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Paneful Struggle:
How Microsoft's Ranks
Wound Up in Civil War
Over Windows' Future
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Vying for Mr. Gates's Nod
On an Internet Strategy,
Doves Took On Hawks
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Choking on `Java Kool-Aid'
By David Bank
02/01/1999
The Wall Street Journal
Page A1
REDMOND, Wash. -- In March 1997, Microsoft Corp.'s top managers
crowded into the conference room in headquarters building 27, anxious
to see how Chairman Bill Gates would resolve one of the most profound
internal conflicts in the company's history.
At issue was a growing threat to Mr. Gates's crown jewel, the Windows
operating system that runs 95% of the world's personal computers.
Archrivals Sun Microsystems Inc. and Netscape Communications Corp.
were combining Netscape's best-selling Web browser with Sun's new
Java software, which promised to allow software programs to run
on any kind of computing device. The aim was to create a new operating
system that ran software programs straight from the Internet's World
Wide Web.
As disturbing to Mr. Gates as the competitive threat was an ideological
split among his own ranks. Unbeknownst to the rest of the world,
many of his best programmers had come to believe what plenty of
outsiders were already saying: The advent of Internet computing
would spell the end of Windows.
That a large and vocal insurgent group even existed inside Microsoft
is something of a revelation, given the monolithic image the company
presents to the outside world. The story of their campaign, and
the heated conflict it generated, has been pieced together from
hundreds of electronic mail exchanges released in connection with
Microsoft's various court cases, as well as from interviews with
a dozen Microsoft officials. In the end, the conflict not only would
affect the business direction of Microsoft, but also would help
fuel the huge antitrust case the company is now fighting in federal
court in Washington, D.C.
The pro-Internet "doves" were led by the quiet but powerful
senior vice president Brad Silverberg, a bearded programming whiz
who had taken over Microsoft's Internet work after heading development
of Windows 95. Mr. Silverberg saw a way to expand one of his projects,
Microsoft's Internet Explorer browser, into the kind of software
Sun and Netscape were proposing: a "cross platform" system
that could run on Macintosh, Unix and other computers, as well as
on Windows PCs.
Instead of cranking out new-and-improved PC operating systems,
Microsoft would beat its rivals in establishing the dominant platform
for Internet computing, Mr. Silverberg posited. The doves pointed
to the surging support for Java from software developers, Microsoft's
key constituency, who wanted to write applications that could run,
without change, on any kind of operating system. Interest was also
high among corporate customers, who sought freedom from the complexity
and cost of running different software on disparate computer systems.
Two months before the March meeting, one of Mr. Silverberg's top
lieutenants, Ben Slivka, proposed the new strategy in a presentation
titled "Java Is Our Destiny." The group believed the only
way for Microsoft to survive was to execute what one team member
called "a graceful exit plan" from Windows.
To Windows loyalists, led by another powerful senior vice president,
Jim Allchin, such talk was heretical. A hard-core Windows "hawk"
and veteran developer in charge of Microsoft's most advanced operating
system, Windows NT, Mr. Allchin was a fierce protector of Windows.
He regarded advances that helped other operating systems as a distraction
and a mistake.
"In my opinion, Windows is in the process of being exterminated
here at Microsoft," Mr. Allchin fumed in an e-mail to Mr. Gates
a month before the meeting. "I consider this cross-platform
issue a disease within Microsoft."
By early 1997, Mr. Allchin was angling to take over development
of Internet Explorer from Mr. Silverberg and fold it into Windows.
He wanted to put a stop to Microsoft's campaign to push software
partners toward the company's new "Internet platform."
As for Java, he advocated the creation of a "polluted,"
noncompatible version that would run well on Windows, but not on
other operating systems.
For months, Mr. Gates let the two camps compete, a favorite tactic
when Microsoft confronts a new challenge. By the spring of 1997,
however, he had to make a decision. Microsoft's software customers,
as well as its own developers, were getting mixed messages about
whether to develop for the Web or for Windows, and competitors were
gaining crucial momentum.
For Mr. Gates, the March meeting was a moment of truth. On the
one hand, the doves' plan hewed to one of his core principles: If
customers want an innovation, Microsoft had better provide it, or
another company will. "Someone will execute on the above strategy,"
Mr. Slivka warned in his January presentation. "Windows becomes
irrelevant in bigger and bigger sections of the market."
Nonetheless, the key to Microsoft's great wealth and power had
been its ability to keep software developers tied as tightly as
possible to Windows. The more applications available only on Windows,
the more popular it became, thereby attracting even more developers
and completing what Microsoft calls "the virtuous circle."
As Mr. Gates saw it, according to several Microsoft executives,
the Internet was threatening to break the loop. Without the hooks
between software applications and Windows, he knew, Microsoft's
software would be left to compete solely on its merits and its pricing,
putting at risk the company's tremendous profits. The hawks' plan
would protect Microsoft's existing franchise by tying customers
as much as possible to Windows-only versions of the browser and
Java technology.
Safe as that course seemed, Microsoft could lose everything if
Sun or another competitor succeeded in wooing away its customers
with true cross-platform software, because Microsoft had no such
product.
Yet Mr. Gates was in possession of a crucial bit of intelligence:
His own programmers were having trouble getting cross-platform Java
software code to run well on different computers, company e-mails
show.
As part of his pro-Java campaign, Microsoft's Mr. Slivka had persuaded
two teams to use Java software to develop Microsoft's Office suite
of productivity applications and for a software tool code-named
Vegas. Both teams were "in effect betting that Windows . .
. loses and Java wins," one of Mr. Slivka's programmers wrote
to him in February 1997. But the results were disappointing. Code
written specifically for Windows ran three times as fast or more,
says one top ranking Microsoft executive.
If Microsoft's experts were struggling with Java, Mr. Gates had
reason to believe Sun's were, too. Sure enough, Sun's Java software
later proved slow and often broke down. That was a big plus for
Mr. Allchin's lobbying campaign.
It fell to Mr. Slivka, as the doves' head cheerleader, to present
his team's progress report at the March meeting. Showing up in his
usual Hawaiian shirt and shorts, he clicked up the first slide.
There wasn't any reference in it to Windows.
Mr. Gates pounced. "There's nothing about that slide I like,"
he snapped, according to several executives' accounts of the meeting.
Mr. Slivka struggled to recoup, but Mr. Gates soon erupted.
"Why don't you just give up your options and join the Peace
Corps?" Mr. Gates is said to have thundered. "Hasn't anybody
here ever heard of Windows? Windows is what this company is about!"
Microsoft declined to make Mr. Gates available for comment for this
article.
The normally brash Mr. Slivka was devastated. Mr. Gates was "amazingly,
unnecessarily rude to me," he complained in one April e-mail
to a colleague. "It is disappointing that Bill chooses to flame
like that without giving me a chance to educate him," he wrote
in another e-mail. "Bill is convinced my group is trying to
kill Windows."
But the die was cast. In no uncertain terms, Mr. Gates had decided
to protect Windows at all cost. "Having cross-platform not
be successful was good news for the Windows group," says one
senior Microsoft executive.
In the months that followed, Mr. Gates decided to follow Mr. Allchin's
suggestion not to fight Sun and Netscape head-to-head with a cross-platform
system. Mr. Allchin argued that Netscape's lead in browsers was
so large that Microsoft could catch up only by making a browser
an integral part of Windows. That, he said, would make Windows a
more compelling and useful product; making the browser part of Windows
would give computer users little reason to buy Netscape's version.
Meanwhile, Mr. Silverberg took a leave of absence a few months
after the March meeting to bicycle around the Northwest; his Internet
group, which once totaled 2,000 employees, was reassigned. Though
he occasionally consults for Microsoft, he has yet to return full
time. He declined to comment for this article.
By September 1997, the Office and Vegas teams had returned to the
Windows fold. "Do we have any pretense of cross platform left?"
asked Prashant Sridharan, the program manager for the Vegas project,
in an e-mail to a colleague. "Don't care about cross platform
in future -- pretense or otherwise," answered Russ Arun, previously
an ally of Mr. Slivka's. Mr. Slivka's Java group was also disbanded,
and he is again working on Windows. Mr. Slivka declined to comment.
"Even at Microsoft, there were some people who drank the Java
Kool-Aid," Mr. Allchin says.
The decision to follow the hawks' course foreclosed a tantalizing,
alternative future for Microsoft. If Mr. Gates had swung the other
way, the company could have pioneered a new era of computing in
which any software can run on any computer using any operating system.
It also could have avoided a heap of legal trouble. In November,
a U.S. District Court judge in San Jose, Calif., issued a preliminary
injunction requiring the company to reverse many of its efforts
to tie its version of Java to Windows, pending a final ruling on
whether Microsoft violated its license from Sun. Microsoft says
it simply gave developers a choice between the Windows-enhanced
version of Java and the "pure" form endorsed by Sun. In
Washington, another federal judge is hearing the antitrust case
brought last year by the Justice Department and 19 states that charges
Microsoft sought to illegally maintain and extend its monopoly by
tying its Web browser to Windows.
Today, Mr. Allchin will begin testifying in that case, explaining
to Judge Thomas Penfield Jackson that his tactic of integrating
Internet technologies into Windows is a common and even desirable
practice in the software industry. The company is relying on a U.S.
Court of Appeals ruling in a skirmish last year that the integration
of Internet Explorer into Windows 95 doesn't violate antitrust law,
as long as the combination provides some benefit to consumers, even
if other motives are involved. The government may seek to overturn
the ruling.
Despite the legal mess, Mr. Allchin's strategy has so far proved
a boon for Microsoft, and his star is still rising; he is Microsoft's
most important line manager, with responsibility for all Windows
development, including Internet technologies. With the appeal of
the Internet driving a boom in cheap PCs, Windows is more wildly
popular than ever. Last month, Microsoft reported a staggering net
profit margin of 40% and a swelling cash hoard of $19 billion for
its most recent quarter, both the highest of any major corporation.
Late last year, Microsoft overtook Netscape in browser market share.
Netscape has agreed to be acquired by America Online Inc.
Still, Messrs. Gates and Allchin may only have bought Windows some
time. Although Java hasn't delivered all it once promised, the Web
has indeed spawned an explosion of cross-platform software not hooked
to Windows. Increasingly, users take advantage of applications on
the Web -- from e-mail to book-buying to tax preparation -- using
simple browsers rather than complex Windows software.
As Web sites are able to handle more sophisticated transactions,
and high-speed modems from cable and phone companies make the Internet
more useful and reliable, more programs will be written for the
Web, not Windows. One of the goals of AOL's acquisition of Netscape
is to create, in alliance with Sun, a $200 machine that provides
access to applications running on AOL's huge Web servers, through
a Java-based browser, with no Windows software at all.
Mr. Gates himself conceded the diminished importance of Windows
on PC desktops last September in an internal memo describing Microsoft's
efforts to develop a "megaserver" of its own to deliver
software and services over the Internet. Microsoft is already offering
several megaserver style services, including HotMail, an e-mail
service that stores messages on a central server and delivers them
through any Web browser.
"We have to improve the PC and we have to offer developers
a great reason to build and deploy distributed applications on Windows,"
Mr. Gates wrote. "Otherwise they might decide simply to target
the basic browser, ignoring the richness that we offer because it
is too hard and complicated to deal with."
Copyright © 1999 Dow Jones & Company, Inc. All Rights Reserved
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