Gates Warns That Penalties Would Cripple Microsoft

Microsoft chairman Bill Gates yesterday warned that the tougher settlement demanded by nine US states in the long-running antitrust case would be crippling for the firm, setting it back 10 years and costing thousands of jobs.

In his first courtroom appearance in the four-year trial Mr Gates said the added sanctions would leave a fragmented, less profitable soft ware industry. He also said the billions of dollars spent on research and development by Microsoft would be sharply cut back if the company was forced to share its technology.

The appearance of Mr Gates, who is likely to be on the stand for two days, was viewed as a high-risk strategy. In his only previous appearance via a videotaped interview in 1998, he is thought to have damaged the case with an evasive, curmudgeonly performance.

In cross examination in the Washington DC federal courthouse yesterday, he was more focused, giving answers that were short and to the point. A repeat of the earlier combative testimony could have played into the hands of the nine US states pursuing tougher penalties against Microsoft.

The harsher settlement would require Microsoft to divulge some of the blueprints and technical information about how its products work. One proposal is for a version of Windows that could be customised by computer makers and rival software firms.

Mr Gates told judge Colleen Kottar-Kotelly that "by reducing Windows to some kind of core operating system [the nine states] would turn the clock back on Windows development by about 10 years and effectively freeze it there. I know that Microsoft could not have developed Windows 95, one of the most successful software programmes in history, if the requirement had been in effect in the early 1990s."

In a written 156-page statement he said Microsoft could not technically meet the demands for a modular version of Windows. "There is no clear dividing line between where a particular block of middleware ends and the rest of the operating system begins."

The penalties he said would amount to a "massive transfer of Microsoft's intellectual property rights" to rivals. He also disputed the claim that his company planned to dominate internet services by designing software that is incompatible with that of rivals.

Microsoft has already been found guilty of abusing its monopoly and has agreed a more lenient settlement with another nine states and the justice department.