Showdown with the government

Microsoft earned $19.75 billion in revenue during the fiscal year 1999. Bill Gates had become an icon not only in the computer and business worlds but also in the eyes of the general public. His ghostwritten book The Road Ahead, which outlined his vision of the future, topped many best seller lists for more than three months. In spite of Gatess financial and literary success, however, he found himself facing his biggest challenge yet as the 1990s came to an end.The challenge came this time from the United States government rather than from Microsofts competitors. Gates and Microsoft had come under increasing scrutiny for unfair business practices from the time of the court case that followed Microsofts purchase of the Q Dos operating system from Seattle Computer in 1980. In 1993 the U.S. Justice Department began an investigation into Microsofts contracts with other computer manufacturers that led to an agreement from Gates in 1994 to eliminate some of Microsofts restrictions on the use of its products by other software makers. In 1997, however, the Justice Department sued Microsoft for forcing computer makers to sell its Internet browser as a condition of using the Windows system a de facto violation of the 1994 consent decree. In December 1997 a U.S. district judge issued a preliminary injunction forcing Microsoft to temporarily stop requiring manufactures who sold Windows 95 or any successor [program] to install its Internet Explorer.

Microsoft appealed the injunction, but the following year the Justice Department and 20 state attorneys general sued Microsoft, charging that it illegally thwarted competition to protect and extend its software monopoly. Although Microsoft won its initial appeal in 1998 to reverse the 1997 decision, Gates soon found himself being questioned for 30 hours over a three day period in a videotaped deposition for the upcoming antitrust trial. The government finally rested its case on January 13, 1999, and the Microsoft defense team ended its case on February 26. The final oral arguments from each side were presented on September 21, 1999.After the judge presented his findings of fact on the case on November 5, Gates issued a response disagreeing with many of the findings that went against Microsoft. In a statement released to the press as reported by Court TV Online, Gates noted, Microsoft competes vigorously and fairly. Microsoft is committed to resolving this case in a fair and a factual manner, while ensuring that the principles of consumer benefits and innovation are protected (November 6, 1999).

U.S. District Judge Thomas Penfield Jackson ruled in June 2000 that Microsoft was a monopoly which had illegally exploited the dominance of Windows, at that point installed on over 95 percent of the worlds personal computers. Judge Jackson then ordered Microsoft to be broken up into several smaller companies. It was the most severe antitrust ruling since the breakup of AT&T in 1984. Jacksons decision was reversed on appeal, however, and the company received a far less severe punishment directed toward restricting some of its business practices. In spite of this relatively favorable outcome, however, Gates continued to battle competitors in American courtrooms over Microsofts business practices. In addition, he found himself subjected to litigation in Europe, where Microsoft was once again accused of exploiting its monopoly of Windows to control other computer related industries, including media player and server software companies.Despite the controversy over whether Gates had created a company that used its dominance of the desktop computer system to obtain unfair control of newer computer related markets, Microsoft continued to prosper. Gates stepped down as CEO in 2000 but kept his position as chairman of Microsoft as well as its chief software architect. In 2004 he doubled the companys research and development budget to $6.8 billion and began pushing a new Windows personal computer operating system code named Longhorn.