Gates contradicts trial witness in new book

Microsoft Corp. Chairman Bill Gates, writing in an upcoming book about the benefits of technology for business, appears to directly contradict a key witness for his company at its antitrust trial when he describes how Microsoft tracks important sales figures.

A prominent economist testifying for Microsoft just weeks ago told a federal judge that the company's accounting records were kept "by hand on sheets of paper." But Gates, in his new book, 'Business at the Speed of Thought,' says the figures are recorded digitally. "When figures are in electronic form, knowledge workers can study them, annotate them, look at them in any amount of detail," Gates wrote. "Going digital changes your business."

And in an interview with the Financial Times newspaper today, which is publishing a four-part series from his book, Gates described how Microsoft already uses an array of high-tech tools. "The sales results are in digital form, so anytime I want to I can look by country, by product, exactly how sales compare to budget, how they compare to other groups," Gates said.

That contradicts how the company's accounting practices were described in sworn testimony for presiding U.S. District Judge Thomas Penfield Jackson, who's expected to return a verdict in the case this summer. Justice Department lawyer David Boies asked Richard Schmalensee of the Massachusetts Institute of Technology about the profitability of the company's dominant Windows operating system. "I will be honest with you," answered Schmalensee, an important witness for the company. "The state of Microsoft's internal accounting systems do not always rise to the level of sophistication one might expect from a firm as successful as it is." When Boies pressed him, Schmalensee added: "They record operating system sales by hand on sheets of paper." Spectators in the courtroom gasped, and Boies immediately told the judge, "Your honour, I have no more questions."

Microsoft spokesman Mark Murray said Tuesday that Gates was describing sales data, while Schmalensee was testifying about methods to track profits. "We obviously have our sales receipts," Murray said, "but how you assign profit is not something that we have" in digital form.

In his new book, also serialised in current issues of Time magazine, Gates also encourages companies to "insist that communication flow through e-mail." He called it "a key component of our digital nervous system."

"There's no doubt that e-mail flattens the hierarchical structure of an organisation," Gates wrote. "It encourages people to speak up. It encourages managers to listen. That's why, when customers ask what's the first thing they can do to get more value out of their information systems and foster collaboration in their companies, I always answer, e-mail."

Throughout the company's antitrust trial, government lawyers have produced a string of embarrassing e-mails -- many from Gates himself -- that appear to contradict its witnesses. Microsoft has protested loudly that lawyers are using "snippets" of its e-mail taken out of context, and it has produced equally humiliating e-mails from some of its business rivals. "I do not have a single piece of e-mail of a business nature that I would be embarrassed to have made public," Gates told Financial Times. "Every piece of e-mail I have sent over the past decade has been read by 50 government lawyers, so there is nothing new. I live the examined life."

The Microsoft trial is in the midst of a six-week recess and is scheduled to resume no earlier than April 12.

Gates' book goes on sale March 24.

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