Article 25 of 54
Business; Financial Desk
THE MICROSOFT BREAKUP RULING THE IMAGE War of Words to Continue as Software Giant Struggles to Shape Public Opinion
Los Angeles Times
Home Edition
Page C-5
Copyright 2000 / The Times Mirror Company


When Bill Gates appeared in a television commercial last month to argue his case for keeping Microsoft Corp. intact, Advertising Age columnist Bob Garfield quipped that Microsoft's co-founder and chairman hoped to "look less like Dr. No and more like Mr. Rogers."

Wearing a comfortable sweater and an easy smile, Gates provided an amiable and low-key contrast to the testy and forgetful executive who appeared in videotaped testimony shown during the Justice Department's landmark antitrust trial.

But the world's largest software company is underwriting far more than an occasional commercial as it struggles to shape public opinion surrounding the government's bid to break up the Redmond, Wash.-based company.

On Wednesday, U.S. District Judge Thomas Penfield Jackson ordered Microsoft to be broken up into two companies.

Microsoft has the deep pockets--$21 billion in cash, to be specific--to make its message heard. This is, after all, the company that hired the Rolling Stones to provide the soundtrack for its Windows 95 ad campaign.

Indeed, even before Jackson's ruling, Microsoft had been spending freely in recent years to assemble the public relations and lobbying firepower needed to press its case in Washington and state capitals nationwide.

Microsoft's allies and opponents alike agree that the company kicked its public relations and lobbying into overdrive when it became clear that the Justice Department wouldn't back away from its push to break Microsoft into pieces.

"A lot of people in our industry hadn't been heavily engaged in Washington and the political process," said Jason Mahler, vice president and general counsel of the Computer & Communications Industry Assn., which supports the government in its bid to break up Microsoft. "But Microsoft geared up very quickly. They've hired an army, because they obviously saw this was going to be the most significant issue for the company. "

Microsoft's buildup is evident in its lobbying expenditures. The company spent $2.12 million on lobbyists in 1997, according to the Washington-based Center for Responsive Politics. Microsoft's budget grew to $3.74 million in 1998, according to the center, and the company reportedly spent $4.6 million in 1999. Microsoft's money bought counsel from such seasoned political veterans as former Republican Party chief Haley Barbour and former Democratic Rep. Thomas Downey.

Political donations also rose significantly as the antitrust case progressed. Microsoft's donations to political parties during the 1995-96 election cycle totaled $256,634, according to the Center for Responsive Politics, which studies Federal Election Commission filings. Donations shot up to $1.4 million in the 1997-98 cycle and have topped $2 million during the 1999-2000 cycle.

Only AT&T; the American Federation of State, County and Municipal Workers; the Communications Workers of America; and Philip Morris topped Microsoft in soft money donations--funds not regulated by federal law--during the first half of the 1999-2000 cycle.

Microsoft also is providing financial support to such advocacy groups as the Washington-based Assn. for Competitive Technology. It also created the Freedom to Innovate Network, a Web site that describes itself as "a nonpartisan, grass-roots network of citizens and businesses who have a stake in the success of Microsoft and the high-tech industry."

The company also is speaking directly to consumers through full-page newspaper advertisements that put the company's spin on trial developments. Gates and Microsoft President Steve Ballmer in May wrote op-ed pieces for Time and Newsweek that argued the company's case. And, industry observers say, Microsoft is actively lobbying in state capitals where attorneys general have initiated antitrust actions against Microsoft.

A Microsoft spokesman maintains that the political donations, lobbying efforts and public relations gambits are separate from the antitrust suit. "We've always believed that this case will be reversed on appeal, and that's where we're headed," said Microsoft spokesman Jim Cullinan.

Detractors describe Microsoft's lobbying and political contributions as an outright attempt at influence-peddling. And public relations experts suspect that everything the company does is being driven by the antitrust case.

"Microsoft is trying to create a snowball effect," Mahler said. "They've tried to create a huge amount of public pressure through political donations and the huge PR campaign."

Microsoft's lobbying efforts are designed to reach beyond the courtrooms of Jackson and appellate judges who would hear the case on appeal.

"This case will continue to be a long, drawn-out affair," said Jerry Swerling, a Los Angeles-based public relations consultant and coordinator of the public relations sequence at USC's Annenberg School for Communication. "Remember, it's an election year, so they've got to be looking ahead to see if a new president in the White House or a new Congress might have a different way of looking at this case."

Public relations experts expect Gates and Ballmer to continue Microsoft's public relations push. "They are, in effect, the company," Swerling said. "They can't duck."

But Microsoft also has been calling upon other constituencies--including business partners whose products mesh well with its technology, and shareholders who have watched the price of their shares plummet over the last year.

"If I were sitting in Redmond, Wash., I'd start getting shareholders--small shareholders in particular--to start singing Microsoft's song," said former Sacramento legislative staffer Christopher Wysocki, now president of the Small Business Survival Committee, an advocacy group that receives some funding from Microsoft. "I'd also get people who use Microsoft products to tell stories of how the software developed by Microsoft has helped people to start and expand their small businesses."

Some of those stories are being delivered by members of the Assn. for Competitive Technology, a group that receives funding from Microsoft. "This is a tough message for Microsoft to be able to deliver by itself," said association President Jonathan Zuck, who says members are "constantly sending cards and letters asking what they can do."

Microsoft also has received support from such advocacy groups as Citizens Against Government Waste--which receives some funding from Microsoft. It also has won support from such organizations as the 60-Plus Assn., a senior citizen group that receives no Microsoft funds.

One of Microsoft's most powerful public relations tools is a cadre of like-minded free-market thinkers that delivers influential messages. "Microsoft has loaded its witness list with blue-chip names, including academics and consultants," Swerling said.

The group includes Lloyd Cutler, former counsel to presidents Bill Clinton and Jimmy Carter; Griffin Bell, a U.S. attorney general under Carter; and Nicholas Katzenbach, attorney general under President Lyndon Johnson.

Microsoft relies upon the friendly voices to counter negative publicity created when such high-powered people as Esther Dyson voice support for breaking up Microsoft. In recent weeks Microsoft has garnered support in op-ed pieces written by Nicholas Economides , a professor of economics at Stern School of Business at New York University, and former Bush counsel C. Boyden Gray, who represents the Assn. for Competitive Technology.

Mahler dismisses much of Microsoft's support as propaganda. "What we find to be interesting is that very few voices are joining the Microsoft chorus that aren't either directly or indirectly paid for by Microsoft, or whose livelihood depends in good part on Microsoft."

Public relations experts expect the war of the words to heighten. "It could evolve into World War I trench warfare, with periods of ongoing uncertainty spiked with occasional episodes of intense brutality," Swerling said.

"Whether Bill and Steve are the nicest guys in the world doesn't make any difference," said Michael Sitrick, a Los Angeles-based consultant who specializes in crisis management. "Americans will say, 'So what.' Microsoft has to tell them why this case is important to consumers."


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