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Gates says states' proposal would "cripple" Microsoft
( 2002-04-23 11:33 ) (7 )

Microsoft chairman Bill Gates, making his first court appearance in the company's antitrust battle, told a hearing Monday that a proposed remedy from a group of states would "cripple" the company.

Gates testified in the hearing before US District Judge Colleen Kollar-Kotelly, who is considering a penalty for the firm's violation of US antitrust laws.

"Microsoft would be greatly devalued as a company," Gates said in prepared testimony totalling 156 pages, adding that the plan would "require Microsoft to withdraw Windows from the marketplace."

"In short, the practical effect of the (plan) would be to cripple Microsoft as a technology company."

Gates said that aside from these concerns, it would be "extremely difficult, if not impossible in some cases," for Microsoft to comply with the plan.

The appearance in the antitrust court case was the first for the world's richest man and founder of the world's biggest software firm. At the original antitrust trial in 1998 his videotaped deposition was introduced into evidence, and analysts said his tone was not helpful to the company's defense.

On Monday, Gates said the company's market capitalization is based on the market's belief that the firm is on track to deliver "breakthrough technologies" that generate new revenues.

Gates told the court the pricing provision of the states plan + which gives discounts to slimmer versions of Windows + could possibly bring the price of Windows to nothing and cost his firm 10 billion dollars.

"Rather than earn a return on our substantial investment in improving Windows, any improvements could result in a revenue loss to Microsoft. In fact, under the pricing formula set forth (by the proposal), the price of Windows could be zero," he said.

Gates said the states' proposal is overly vague and does not provide his firm with enough direction and guidance as to how to ensure it is complying with what would be newly created rules.

"It doesn't give us enough information to be able to comply," Gates said.

The states proposal "doesn't give us any guidance about what blocs of code are included in these things and what blocs of code are not included in these things," he said.

Late last year, Microsoft and the Justice Department agreed to settle their four-year old antitrust dispute, but only half of the 18 states that were suing the company alongside the federal government signed on to that deal.

Kollar-Kotelly is holding hearings on two separate tracks in the case + whether to accept the Justice Department settlement as well as the stricter remedy proposed by the non-settling states.

Atop the list of actions the states are seeking is for Kollar-Kotelly to force Microsoft to offer a stripped-down version of Windows that does not include add-on software, known as middleware, thereby giving consumers a choice of vendors for added features to the basic Windows operating system.

Echoing opening arguments from Microsoft attorney Dan Webb six weeks ago, Gates told the court that the requirement of stripped-down Windows would be technically unfeasible for the software giant.

"It would be utterly impractical for Microsoft to undertake the level of testing and problem solving described above if the (states' plan) were in place," he said, adding that the states' plan would force the company to create 4,096 different versions of Windows.

States that rejected the government's settlement with Microsoft and have continued to pursue the antitrust case are California, Connecticut, Florida, Iowa, Kansas, Massachusetts, Minnesota, Utah and West Virginia, along with the District of Columbia.