Microsoft Windows 98 'Rally' Anything but Grassroots

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In a last-ditch attempt to keep the government from blocking the release of

Windows 98

, Bill Gates held what

Microsoft

(MSFT) - Get Report

billed as a "rally" in New York on Tuesday afternoon.

But Microsoft, which has already proven a klutz in its ability to orchestrate public opinion, made it clear that the company stages a rally the way it releases software: (1) behind schedule; and (2) so full of bugs that for everyone's sake, you wish they would have skipped to release 1.1.

The first problem with the gathering, where Gates and other industry execs spoke out against government meddling, was how it was billed. "A Rally for Continued PC Industry Innovation and Economic Growth," read the media alert for the event.

A rally? Hanging the "rally" name on what obviously was a press conference only invites further abuse of Microsoft, the kind of abuse the company is desperately seeking to avoid.

You don't have a rally on the 50th floor of the

Equitable Building

, the capitalist bastion overlooking midtown Manhattan.

You don't have a rally upstairs from the restaurant

Le Bernardin

, where the prix fix lunch costs $70 (unless you order the Thyme and Pepper Crusted Rare Yellowfin Tuna Seared, Layered on Truffled Herb Salad, which adds $8 to the bill).

And if you're trying to rally grassroots support against government intervention, you don't pack the stage with an uncomfortably crowded group of wealthy-looking executives, nearly all of whom were men wearing dark or gray suits.

It all gets in the way of the message that Gates and the other speakers were trying to hammer home: That government intervention would hamper innovation, consumer choice and the growth of the economy.

Or, as Gates said, "Any attempt to block the release of Windows 98 would be a step backward for the industry, for consumers and for the whole country."

How the message could get muddled was made clear during the presentation made by Dr. Gregory Mankiw, professor of economics at

Harvard University

.

You have to admire Microsoft's audacity in trotting out a Harvard economics professor to bolster its case. After all, the company spent months and thousands of dollars of attorney man-hours to get a Harvard law professor, Lawrence Lessig, thrown out as a special master in the government's antitrust case against Microsoft. (Now! In the center ring! The battle of the Harvard professors!)

Mankiw, like Microsoft and its corporate supporters, argued Tuesday that the government's meddling in Microsoft's affairs would throw sand in the gears of economic prosperity.

But Mankiw concluded with another observation that had an unfortunate double-meaning. "The computer industry is not broke," he said, "and the government should not try to fix it."

Not broke, indeed. That's certainly true of Bill Gates, who's worth something more than $40 billion. And it's true of

Compaq

(CPQ)

CEO Eckhard Pfeiffer, who told the assembled reporters, "Any injunction delaying Windows 98 would clearly have a negative impact on the country as a whole." Pfeiffer got stock options last year valued between $40.3 and $102.2 million, according to the company's proxy statement. Another non-broke part of the computer industry was James Halpin, CEO of retailer

CompUSA

(CPU)

, who earned stock options last year worth an estimated $8.7 to $35.2 million. Halpin warned that any delay in Windows 98 would have "an extremely negative effect on CompUSA" -- resulting in millions of dollars in wasted advertising costs. Afterward, he hinted at possible layoffs at the chain, if Windows 98 were to be delayed.

The shame of it all is that the assembled speakers' dire messages may be right. One's heart goes out to all the retailers who might have to throw away millions of promotional advertising inserts if Windows 98 were delayed. And to all of them the peripheral makers, such as

Logitech International

(LOGIY)

, which have been manufacturing new gadgets that connect to computers through the Universal Serial Bus, which Windows 98 prominently supports. After their presentations, it seems conceivable that

Janet Reno

could ruin the economy by slowing down Microsoft.

One could also come away from the press conference truly persuaded that it's the greatest innovation in the world to integrate

Internet Explorer

into Windows 95 or Windows 98, not the evil deed that Janet Reno or

Netscape Communications

(NSCP)

might have you think. Ted Johnson, chief technology officer of the software company

Visio

(VSIO)

, quietly explained in five minutes what Microsoft has had trouble doing in months of lobbying: The more features Microsoft puts into the operating system, the less time and money Johnson and other independent software developers have to spend reinventing the wheel to add certain features to their products.

But this all seems too late, like a game of chicken in which there's no time left to grab the wheel of a speeding car. It's only 10 days until Microsoft has to ship Windows 98 to computer manufacturers to get the software onto machines in time for its official June release. Microsoft shouldn't have waited until the eleventh hour to rally the troops.

Gates acknowledged, at the rally's close, how hard federal and state authorities have worked to dig up dirt against Microsoft -- an effort they might not be inclined to walk away from. "This is a very serious situation," he said.

Like most causes, perhaps not one that a rally can remedy.