Overdrive Read online

  Overdrive

  BILL GATES

  and the

  RACE TO CONTROL CYBERSPACE

  James Wallace

  Contents

  Prologue: Prelude to War

  1 The Road Ahead

  2 The Trustbuster

  3 Internet 101

  4 Bachelor Tycoon Takes a Wife

  5 The Davids vs. Goliath

  6 The Sleeping Giant Awakens

  7 Nothing but Net

  Preface

  This project began with a request in the spring of 1996 I from publisher John Wiley & Sons to update my previous book Hard Drive, which I wrote with Jim Erickson. But it quickly became apparent that so much had happened since the publication of Hard Drive in 1992 that another book was needed to frilly tell the incredible story of the rise of the Internet and how Microsoft responded.

  As was the case with Hard Drive, Microsoft did not cooperate with research for this book. The company was not pleased with Hard Drive, which had been cited by U.S. District Court Judge Stanley Sporkin in rejecting the antitrust consent decree negotiated in 1994 between Microsoft and the U.S. Justice Department. As a result, Microsoft spent many more months in court before Sporkin’s ruling was overturned.

  While Microsoft officially refused any help with this book, some of its employees and executives agreed to off-the-record interviews. Their names are not used in this book, but they know who they are and I would like to thank them for helping me tell this story.

  My most special thanks, though, goes to my editor, Hana Lane, at John Wiley & Sons, who offered hope and encouragement and whose life expectancy was probably shortened considerably because of the number of deadlines that I failed to meet.

  This book would not have been possible without the tireless efforts of several others at John Wiley & Sons, including Marcia Samuels, managing editor, Elizabeth Doble, director of production, and, finally, Gerry Helferich, the publisher, who never lost his cool and gave the book his full support all along the way.

  Many people outside of Microsoft were interviewed for this book, and I would like to single out a few for the hours they spent talking with me: Bill Joy, Eric Schmidt, Rob Glaser, Jeff Lill, Dave Thompson, Tim Krauskopf, and Mike Tyrrell.

  I would also like to thank Jim Erickson, my co-author on Hard Drive, who provided help with interviews. Jim is now a reporter for Asiaweek in Hong Kong.

  Thanks, too, goes to J. D. Alexander, publisher of the Seattle Post-Intelligencer, the newspaper where I work as a reporter. J. D. graciously allowed some of the newspaper’s photos to be used in this book.

  When I began Overdrive, I was doing research for a book about Philippe Kahn of Borland International. That project got sidetracked by this one but not before Philippe had given me about 50 hours of his time for interviews. Those interviews yielded invaluable insights and information about the computer industry, and relevant material from those interviews with Phillipe is included in this book. I am in his debt not only for his help but also for the kindness he showed me, especially when I had to tell him I was going to stop work on his book so I could write another book about his bitter rival, Bill Gates.

  Finally, I would like to thank two very dear people in my life, Linda Moore and Jackie Lincecum. Linda helped me to survive a couple of very dark times during the writing of this book. And Jackie worked tirelessly to transcribe interviews, even though she had a full-time job. More important, she gave me her love, friendship, and support, without which I would have lost my way.

  James Wallace Seattle, February 1997

  Prologue: Prelude To War

  Ringmaster Bill Gates was growing increasingly testy.

  Under the enormous white tent that had been erected on the lush green lawn of Microsoft’s campus for this crazy circus known as the Windows 95 launch, a dress rehearsal for what was to be the greatest show on earth was going badly. After several weeks of unprecedented hype, the day that the entire planet seemed to be talking about was only hours away, and this was the last opportunity to work through the launch-day script.

  The next morning, August 24,1995, more than 2,500 journalists, industry big shots, and special guests, along with friends and family of Gates, would fill this cavernous tent to hear Microsoft’s chairman deliver a now familiar sermon on why Windows 95 would change the world. Millions more in 42 U.S. cities and in major capitals around the world would watch on closed-circuit television from satellite feeds. Microsoft was spending more than a quarter of a billion dollars on the biggest and noisiest product launch in the history of the computer industry—hell, this was the biggest marketing extravaganza for a consumer product ever, outstripping the hoopla over New Coke or the first Super Bowl. But a series of minor technical glitches during the final run through were making Gates nuts.

  Probably the only person or thing Gates was not yelling at was comedian Jay Leno, who had been paid some of those marketing bucks to be the surprise guest at the Windows 95 party. Poor Leno. The square-jawed Tonight Show host was trying to learn how to use a computer before the next morning. At least Gates was showing some atypical patience with Leno, explaining where to position the mouse and how to click it.

  But some troublesome equipment was not so fortunate. “C’mon!” Gates yelled in disgust at one point when the onstage computer began to act up. He angrily picked up the mouse pad and threw it on the podium. Not far away, a reporter for USA Today, who had been given behind-the-scenes access to Gates during the pressure-packed hours before the launch, hurriedly scribbled notes.

  “You’ve got the wrong screen set up here,” Gates snapped at a technician.

  By early evening Leno had had enough.

  “I came illiterate,” Leno quipped about computers as he walked out of the tent. “Now I’m leaving virtually retarded.”

  The others who remained in the tent did not escape Gates’s wrath, especially when his TelePrompTer conked out. But it was not until he watched a special promotional video that had been prepared for the next day’s show that his anger finally exploded.

  “This video makes no sense!” Gates shouted at Brad Chase, the marketing manager for Windows 95.

  Gates was especially upset about a scene in which an interviewer playfully asked an executive if Windows 95 would improve his sex life. Although the line in the video got a laugh from the sparse crowd in the tent, Gates was not amused. He was dumbfounded that anyone would try to link Windows 95 with people’s sex lives. (No one dared tell Gates, of course, that the quarter billion dollars his company was spending to hype Windows 95 had already linked it with everything under the sun.)

  “We are supposed to be making serious points here!” he heatedly told Chase.

  Gates decided to watch the video one more time. Long before it was over, the dour expressions that washed across his face, which by now was beginning to show the strains of a very long day, gave the verdict away.

  “I’d rather have nothing than have that!” Gates complained as he walked away for an interview with an anchor- woman from the BBC.

  The interview was to be the last of his media appearances this day. They had started that morning, nearly 12 hours earlier, around 8:30 A.M., when Gates had done the first of what would be 14 television interviews over three hours. That brought his total for the week to 29, including Today, Good Morning America, and Larry King Live. After he had finished the last of those, Gates had explained their value to the reporter from USA Today as he walked back to his office for lunch, in Microsoft’s Building 8.

  “I have to ask,” he told the reporter, “is it worth six minutes of my time? Well, each of those shows has 50,000 to 100,000 viewers. So it’s time well leveraged.”

  Well-leveraged time. It was a concept of media relations that Gates had learned a year or so earlier from hi
s pal Warren Buffett. The two were at a party thrown by mutual friend Meg Greenfield, editorial page editor of the Washington Post and, like Gates, a Seattle native. Gates was playing croquet on the lawn of Greenfield’s house on Bainbridge Island, across Puget Sound from Seattle, when he overheard Buffett talking about how he had handled the media during the Salomon Brothers trading scandal. Croquet mallet in hand, Gates walked over to Buffett.

  “Did you hire a media adviser?” Gates asked.

  “No,” Buffett told his friend. “You just call them all into a room and you go talk to them.”

  Later that week, for the first time, Gates invited the Seattle media to his office for one-on-one interviews.

  For the Windows 95 launch, Gates had invited about 500 journalists and dozens of television crews from around the world to join the Microsoft party at its corporate campus in Redmond, a woodsy suburb east of Seattle. They had come from more than 30 countries: from Lativa and Turkmenistan, from Finland, France, and Australia. They had come from newspapers and the networks, from the trade press and the mainstream press, all to stoke the fires of Microsoft’s relentless advertising hype with an incalculable amount of free publicity on what had become a worldwide “happening,” a love feast straight out of the sixties, the computer industry’s Woodstock.

  All this for an imperfect software upgrade with 15 million lines of computer code that was more than two years late getting to market.

  Microsoft had paid several million dollars for the rights to use the Rolling Stones song “Start Me Up” as the official soundtrack of its Windows 95 advertising campaign. In Great Britain, entire fields had been painted with the colorful Windows 95 logo to catch the attention of planes flying overhead. Microsoft had even bought the entire press run of the Times of London and on launch day planned to give away 1.5 million copies free, with an advertisement across the bottom of the front page that read: “Windows 95. So Good Even the Times Is Complimentary.” In Australia, a four-story box covered with Windows 95 logos was to be towed into Sydney Harbor on a barge, as dancers performed in the streets. All babies born Down Under on launch day were to get a free copy of Windows 95. In Toronto, a 500-foot banner pitching Windows 95 was to be unfurled on one side of the government-owned 1,800-foot Canadian National Tower. In the Philippines, the very first copy of the new operating system to hit the country was to be hand-delivered to President Fidel Ramos. In Poland, Microsoft representatives planned to take reporters down in a submarine to show them what it would be like to live in a world without windows. In New York City, Microsoft, the 800- pound gorilla of the software industry, had paid to have the 102-story Empire State Building bathed in the logo colors of Windows 95. Even the “Doonesbury” comic strip was featuring the new computer operating system during the week of the launch.

  And Microsoft’s 270-acre corporate campus was the perfect setting for this media and advertising circus. It had been transformed, complete with Ferris wheel. The sweeping expanse of lawn had been decked with 15 large white tents, the biggest of which was to be used to accommodate the 2,500 people with special invitations. More than 10,000 others had received passes to take part in the event, but from outside. Those 14 other tents would be filled with software executives demonstrating their applications designed to run on Windows 95. More than 100 computer companies had signed up to participate.

  Although The Launch was officially set for 11:00 A.M. on Thursday, August 24, the party had already started by the time Gates was blowing his top during the final rehearsal in the big tent with Leno.

  As part of its savvy marketing campaign to convince customers that this was a must-have product, Microsoft had declared that Windows 95 could not go on sale until 12:01 A.M., local time, on August 24. Retail stores from coast to coast, their shelves stocked with boxes of Windows 95, had decided to open their doors at midnight to the hordes of customers who had bought into the marketing hype and couldn’t wait to be among the first to buy what was billed as the greatest software product in the history of the universe. CompUSA, the computer chain, arranged to keep its 86 stores across the country open until past midnight for the first time, and offered free pizza to all customers as well as discounts on American Airlines tickets for buyers of Windows 95.

  At the stroke of midnight in New Zealand, the first English- speaking country to greet the new day, the very first copy of Windows 95 was sold to a business student in Auckland. From there, the insanity spread west toward New York City, where hundreds of people pushed their way into computer stores at midnight.

  Three hours away on the West Coast, Gates had finished his interview with the BBC anchorwoman and returned to his office alone to read his e-mail. He later returned to the big tent, where he and Chase and others discussed how to fix the promotional video. They finally agreed to take it out of the launch program altogether. Around 11:00 p.m., after a final review of the script, Gates left his office, got into his car, and headed for home. He was still hyped, but he looked beat.

  A few years earlier, there might have been great concern among Microsoft’s senior managers about the condition of the chairman when he showed up the next morning. After a restless night before the launch of Microsoft’s Excel spreadsheet in New York City in May 1985, Gates had shown up for the big event without sleep, without a shave, and without a shower. He looked as bad as he smelled.

  There was no need to worry this time. Gates was going home to his wife, not to some hotel room. Gates had been 29 years old that May day in New York City. Now, he was a couple months shy of his fortieth birthday. The computer geek once ridiculed for his personal appearance had cleaned up—literally. The personal changes in Gates had been as dramatic as the increase in his wealth, which was now approaching a staggering $20 billion. Forbes had recently named him the world’s richest individual. He was also one of the world’s most powerful. He was so well known internationally that he conducted his own foreign policy, calling on China’s president and other world leaders during business trips abroad. He socialized with Buffett. He played golf with the president. Gates wanted to be taken seriously, as a visionary, as a statesman, as an adult.

  But for all the changes, he was still very much that intense young college dropout who had founded Microsoft with buddy Paul Allen at age 19. Neither marriage nor fame nor fortune had diminished the white-hot competitive fire that consumed him. In the last few years, that fire had fueled the Microsoft juggernaut as it rolled inexorably across the computer industry, crushing all competitors and rearranging the landscape. Once-feared foes had been vanquished: Lotus was swallowed by IBM, and its chairman, Jim Manzi, one of Gates’s most outspoken rivals, quit. Novell, which spent a fortune on what was expected to be Microsoft-killer WordPerfect, was instead losing market share and withering away. Borland International, once touted as the next Microsoft, was now a third- rate player whose flamboyant chairman, Philippe Kahn, had been knocked out of the game and off his board by his archenemy Gates. Microsoft had even taken on the U.S. government and won. When Gates and Justice Department trust- buster Anne Bingaman faced off in 1994, it was Bingaman who blinked. After investigating Microsoft’s anticompetitive behavior and building what was thought to be a strong case against the company, the Justice Department backed down rather than risk a land war with Microsoft. Gates got off with a slap on the wrist.

  Microsoft was entrenched on top, and Windows 95 was designed to keep it there. But for how long?

  As a tired Gates left the Microsoft campus and drove home along Highway 520, he had far more on his mind than the launch of Windows 95, now just a few hours off. Old foes had been beaten back, and in some cases buried, but down the road was a new and even greater enemy than Microsoft had ever faced before. It was a Cold War relic called the Internet. And a bunch of wise-ass kids from an upstart company called Netscape a thousand miles from Seattle in the Silicon Valley, a company that did not even exist two years earlier when Windows was initially supposed to be ready for market, had been keeping Gates up nights.

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p; The Net, as the Internet had come to be known, represented a true paradigm shift in the computer industry. Remarkably, despite his prescience, Gates had missed the turnoff signs, and Microsoft now found itself far behind in the battle to create a new industry standard for tapping the unlimited resources of the Net. “We set the standard” had long been Microsoft’s battle cry. First with DOS and then with Windows, Microsoft had become dominant because it controlled the operating system for most of the world’s personal computers.

  But while Microsoft’s programmers were finishing Windows 95, the Netscape team had been creating a browser designed for cruising the Internet. By January 1995, seven months before the launch of Windows 95, when Microsoft had only a handful of people working on its own Internet browser, thousands of techno-hip computer users were downloading the Netscape Navigator. Netscape had set the standard, leaving Gates to face the very real possibility of Microsoft’s demise unless the company could do a 180 and overtake Netscape’s sizable lead.

  Gates was all too aware of what had happened to once- mighty IBM during the last paradigm shift in the computer industry at the dawn of the personal computer revolution. Big Blue lost its dominance to another upstart company with a bunch of wise-ass kids in pizza-stained T-shirts. That company was Microsoft. Gates was not going to let someone else beat him at his own game. He had decided to reinvent the company. On May 26, three months before the launch of Windows 95, Gates had issued a lengthy memo to his executive staff titled “The Internet Tidal Wave,” in which he announced: “Now I assign the Internet the highest level of importance. In this memo 1 want to make clear that our locus on the Internet is critical to every part of our business.” Even as Microsoft readied for the biggest celebration in the company’s history, it had already shifted into overdrive in the race to overtake Netscape. It was going to be a long, tough fight, but Microsoft had very deep pockets. And it also had Bill Gates.