From:                     Bill Gates

Sent:                      Sunday, April 02, 2000 3:09 AM

To:                         MS Corporate Employees: FTE Only; MS Intl Employees: FTE Only; MS Domestic Employees: FTE Only; WebTV Wnifolk

Subject:                 DOJ update

Despite our best efforts, the mediation process in the antitrust lawsuit has concluded without reaching a settlement. The mediator, Judge Richard Posner, has issued a statement announcing the termination of mediation. A copy of that statement is attached.

 

I want you to know that we did everything we possibly could to reach a fair settlement through mediation. We negotiated in good faith for four months, and exchanged many drafts of settlement papers. We offered many significant proposals to address the government’s concerns, and we were close to agreement on many of these issues. We went so far as to offer concessions that went well beyond the issues in the case, because we thought it was in everyone’s interest for there to be a settlement. We really went the extra mile, as did Judge Posner, who deserves an enormous amount of credit for his diligence and tenacity.

 

Unfortunately, despite thousands of hours of work by our settlement team and senior executives - and hundreds of hours by Steve Ballmer and I - we could not agree to demands that would have imposed radical limitations on our business, especially when those demands related to issues outside the case. A settlement that would have prevented us from innovating in Windows would not benefit consumers.

 

The biggest problem in the negotiations was that, right up to the end, the states and the DOJ were never on the same page. I think we could have reached a settlement if the other side had spoken with one voice and taken reasonable positions, but the divisions and extreme views on the other side made it impossible.

 

We have a very strong case and believe strongly that the judicial system will ultimately rule in our favor. The developments since the case was filed show just how dynamic and competitive our business is. Please remember that the core of this case is that the government is saying that we should not have provided integrated support for the Internet in Windows, even though Windows always did a great job running our competitors’ Internet software.

 

We expect the U.S. District Court will announce its Conclusions of Law as soon as Monday. Based on the District Court’s findings of fact we don’t expect the ruling to be favorable to M?crosöft, but are confident that we will prevail on appeal if an appeal is necessary.

 

The government’s refusal to settle represents a missed opportunity to resolve this case in the best interests of consumers and the U.S. economy. Public opinion has consistently shown that the American people wanted this settled. That would have been far better than wasting years of resources in continuing litigation.

 

I’ll continue to keep you informed about new developments over the next several days.