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Fueling the debate-and industry gossip mills-are fresh details of Microsoft's hard-nosed business dealings. In a new book called Startup (Houghton Mifflin; $22.95), for example, GO Corp. founder Jerry Kaplan tells how in 1989 his company, hoping to persuade Microsoft to write some software for GO's pen-based computer system, gave Gates and his developers a demonstration of how it worked. Microsoft said it wasn't interested. But two years later, the company unveiled a competing system called Pen Windows that bore an uncanny resemblance to GO's design, even using the same "gestures" to insert and delete characters. Microsoft calls the account "factually inaccurate."
More recently, according to court papers submitted last February by Apple Computer, Gates personally threatened to stop developing application software for the Macintosh if Apple continued working on a programming tool that would compete with Microsoft's. "Since Microsoft is the largest supplier of software applications for the Macintosh," wrote Apple general counsel Edward Stead, "this threat was a serious one." Gates denies saying any such thing.
But such a thing would not be out of character. In a complaint filed in April as part of the Intuit suit, the Justice Department quoted a memo, directed to Gates, in which a Microsoft vice president told how he had tried to pressure Intuit chairman Scott Cook into accepting a $1 billion buyout offer by hinting that Microsoft might spend the money attacking Intuit in the marketplace. "I tried to tell him how much we could do with $1 billion," the V.P. wrote. "I tried to be nonthreatening, but let him know we would do something aggressively."
American capitalism likes entrepreneurs to have a gleam in their eye, and even tolerates some clawing and scratching as long as the playing field is level and the fight is fair. But it does not take kindly to bullies. When a company gets to be big enough, it either curbs its youthful ways or it invites the kind of scrutiny Microsoft is now getting.
How big is Microsoft? Measured by the standards of the computer makers, it seems relatively small. Its annual revenue is half that of Apple and one-fourteenth that of IBM. But software is vastly more profitable than hardware. Apple makes 3.3% profit on every dollar of sales, compared with nearly 25% for Microsoft. In some respects, the power Microsoft wields over the computer industry may exceed IBM's in its heyday.
Eight out of 10 of the world's personal computers could not boot up (that is to say, start) if it were not for Microsoft's operating-system software-programs like MS-DOS, Windows and Windows NT. What is even more impressive (not to mention profitable) is that the company also dominates the market for almost every big-ticket application program, like word processing (Microsoft Word), electronic spreadsheets (Excel), filing (Access), scheduling (Project) and the new all-in-one program "suites" (Office). Microsoft's Flight Simulator is one of the best-selling PC games of all time. Microsoft's electronic encyclopedia (Encarta) outsells the Encyclopaedia Britannica.