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THE MICROSOFT BREAKUP RULING | THE IMAGE

War of Words to Continue as Software Giant Struggles to Shape Public Opinion

June 08, 2000|GREG JOHNSON | TIMES STAFF WRITER

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.

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