Transcript of Media Teleconference with Bill Gates, Steve Ballmer and Bill Neukom 

April 28, 2000

THE OPERATOR: Good afternoon and thank you for standing by. Welcome to the Microsoft conference call. Presently all participants are in listen only mode. Later we'll conduct the question and answer session if you have a question simply press star then one on your touch-tone phone at any time during the presentation. You'll be announced prior to asking your question. If you need assistance, press star zero.

As a reminder, this call is being recorded at the request of Microsoft for replay purposes. At this time I'd like introduce Mr. Mark Murray, Director of Corporate Public Relations. Sir you may begin.

MR. MURRAY: Thank you very much. Thanks everyone for joining us. We realize you have got deadlines, so we'll get right to it. With me are Bill Gates, the Chairman and Chief Software Architect of Microsoft, Steve Ballmer our president and CEO, and Bill Neukom our executive vice president for law and corporate affairs.

Because we have only just received this proposal from the government, we'll not be able to comment a great deal on specifics. We're going to start with statements from both Bill Gates and Steve Ballmer, and they will be able to stay for a brief time to take a few questions. Then we'll have Bill Neukom here to talk more about where the legal process goes from here. At this point, I'll turn it over to Bill Gates for some initial comment.

MR. GATES: Obviously, we think that today's proposal by the Department of Justice and the state attorneys general are very disturbing, not just for Microsoft but for consumers and the entire high technology economy.

Rather than be reasonable and try and resolve the case or come up with a focused remedy, what they have got here is something that is not supported by the facts, would be greatly harmful to consumers, and we certainly don't believe will be sustained by the courts.

While I know there is a great deal of interest in the government's proposed regulations and breakup, I think it's important to emphasize that this is just one step in the process. We don't believe the courts are going to uphold this kind of unprecedented and radical regulation of our activities. We are confident at the end that the courts will rule in our favor. We'll continue to focus on building great products as we go through this process.

Although I've only had a little time to look at the document, I want to say a word about its impact on consumers in the industry.

These proposals would block us from doing new product work. Microsoft could never have developed Windows under these rules. We couldn't have developed Windows because without the great work of the Office team and the Windows team it never would have come together. We couldn't have developed Windows because of the way that this thing reads without so-called middleware, which is defined to be almost anything that we can't integrate new innovative features in. And, also, this proposal takes away any incentive for us to do new work by saying that the intellectual property has to be given away to other companies.
So even if you set aside the breakup, the conduct remedies are extreme regulation unprecedented and far beyond anything in this case.

In terms of the breakup, and I don't know why they're not using that term why they call it reorganization this is a breakup. This is a breakup of an operating company. Basically, the way they've defined things here is the most arbitrary split saying that speech recognition is not part of the operating system, saying our research is not part of the operating system. This was not developed by anyone who knows anything about the software business.

We have a proven track record of giving consumers great innovation and great products as a single integrated company. We have been a great contributor not only to America's leadership in the technology business but also to our shareholders. It's very important to me that we keep the company together because that's the only way we're going to be able to continue to deliver for those people. Microsoft will be greatly damaged by this kind of split. No one should think that shareholder's value would be preserved with this kind of activity.

Microsoft is an R&D company whose products need to be updated on a very rapid basis. We're in a very competitive industry. It's not a company that owns mines or resources or anything like that. What we have are smart people who work together as a team. And it's only by working as a team that we have been able to do our great work.

In inclusion, this is really out of bounds; it's out of the touch with what's going on in our industry. We're very proud of being part of the creation of the personal computer industry. We think that's an industry that should be allowed to move forward. There are tens of thousands of companies that have benefited from this. There are lower prices and immense consumer benefit. Consumers should understand that these remedies would not allow us to continue to deliver new software products the way we have in the past. These regulations would not help the software industry they would simply retard the speed at which it moves ahead.

MR. MURRAY: Thanks very much Bill. Now I'd like to introduce Steve Ballmer our president and CEO for some remark.

MR. BALLMER: I want to talk about a couple more areas that Bill touched on. First it's clear that these proposals both the breakup proposal and the regulation of the business would hurt Microsoft's ability to innovate going forward. And that would dramatically and painfully hurt American consumers.

We were working on a whole new generation of software that will really bring the power of the Internet to businesses and homes everywhere. All of these new ideas and new opportunities would be threatened by the extreme regulation proposed by government lawyers. I think it's important to notice that while many of you will focus on the breakup proposal, the regulation described here would be equally as threatening and hard on our core ability to do any good work, new good work for consumers.

The second point I would make is that Microsoft will continue to move forward in a responsible way, both to resolve these legal issues and to continue to develop products and solutions for our customers. And while I'm disappointed, very disappointed, in this proposal, and I'm disappointed beyond belief that the interests of consumers and the health of the American economy don't seem to be evident in this proposal. We're going to continue to move forward for the time as we have in the past.

On the legal side, we recognize that there is a disagreement between Microsoft and the government. We will continue to work in good faith with the government to resolve the dispute. We believe we have a very strong case on appeal. We are confident that the judicial system will ultimately reaffirm that our actions have been within the law and good for consumers.

Throughout this process we'll continue to compete in a fair and legal manner as we believe and know we always have. As we work to resolve this lawsuit through the appeals process, we'll also continue to innovate, to listen to customers and to build great new software, that lets people do great new things.

The Government today has proposed to regulate in many, many, many ways what Microsoft can and cannot include in our products, and how our employees can work together to bring new products to consumers. The regulation affects Microsoft and our thousands of partners by giving the government, instead of consumers, the power to determine the direction of technological innovation.

The government is not well equipped to meet these decisions. To compound this problem, the government proposes to break Microsoft. As difficult as it would be for the government to regulate one company under this proposal, the government wants to heavily regulate two companies. And the proposals leave unsaid a great deal of regulation that would ultimately be required if the breakup were imposed. Everyone in America should ask themselves what the economic impact and technological impacts are of this drastic and disproportionate proposal.

Finally, I do want to say that despite these radical proposals from the government, I am optimistic as I look to the future of this case and the future of the company. I am confident that this company, which has done so many great things for consumers and for the American economy over the last 25 years, will not be broken up.

Even though the government has proposed in addition these draconian regulations, the legal process has many more steps remaining, including Judge Jackson's final remedy, appeals to the Court of Appeals, and the United States Supreme Court, if necessary. We have won at the Court of Appeals before. And we feel very confident in our legal position as we move forward.

Even more importantly, I'm very optimistic about Microsoft's future. We were born a competitor in a competitive industry, and we'll continue to compete as we have in the past, vigorously, and responsibly. We have great products like Windows 2000, Windows 2000 Server, the newer release SQL Server 2000 of our SQL database product, Office 2000, Pocket PCs, MSN, our new version of Microsoft Money which, I'm very excited about, which are moving very well in the marketplace.

We have an incredible number of great new products coming in the months ahead that consumers will benefit in amazing ways and at amazing prices. And we see great opportunities for technology and services and economic expansion in the future.

We've got great people in our company, with our technical talent, our strong leadership team and our commitment to R&D. As the fourth leading spender on research and development in this country and our commitment to our customers to consumers I believe we can compete with anyone in the high tech industry and I believe we can serve customers of the high tech industry in the ways that will benefit them the most. Thank you.

MR. MURRAY: Thanks Steve. Now I'd like to introduce Bill Neukom, executive vice president for law and corporate affairs for some brief remarks, and then we'll take a few questions.

MR. NEUKOM: Thank you Mark. As Bill and Steve have said, we are working in good faith to resolve this lawsuit. We are disappointed in the government's actions today. Their proposed remedies go far beyond the scope of the case they tried to prove. They are not supported by the evidence or the District Court's legal conclusions.

And most importantly, these proposed remedies would discourage innovation and hurt consumers. We'll file our initial response to the government's proposals on May 10. At that time, we will provide our initial arguments against the government's radical proposals. We'll also provide the court with our view of the remedy that would be appropriate under the Court's rulings, even though we'll be seeking appellate review of the entire case.

And finally, on May 10, we'll propose a schedule for the remedies process going forward. The government's unprecedented and extreme remedy proposals will require a significant expansion of the remedy process currently contemplated by Judge Jackson's order. Even the government will have to agree that an American company deserves more than 12 days to respond to a government proposal to tear apart a $400 billion company.

The government's excessive demands will require months of discovery and evidentiary hearings. We think this is very unfortunate. Microsoft wants to see this case resolved in a fair and expeditious manner. The court and all the parties recognize this case will be decided by the appellate courts. So today's government proposals, simply delay the ultimate resolution of this case.
The government's proposals are particularly disturbing, because they are so far outside the scope of the lawsuit. There is no evidence in this case about the relationship between Windows and Office. There is nothing in the Judge's ruling about the relationship between Windows and Office. There is nothing in the evidence or the District Court's ruling concerning Windows CE or Windows 2000. 

There is nothing in the Judge's ruling to support the government guesswork, that tearing apart Microsoft and creating a separate applications company will somehow jump start other operating systems or somehow benefit customers in any way.

This case has always been about browser software not about spreadsheets and word processors. The government is seeking to try a whole new lawsuit involving products, competitors, and interests that were not involved in any way in the case that the government tried. In effect the remedies proposed by the government acknowledge that competition and innovation in this industry are moving so quickly that the government no longer cares about a remedy that addresses the case it put on in the courtroom.

It's important to put today's government proposals into the context of the broad lawsuit. We have good reason to be confident about our prospects on appeal. The court has already ruled that Microsoft did not foreclose Netscape, the distribution of Netscape's technology into the marketplace.

In fact, to the contrary, the court found that Netscape could reach every single consumer in the world. The appeals court has already rejected the tying claim in a virtually identical case in its decision June of 1998.

In this, district court acknowledged that his decision was at odds with the appeals court decision and the decision of the other appeals courts who have considered similar issues in uniformly applied the technology-tying test from -- that was articulated in the June 1998 decision by the DC Court of Appeals.
Most experts agree that the attempted monopolization claim has always been the weakest part of the government's case. And the recent announcement by AOL that they're going to make Netscape Navigator 6 the default browser in the AOL system would of course make Netscape the leading browser once again. That is not a monopolized market.

Finally, the government's maintenance of monopoly claim depends on the discredited theory of so-called monopoly broth an inadequate and untenable theory that has been discredited in a number of opinions. Most recently was rejected wholesale by the federal Circuit Court of Appeals in the Intergraph versus Intel case handed down November of last year.

Finally, let me say that regardless of what happens to this lawsuit on appeal, the government's demands are out of all proportion to the case itself. Microsoft built Internet support into Windows to benefit consumers and ISVs. We entered into a number of agreements to ensure that our new browsing technology got to customers.

The court concluded that these efforts violated the law. The appropriate remedy for such a violation is to address the violation found not to impose a regulatory death penalty that will harm consumer increase costs and threaten America's leadership in the technologies that are driving the new economy.
MR. MURRAY: Thanks very much Bill. I want to point out, before we get to questions, this call will be replayed and we'll provide that numbers at end of the call. We'll also have a transcript of the call posted on Microsoft's Press Pass Web site within a few hours. So if you want to come back and get the direct quotes from any of this, you can do so.

Operator, we're now ready for the first question.

OPERATOR: Thank you sir. Ladies and gentleman we will now begin the question and answer portion of today's call. If you have a question please press *1 on your touchtone phone. You'll be announced prior to asking your question. If you would like to withdraw the question, depress the pound key. One moment please for the first question. Mr. Bill Epifanio of JP Morgan, you may ask your question.

Q. Hi Steve, Hi Bill. Couple questions. One is what do you think the likelihood is that Jackson will accept this DOJ proposal as is? And also, given these proposed remedies, when do you now think the final decree from Jackson could likely come?

One other question that is there has been some speculation about a direct review by the Supreme Court. Do you think that is likely and would that be good or bad news for you?

MR. BALLMER: I think we'll defer all three of those questions to Bill Neukom.

MR. NEUKOM: To the first question, it remains to be seen what Judge Jackson will do. He has some discretion in entering remedies based on his findings of fact and conclusions of law. This, of course, is just a first round.
On May 10, we have an opportunity to put before him and the public our objections to these radical proposals and a summary of what we think is appropriate and commensurate remedies on the record of the case.

Under the current schedule, there would be a reply by the government on May 17, and some kind of oral argument on the 24th. But we, of course, in light of this broad side from the government will be asking Judge Jackson to create a new process where there can be the normal sort of opportunity to develop facts and law so that he can in a deliberate, rational way decide whether there is any part of the breakup or this very over-reaching regulatory scheme that is commensurate with his findings and conclusions.

In terms of the prospect of a direct appeal to the Supreme Court, that is a decision which will not manifest until there is the entry by Judge Jackson of a final decree, which will come after the remedies phase, however short or long that phase may become. And the decision about whether to ask Judge Jackson to certify the appeal directly to the Supreme Court under the Extraditing Act, will be made by the solicitor general's office, not by the antitrust division.

That office will determine whether it's in the best interest of the government to seek that appeal if it requests the appeal. As you know from the transcript of the statements in chambers, Judge Jackson is likely to certify the case for appeal. It goes to the Supreme Court, which has unfettered discretion as to whether to keep the appeal.

We think it's somewhat unlikely that the Supreme Court would keep it. The Extraditing Act was amended in '74. In the 26 intervening years only one case has been kept that was a consent decree review situation. This is an entirely different matter with a huge evidentiary record. Just the sort of thing that Court of Appeals is designed to review. And to put in a form where the Supreme Court, if it chose to, could later under Certiorari review nice legal aspects and policy questions.

MR. MURRAY: Thanks very much. Next question please operator.

OPERATOR: Mr. Mike Kwatinetz of Azure Partners, you may ask your question.
Q. Thank you. Just as a parallel situation, perhaps you could talk a little bit about some of the comments that Sun has been making on the server side. How do you see that? You spoke a lot about what it might do to the competitive front. Would this affect companies in terms of what they pay for services in the future?

MR. GATES: No. In the server business, Sun, is, you know, relative to high price, low volume, and they are a competitor of ours. They're attempting to benefit and get a leg up on their competition by promoting this government interference and regulation of our business. That is not a proper thing that has gone on in terms of the relationship between them and the Department of Justice.
MR. BALLMER: Certainly there was no part of this case this lawsuit in any way whatsoever in any form that has anything to do with the Sun complaints to the government.

Q. What if these proposals were accepted and put forth, would this affect your ability to compete with them in the server market?

MR. BALLMER: This kind of regulation in all forms will affect our ability to compete. But more importantly perhaps our ability to do good work for our customers to protect their valuable information and all the other things they want from us.

MR. GATES: If you look at the server software, it's sort of beyond random how they separated -- like software distribution is in one company but the operating system is in another company. You have to appreciate that what is in here would make no sense.

MR. MURRAY: Okay, next question please operator.

OPERATOR: Mr. Mike Martinez, of Associated Press, you may ask your question.
Q. Hey, gentlemen. I'm curious about the meantime -- obviously, this is going to go through appeals. If Jackson accepts part of this, and if it gets past appeals, we understand that, but in the meantime, you're built on the relationships with your partners and OEMs, do you feel this whole process is going to degrade the confidence that your partners and your investors have in Microsoft?

MR. BALLMER: I think that our partners and customers recognize a couple of things. Number one, I think they recognize that we do good work that we price at very attractive prices that benefit their business. I think Our customers and partners will remain convinced that our government and government lawyers with judicial review will not be able to commit anything so egregious that they cannot continue to invest in and benefit from our innovation. And we are sure that through this process, we'll prevail. We'll reassure customers of that, and they will be able to understand that they can continue to invest in accepting the incredible new products and kinds of attractive prices that we provide for our product.

MR. MURRAY: Next question please operator.

OPERATOR: Drew Brousseau of SG Cowen, you may ask your question.
Q. I'm curious as to whether there's anything that the remedy from the government that you found at all acceptable, and while you may not want to talk about the details of what your proposals of a remedy relative to this case might be, whether you might provide some outline of, broad outline, of what you think would be more appropriate.

MR. BALLMER: It's very premature for us to comment on the document. We've had not very long to. if you take a look at the document in aggregate and a first read as We commented in our opening statements, we're incredibly disappointed that government lawyers are seeking to break up and regulate us in a way that would really hurt consumers in the economy.

MR. MURRAY: As I said on the outset, we really have not had a chance to study this document in detail. We actually received this document later than many of you in the news media did. So we are at a disadvantage even to you folks, even though we're one of the parties to the lawsuit. Operator next question please.
OPERATOR: Mr. Paul Andrews of Seattle Times, you may ask your question.

Q. Hi guys, I have questions along three lines. First, Bill Gates' statement that Microsoft never could have created Windows and Office if they were in separate companies.

I'm trying to clarify that and how that would work and what would be different in that relationship, if the companies were separate.

Also if you have behaved ethically and legally as Steve says, what remedies are you thinking along the lines of actually proposing? You've maintained that stance throughout, and it kind of suggests that you think you've been right all along.

And finally, in terms of the Court of Appeals, will the same three judges hear the case, as have heard the previous appeals?

MR. MURRAY: Let's take those in turn. I think that Bill and Steve can address the first question and Bill Neukom is probably the best for the second and third.

MR. GATES: We never could have created Windows without having in the same group the people who are designing the interface. Designing the way that it was going to work and getting that new approach to critical mass in the marketplace, Office and Windows, because we had a common design a common approach, we went out there, and we did what it took to expose the way those two things worked together.

And under this proposal, we wouldn't be allowed to do that in the future. We also wouldn't be allowed to do a product that integrates in new functionality unless we also offered it on an a la carte basis. And when we do hundreds of new features, we can't possibly create two to the one-hundredth flavors of the product for people to install and deinstall different features and expect a third party software to run or people to understand what they'll get out of that and even have us test that software. You have got engineering requirements in here. You have IP giveaway in here, and you have a requirement that the Office people not work with the Windows people. All of which would have been fatal to the creation of Windows.

MR. BALLMER: I don't think that is that much to add. It's imponderable how that would ever happen with this kind of excess.

Q. What about the remedies part?

MR. NEUKOM: As to your question about why we would suggest any remedies if we thought we hadn't violated the law, because Judge Jackson asked us to do that as part of our submission, and we do what judges ask us to do.

You should understand, as I tried to make clear, but didn't do a good enough job in my remarks earlier. We do not accept respectfully many of the findings of fact and the conclusions of law entered in this case. We'll test those on appeal. That is our absolute right. It's just these kinds of antitrust cases which, as you know, are often reviewed and many times reversed, even in a pretty wholesale manner on appeal like the Intergraph versus Intel case, like the cases involving IBM and Kodak in the '70s and '80s.

The fact is that we have to respond to the judge and give him an indication what we think would be commensurate relief, appropriate remedies based upon his conclusions and findings. We assume them to be valid for sake of that presentation. We do not accept the proposition that they are valid and we'll test that on appeal.

Finally, as to your third question, Paul, if the case goes to the Court of Appeals, a panel of three will be selected out of a pool of eligible judges on a purely random basis. There is no so-called related case doctrine in the Court of Appeals the way there is at the trial court level, which is why this Windows 98 case came before Judge Jackson who is the Windows 95 consent decree judge.

And we are aware of the judges who would be eligible, and we look forward to having a chance to advocate our case in front of any panel of three from the District Court of Appeals. If, in fact, in the somewhat, I think, unlikely situation as the case goes directly to the Supreme Court, we look forward to those nine justices sitting in review of the liability finding by Judge Jackson. And indeed, you should understand that Judge Jackson, I trust, has not made up his mind about remedies at this point. He's received something from the government.

He will receive something from us on the 10th of May, something more from the government. I'm sure he wants to be educated and informed about this before he enters remedies. And we'll see what kind of relief he enters. This is just the government's request -- 

MR. MURRAY: I realize the time is very late. I appreciate your patience. We do have time for a couple more questions. Bill Gates and Steve Ballmer had to leave, but Bill Neukom has agreed to give us a little bit more time, if we have any more questions. Operator do we have any other questions?

OPERATOR: Yes sir. Mr. Steven Levy of Newsweek, you may ask your question.
Q. Is it possible that you did see what the government is doing here is asking for the breakup in hopes of getting, you know, all they won on the behavioral remedies? Does that sort of, you know, ask for the moon process take place, and then presumably you would in your remedy say something much lower than what you might be intended to accept?

MR. NEUKOM: I think that's a plausible strategy. The fact is that we because there is literally not a single precedent of an organic unified integrated operating company like Microsoft, let alone an IP company, ever having been broken up by a court order, we do think that that will be viewed by Judge Jackson, as it would be any federal judge, as a very radical form of relief.

But moving beyond that, if he rejects the government's request for structural relief, which we think because it's so unprecedented and so far-reaching is a reasonable likelihood, then everybody, including the court needs to focus on the conduct relief. And the kind of conduct relief the government has proposed here is over-reaching to say the least. It goes so far beyond the evidence and the conclusions of law as to be stunning.

Q. Is there any one thing in particular that you point out as particularly egregious in that set?

MR. NEUKOM: They want relief in new product areas as to new areas of competition as the lines of business that were not even mentioned in the litigation.

Q. Okay. Thanks a lot.

MR. NEUKOM: This is apparently a one-time, all-time attempt by the government to get any relief it could possibly conceive of they were restricted under the rules of law to relief which is within the bounds of the lawsuit they have tried. There is a record of evidence and there are conclusions of law as to three, and only three, causes of action. That is all that is left in this case.

Q. Thanks you lot.

MR. NEUKOM: You're welcome. Operator do we have any other questions?

OPERATOR: Yes sir. Next question comes from Mr. David Readerman of Thomas Weisel Partners.

Q. Hi, Bill. How did browsers end up in sort of middleware in this case? And I'm just really trying to understand what -- I know from your opening comments you haven't had a chance to read it all, but I'm trying to understand. Really it seems like the restrictions on the operating system business are very extreme, and I'm just really trying to understand exactly what business the government thinks operating systems would be constituted as proposed in this remedy.

MR. NEUKOM: It's a very fair question. I don't know the answer to it. You're going to have to ask the government what I think --

Q. They don't take Wall Street's questions. That's a challenge. They like to take questions elsewhere.

MR. NEUKOM: Let me suggest a way of looking at this set of proposals in their entirety. I think it provides powerful evidence for the proposition that this is yesterday's controversy.

They are seeking relief that has nothing to do with the lawsuit, because the industry has moved past the central issue in the lawsuit. That was whether it was appropriate for Microsoft to support the Internet in its operating system technology.

The answer to that is as a matter of technology, as a matter of serving customers, as a matter of law under the technology tying doctrine, yes.

Now in an after-the-fact attempt, this document stands for the proposition that that controversy has come and gone, and the government is trying to solve some other problems, but it hasn't proven that those are legal problems.

Q. So, Bill, to be clear, obviously this is the question on many institutional investors' minds. But to be clear, there are a lot of discussions here about financial judgment and the process?

MR. NEUKOM: Yes.
Q. As constituted here, are there restrictions on the way you can conduct your current business during the period upon which we're hearing the remedy phase Jackson presumably issues his judgment and then you're waiting for appeal?

MR. NEUKOM: No restrictions until a so-called final decree is entered. That will not happen until the full remedy phase is concluded David. And once the decree is entered, then any remedies included in that decree are subject to being stayed by either Judge Jackson himself, who has on several instances indicated his strong interest in having the liability questions reviewed before he would have to get the remedies. That's not practical. But he indicated his interest in that.

So we think that he will take seriously our request to stay pending appeal any remedies he might enter at an extent that if he doesn't we will seek that same stay relief from the Court of Appeals. And we think that as to any remedies which will have a material effect on our ability to innovate and compete, that both Judge Jackson and the Court of Appeals would be quite sympathetic to a stay.

So after you've gone through the stay process, if any of the remedies that are not stayed, those are remedies as to which we'll comply during the appellate process. We do not anticipate that there should be any material, any material restriction on our ability to innovate or to compete during the appeal.
Q. During the appeal? 

MR. NEUKOM: Right.

Q. Okay. All right, thanks for taking my questions.

MR. MURRAY: Do we have maybe one or two more questions?

OPERATOR: Yes sir. Mr. Tom Quinlan of San Jose Mercury News.

Q. In any event, you keep referencing the fact that you were very disappointed in what the Justice Department actually suggested to the judge. But at the same time it can't come as a complete surprise what they're thinking was given that you were in settlement talks just prior to the April 3rd ruling.

Was in fact, anything that the Justice Department recommended a surprise or unexpected by Microsoft and will this have any impact on the remedies you intend to suggest to the judge?

MR. NEUKOM: Well, as I said on May 10, we'll be filing with the judge what will be a public document which will include our objections to each of the items of relief that the government has sought with this filing, so that will be set out I think plainly and forcefully.

I think what we're most surprised about in terms of this filing is the extent to which this set of remedies seems to ignore some of the realities of our business and our industry. It ignores the fact that we are an integrated intellectual property business, ignores the rapidity of the changes in the competitive landscape in our business. It ignores the rampant competition that drives this business. It ignores all the good things that this PC industry brings to the consumer. It is dangerous in that it threatens the ability of one important company to continue to innovate and serve consumers. That is going to result in harm -- would result in harm to the industry and to the consumers and more broadly to the economy. That is what is surprising about this.

Q. But if it is surprising, then, it does indicate that this is a much more far-reaching set of remedies than what was discussed in the settlement talks between yourself and the government?

MR. NEUKOM: I cannot and I won't compare this document with what we saw during the mediation because we've all agreed that the mediation should stay confidential, and Microsoft has carefully honored that commitment to Judge Posner.

MR. MURRAY: Next question, please operator.

OPERATOR: Mr. Stuart Glascock of TechWeb, you may ask your question.
Q. It was almost answered by the previous question. But just In case it isn't entirely clear, are there or have there ever been contingency plans in place to divide the company in the worst-case backstop scenario that you received today?
MR. NEUKOM: I'm not aware of any such contingent plans. We are an integrated, innovative, intellectual property company. We need to continue to use all of the talent we have to create useful technology for our customers. We intend to do it.

MR. MURRAY: We'll make this the last question given the late hour.

OPERATOR: Thanks. Our last question comes from Mr. Rick Sherlund of Goldman Sachs.

Q. Bill, given that the remedy proposed does seem so far over the top, there is nothing you read in the judge's conclusions here that, you know, gets to something this extreme it would seem.

So I'm not sure the judge in setting forth his time frame and desire to go through remedy phase contemplated something like this, and given that it sounds like you'll make motions here for kind of extensive, I don't know, discovery testimony, basic due process, do you think, why go through all of this, if in the judge's words were that he's arguably at variance with his own appeals court, it may all be kind of academic?

Why not go through appeal now and see if you know where we stand and then spend months arguing over this kind of remedy? Is there a way to get this to appeal faster?

MR. NUEKOM: The court indicated an interest in that as I mentioned earlier Rick. And we certainly would have been interested in pursuing that. We looked into it, and as far as we can tell it's just not practical. Under the Expediting Act, there is no ability to appeal a decision in this kind of a case, until a final decree is entered and the decree has to include relief. We think that we are stuck with this process, even though the alternative you described would appear to be maybe a more efficient way to go about resolving this case.
Q. The judge can't ask for it to go to appeal first; there is no discretion there on his part either?

MR. NEUKOM: There does not appear to be, no.

He does have this summary schedule that he has set out that you're aware of. And I suppose some point he could indicate that he didn't want to contemplate the sort of what you call over-the-top relief proposed by the government. And if you were to give some indication at some point he was going to consider only a narrower band of relief, there is a way, I suppose, that that could make possible a shorter process. But until we have such an indication from him, given this over-reaching set of remedies, we'll have to ask for the kind of process that is required given these requests from the government.

MR. MURRAY: Thanks very much everyone. We know the hour is late and that your deadlines are upon you. That is going to conclude the question and answer.