Microsoft employee approached the student and spent 45 minutes trying to convince him that Microsoft is turning over a new leaf.

"I think we can change, and that is why I'm in this role," Doug Hammond told the Berkeley student, Ka-Ping Yee. Hammond's job: to relay and allay critics' concerns.

One conversation at a time, Microsoft is trying to show the world a new, friendlier persona. It's a deliberate campaign aimed in large part at Silicon Valley, home to many of its original antitrust foes.

The Redmond, Wash., software giant once known for its gargantuan antitrust battles is now offering an olive branch in the name of getting on with business.

That message has taken hold, with Microsoft gaining more allies than enemies recently in the valley, a place that once loved to hate the world's largest software company.

Indeed, Gates got a generally good reception when he gave three speeches in the Bay Area recently.

"I think we've come a long way. The atmosphere is quite positive," said Microsoft CEO Steve Ballmer, in an interview with the Mercury News. "We took a look and absolutely wanted to upgrade our relationships with Silicon Valley partners. When you are one of the bigger companies on the block, you have to work extra hard to convince them that you are a partner." Some skeptics remain But some of Microsoft's former adversaries don't see it as a suddenly benevolent company -- more that it's too late to challenge its dominance.

"There is certainly less open hostility in Silicon Valley" today, says Gary Reback, an attorney at Palo Alto's Wilson Sonsini Goodrich & Rosati who spearheaded the antitrust fight against Microsoft in the 1990s. "But that is because Microsoft has rolled over the people who were the primary opposition." Even if Microsoft hasn't completely changed its image from bully to friend, it has ended many of its epic legal battles. The company reached a landmark antitrust agreement with the Justice Department on Nov. 2, 2001. It has settled consumer antitrust cases in 14 states, and with AOL Time Warner over the Netscape browser that Microsoft's Internet Explorer had trounced. In April, in the equivalent of detente among tech superpowers, Microsoft agreed to pay Sun Microsystems $2 billion to resolve antitrust and patent litigation.

A 180-degree turn Sun Chief Executive Scott McNealy had frequently referred to Microsoft as a "convicted monopolist." But in a recent interview he said, "Microsoft has done a 180. Our relationship with them is one of our best and most interesting relationships."

Gates and Sun Chief Technology Officer Greg Papadopoulos have been meeting regularly to hammer out terms of a partnership aimed at making Microsoft and Sun products work together better. "Both sides went into this with trepidation," said Papadopoulos. "But the cooperation level is surprisingly good. We're trying to make sure that our people don't play old tapes and say, 'Look what happened the last time we tried this.' "

Added Papadopoulos: "You have detente because despite your best efforts, the other company isn't going away." Some called the truce with Sun a payoff by Microsoft to silence its most vocal critic. Others said it was a pragmatic move by both companies to get on with business in a world where customers buy technology from numerous suppliers and need it all to work together.

Microsoft has also struck technical cooperation deals with other former archenemies, such as Oracle and IBM. Ballmer calls this "enlightened self-interest" by Microsoft.

Nonetheless, the software giant still has its adversaries. Real Networks has an antitrust suit pending against Microsoft for bundling its media player with the Windows operating system, and Microsoft's battle with European antitrust regulators continues.

In newer markets beyond PC operating systems and Web browsers, pockets of mistrust remain.

David Nagel is the CEO of PalmSource, the Sunnyvale company that competes against Microsoft in software for handheld devices and cell phones. "I see no signs they have changed their business practices," said Nagel. "They are still very rigid on terms with their customers, as they were in the PC space. Our strategy is to develop our business as a counterweight against them."

John Thompson, CEO of Cupertino-based anti-virus software maker Symantec, said that his company and Microsoft depend on each other to make their respective software more secure, and that cooperation has never been better. But Thompson is keenly aware that Microsoft might compete with Symantec directly in the future. Thompson says Justice Department oversight of Microsoft remains important.

"They integrate things into the operating system over time, and so you have to have a business model that adjusts to that," said Thompson, who spent years at IBM competing against Microsoft. "You partner with Microsoft with your eyes wide open." When Microsoft was creating its update for Windows this year that added security features, it consulted with Symantec and made sure that Symantec's software would still work, Thompson noted.

Microsoft is embracing alliances because it needs a bigger ecosystem for its .Net software development platform and because rival technologies such as Linux or Java have gained ground in recent years.

Some of the changes in Microsoft's behavior also reflect personal leadership styles. Ballmer took more interest in defrosting relations after he took over the CEO job from Gates in 2000.

In 2001, Ballmer hired longtime valley technologist Dan'l Lewin as Microsoft's point man in Silicon Valley at its research campus in Mountain View, which employs 1,200.

Lewin works with valley start-ups and venture capitalists to ensure that software firms are developing for the Microsoft technology platform and to promote distribution of Microsoft products through business partners.

"If people don't bet on our stuff, we don't do well," Lewin said.

"I live, work and play here. Being an ambassador is part of my role."

Many start-ups once feared, and some continue to fear, that Microsoft will steal their intellectual property or wipe them out by bundling it for free with Windows.

"They always had this aggressive or defensive reaction," said Wade Woodson, a partner at the Sigma Partners venture firm. "As a small company, you had to be concerned about the appropriation of your intellectual property. They are greatly changed from a decade ago."

One of Woodson's companies, Stac Electronics, got tangled in a patent-infringement suit with Microsoft in the early 1990s. It accused Microsoft of stealing data-compression technology and bundling it into Windows. Microsoft settled the suit for $120 million. Now, Woodson says Microsoft is among the best companies to deal with.

"They are organized, clear about what they offer and what they ask for. They are open about where they are going with their products, so that the small companies can stay out of their way," he said.

Eric Hahn, the former chief technical officer of Netscape, sold his search company Lookout Software to Microsoft in July. He said Microsoft brought in a third party to evaluate Lookout's software code, allowing Lookout to protect its secrets if the deal fell through.

"Those of us who are older and have been in the industry long enough know that the theatrical anti-Microsoft bashing isn't helpful for customers or shareholders," said Hahn. "And I think that Microsoft has matured, too. They have learned lessons with Justice and are more thoughtful about the battles that they pick."

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(c) 2004, San Jose Mercury News, Calif. Distributed by Knight Ridder/Tribune Business News. For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

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Source: San Jose Mercury News

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