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At a small
party in downtown Seattle in the spring of 2000, Tod Nielsen was
introduced to an affable young man who said he was a paralegal at
a local law firm. Nielsen mentioned he worked at Microsoft.
"I know," the paralegal said. He was familiar with Nielsen's
shifting assignments, his promotion to vice president, and his upbeat
tone. "You have always seemed like a really nice guy."
"Excuse me," Nielsen said. "Have we met before?"
"No," the man explained. "But I'm the guy who reads
your e-mail."
The paralegal was far from the only person reading Nielsen's e-mail,
or that of dozens of Microsoft's midlevel managers and top executives.
With the company's business practices under legal scrutiny for most
of the past decade, the collection and review of the company's internal
communications had become as routine as the specials in the employee
cafeterias. Once a month or so, a company lawyer contacted Nielsen's
assistant and arranged to arrive at a time when Nielsen would be
out of his office. With a technician, the lawyer downloaded the
e-mail archive from the hard disk drive of Nielsen's computer and
copied any new Word files or PowerPoint presentations. Nielsen's
hard copies of charts and presentations were taken down the hall
to be photocopied and returned to his office. Nielsen could hardly
tell anyone had been there. The drill was the same for all the key
employees working on major projects, such as Windows, Office, Internet
Explorer, and tools for outside software programmers.
Each round of newly collected documents was added to e-mail records
copied straight from the caches on Microsoft's central computer
servers. Each printout was stamped with an identification number
and, in a bit of wishful thinking, the word Confidential. A courier
delivered the documents to one of several outside law firms. There,
the piles of paper were divided among dozens of paralegals, who
over time developed familiarity with the people on their particular
lists of Microsoft executives.
Paralegals spent their days reviewing the huge volume of everyday
electronic correspondence that coursed through the networks of the
world's largest software company. The bulk of the material was mundane.
But if the subject matter appeared to be covered by any of the dozens
of subpoenas and "civil investigative demands" issued
in the legal actions against Microsoft, the documents were pulled
for further review by lawyers. Under legal orders, Microsoft's attorneys
then turned over the relevant material to prosecutors from the anti-trust
division of the U.S. Department of Justice, or to lawyers for Sun
Microsystems or the other companies waging private lawsuits against
Microsoft. By introducing the e-mail into evidence in the courtroom,
the opposing parties made the documents public, and later posted
them on sites on the World Wide Web. On a smaller scale, a similar
effort was underway at Microsoft's competitors, such as Sun, Oracle,
Netscape, IBM, and AOL, in response to legal demands from both the
government and Microsoft.
Most of Microsoft's e-mail was collected long before the most sensational
snippets began to appear in the press. But even after they must
have realized the potential ramifications, Microsoft employees continued
their running dialogues in writing. The collecting of e-mail became
part of the white noise of a day in the office at Microsoft and
was easily forgotten. So were the pro forma warnings from the legal
department advising against the use of incendiary language in written
communications. And the company's defense lawyers dutifully continued
to turn over the transcripts of these in-house dialogues, providing
their legal adversaries with some of their most valuable evidence.
Beyond the damaging snippets, the record of internal communications
provided an unprecedented glimpse into the strategic debates and
internal decision-making processes of a company that had long restricted
outside access to its insular corporate culture. The leader of the
emerging information age was turned inside out by a powerful tool
of that new age, electronic mail.
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In the fall
of 1998, a courier delivered three heavy boxes full of
paper to the downtown San Francisco offices of the Wall Street Journal,
where I was the reporter assigned to the Microsoft beat. A legal
effort by the San Jose Mercury News and several trade publications
had convinced the judge to unseal most of the evidence in the federal
civil lawsuit against Microsoft by Sun Microsystems, filed in 1997,
in which Sun charged Microsoft with violating the terms of its license
to use Sun's heavily hyped Java software technology.
With my colleague, Don Clark, I took over a conference room and
began tagging and sorting the photocopies of the e-mails and other
documents. The most interesting parts, to us, had little to do with
the specifics of the legal cases. We read each e-mail thread from
the beginning, and tried to understand the often arcane technical
discussions. It required considerable effort to sort out the players
and the plots. But by arranging the documents in chronological order
and constructing an organization chart, we began to assemble a picture
of Microsoft's internal debates and personal rivalries. What emerged
was a cast of characters, known by their e-mail screen names, who
had played parts in a grand opera set in the dramatic early days
of the digital revolution.
Some players were familiar. "Bradsi" was Brad Silverberg,
the senior vice president who had delivered Windows 3.1 and Windows
95 before forming Microsoft's Internet division to wage the "browser
war" against the upstart Netscape Communications. "Jimall"
was Jim Allchin, now the head of Microsoft's Windows division and
the champion of its new Windows 2000 operating system. "Paulma"
was Paul Maritz, effectively the company's third-ranking executive
and the one to whom both Silverberg and Allchin reported. "Steveb"
was Steve Ballmer, then the head of Microsoft's sales force and
later its CEO. Over much of the e-mail hovered the presence of "Billg,"
Bill Gates, Microsoft's chairman and cofounder, who had created
a company that remained uniquely a projection of himself.
Other e-mails came from the ranks of programmers with whom reporters
rarely came into contact. There was a February 1997 message, for
example, from Andrew Layman, a member of Microsoft's own Java team,
that concluded, "We appear to have a clash between what Bill
says we should be doing and what we...are in fact doing." The
response from his colleague Russ Arun: "Yup, there is a disconnect
with Billg."
I had already gotten hints of such a conflict. In an interview earlier
in 1998, Allchin had criticized the embrace of Java by others at
Microsoft. He considered Java a flawed technology that handed an
advantage to Sun. "Even at Microsoft, there were some people
who drank the Java Kool-Aid," he told me. Separately, over
dinner in Seattle, a midlevel Microsoft manager had described what
he called a "come to Bill" meeting in the spring of 1997.
The meeting stood out even among Microsoft's knock-down drag-out
reviews: Gates had been merciless in lacerating the Java team for
failing to pay sufficient attention to protecting Windows, the company's
crown jewel.
"Why don't you just give up your options and join the Peace
Corps?" my source quoted Gates as shouting. "Hasn't anybody
here ever heard of Windows? Windows is what this company is about!"
Now, as I culled through the documents in the Java lawsuit, I came
across a series of e-mails from March 1997 that appeared to refer
to the internally infamous meeting. The leader of the Java team,
Ben Slivka, or "Bens," was responding to a colleague who
had tried to comfort him for the shellacking he had received from
Gates.
"It is disappointing that Bill chooses to flame like that without
giving me a chance to educate him," Slivka wrote back. "Bill
is convinced my group is trying to kill Windows, and I clearly haven't
said the right things to show him otherwise."
It was a rare crack in Microsoft's monolithic public image. With
the climactic meeting as an anchor, I reconstructed the debate over
Java and the future of Windows. Microsoft's Java efforts had foundered
in part on technical grounds, but the e-mail record revealed a more
fundamental split between Silverberg and Allchin, both members of
the eight-man executive committee that steered the company's strategy.
Allchin emerged as a hardcore "Windows hawk," fiercely
protective of the revenue stream and competitive leverage Microsoft
gained from Windows, its flagship product. Silverberg was the leader
of Microsoft's "Internet doves," pushing the company to
develop a new platform for software development in order to capture
the new opportunities opened by the Internet.
Allchin prevailed. By the time the story appeared on the front page
of the Wall Street Journal in February 1999, on the day Allchin
took the witness stand in Microsoft's antitrust trial, he appeared
to have been vindicated. Windows had become more wildly popular
than ever, driven by ever-falling PC prices and the popularity of
the Web. Through the end of that year, Microsoft's already staggering
profit margins expanded and its stock market value soared even higher.
Allchin and Gates had only bought Windows some time. Over the next
two years it became clear that Microsoft's internal splits underlay
much of what happened -- the courtroom debacle in the antitrust
trial, the exodus of many of the company's most talented employees,
and Gates's own fall from grace as a corporate leader and technology
visionary.
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By the spring
of 2000, as the two-year antitrust trial neared its conclusion,
the cycle of dialogue and disclosure had become a recursive loop.
Microsoft's lawyers were collecting, reviewing, and turning over
e-mails written during the course of the trial itself. The newly
released e-mails revealed the state of affairs inside Microsoft
in early 1999, not long after Allchin and other executives had testified.
The past was catching up with the present, most notably in a long
e-mail exchange between Silverberg and Slivka that had taken place
on a cold, cloudy Sunday afternoon in February 1999. Slivka, who
had refused to talk with me for the article on the rivalry between
the Windows hawks and the Internet doves, mentioned to Silverberg
that he had agreed to have an off-the-record dinner now that my
article had been published.
"Hmm, David Bank. He's not exactly on my Xmas card list right
now," Silverberg wrote back. The article about the earlier
battle hadn't helped his current position inside the company or
his mood. After a long leave of absence, Silverberg was back at
the company part time as a consultant to Ballmer. He was weighing
Ballmer's offer to return full time to take command of all of Microsoft's
consumer efforts. He thought the account made him appear soft on
Sun, which he wasn't, and that his support for a new platform could
appear as disloyalty to Windows. He didn't trust me, he said. Silverberg
complained that I had disregarded the explanations he had provided
in a lengthy off-the-record e-mail and that I had fallen for what
he called the "superwhipped spin" fed to me by other Microsoft
executives. "What I sent him was accurate," he wrote.
"Yes, a little sanitized, but still accurate, and 100 times
more accurate than what he got from Microsoft."
Slivka promised to be circumspect. "Sounds like I'll be having
a coy little dinner with Mr. Bank," he said.
But Slivka and Silverberg were anything but circumspect in this
e-mail exchange. Their dialogue made clear that in the two years
since Gates's tirade at the Java strategy meeting, the divisions
inside Microsoft had only grown deeper, the disenchantment more
profound.
The spark was Slivka's analysis of the company's Internet strategy,
which he had sent several days earlier to Gates and Ballmer as well
as Silverberg. "I fear very deeply that trying to win the Internet
using Windows is a losing strategy," he wrote. Slivka had the
temerity to suggest Microsoft had fallen into what Harvard Business
School professor Clayton Christensen described as the inability
of even well-managed companies to embrace innovation that threatened
their successful franchises. Christensen's 1997 book The Innovator's
Dilemma had become a manifesto for many Microsoft employees.
Silverberg agreed. What followed was off-the-cuff, but represents
one of the most explicit critiques ever of Gates's leadership of
Microsoft. The criticism was all the more credible because it came
not from the company's critics or competitors, but from one of its
own most senior executives.
"I simply do not want to spend my life in meetings struggling
with the internal issues, getting pissy mail from Billg," Silverberg
wrote to Slivka. "Or hearing from people who want me to do
unnatural and losing things to 'protect' Windows."
This e-mail exchange was released by Justice Department prosecutors
in May 2000, attached to a brief prepared to bolster their claim
that Microsoft could feasibly be split into two separate companies.
Silverberg insisted he had meant no such thing and was embarrassed
that his personal frustrations had been used to hurt the company.
But once again, the e-mail was less interesting for its legal implications
than for its confirmation of the dissatisfaction and division in
Microsoft's executive ranks over the company's direction.
"I simply do not believe in the path the company is pursuing
right now," Silverberg had written. "I think Steve [Ballmer]
feels totally overwhelmed right now. He does not know how he's going
to solve the problems and he doesn't know who he'll be able to count
on."
In preparing this book, I found little enthusiasm at Microsoft for
revisiting the internal debates that have so riven the company.
The participants have, as they say, moved on. However, in the written
record, they have left behind fascinating fragments that made it
possible to reconstruct parts of the Microsoft story that otherwise
might never have been told. It is Microsoft itself that provided
the trail to follow.
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