Jury Sees Gates Letter to Intel Chief

A letter Bill Gates wrote in 1990 imploring Andy Grove not to invest in a potential competitor was shown to jurors as part of a Minnesota class-action lawsuit against Microsoft.

MINNEAPOLIS (AP)—In June 1990, Bill Gates wrote a letter that began "Dear Andy" and ended with the Microsoft co-founder imploring Intel Corp. chief executive Andy Grove not to invest in a potential competitor, a jury was told.

The letter was shown to jurors Wednesday as part of a Minnesota class-action antitrust lawsuit that seeks as much as $505 million from Microsoft for overcharges for its Windows operating system and Word and Excel programs.

Attorneys for the plaintiffs have said the letter shows Microsofts willingness to use its near-monopoly with Windows to stifle rivals.

Around 1990, Go Corp. was designing an early hand-held computer expected to run on chips made by Intel. Go co-founder Jerry Kaplan testified Wednesday that Intel was interested because Go planned to use its chips, giving Intel a potentially significant new market. And Kaplan wanted something from Intel—its endorsement and the cachet that it brought among technology investors.

"Intels endorsement could rocket a company to nearly assured success," Kaplan testified. "Their cooperation and support would attract the investment of everybody. Its like the President of the United States coming out and saying, This is the guy."

Kaplan said Intel indicated it would invest around $10 million, although Microsoft attorneys pointed out that Kaplan wrote in his book that Intel promised $5 million. Either way, Kaplan said Intels endorsement was worth more than the money.

E-mail sent by Microsoft executives at the time and displayed to the jury show they viewed Go as a competitor because it wasnt using Windows. One of the e-mails suggested Gates write to Grove to dissuade him from supporting Go.

Gates three-page letter said an Intel investment in Go would confuse the computer industry. He said Windows could be adapted to hand-held computers, and if Intel wanted to make a hand-held computer, it should work with Microsoft, not Go.

"I guess Ive made it very clear that we view an Intel investment in Go as an anti-Microsoft move," Gates wrote. "... Wed like to work with you to develop the market and to introduce you to appropriate technology sources. Im asking you not to make any investment in Go Corp."

Intel ended up giving Go $3 million, Kaplan wrote in his book. But the strings Intel attached to the money were devastating—instead of an endorsement, Intel demanded that its investment be kept secret, Kaplan said Wednesday.

An Intel spokesman declined to comment.

Go ended up using an AT&T chip in its hand-held computers. A unit of AT&T eventually bought Go and closed the operation a short time later, Kaplan said.

Microsoft attorney David Tulchin said outside the courtroom that communication between Gates and Grove was common. In any case, he said Gates effort to dissuade Intel from investing in Go failed, because Intel ended up giving money to Go.

"Hes presenting this as if the reason he failed is because Microsoft did something," Tulchin said. "The reason his company failed is because his company failed."

The Minnesota case is expected to last several more weeks.

Microsoft has settled other cases similar to the Minnesota one. It reached settlements with nine states and Washington, D.C., totaling $1.5 billion. Cases were dismissed in 16 other states.