A Well-Scripted Day for Gates Ends With a Bloomberg Feud - TheStreet

William H. Gates, producer and star of the one-day

performance entitled

Windows 2000 Launch,

delivered his lines on cue Thursday. The product demonstrations worked; the live audience at the Moscone Center in San Francisco applauded at all the right moments; even the streaming video broadcast was seamless, if slightly stilted.

It took just one off-script sentence -- nay, sentence fragment -- reportedly delivered backstage after the cameras shut down, to shake up the performance and ignite a dispute between

Microsoft

(MSFT) - Get Report

and

Bloomberg News

, a wire service covering the event.

Bloomberg

reported that the Microsoft chairman, asked whether the company would be willing to open source code for its flagship Windows product in order to settle the antitrust case brought by the

Department of Justice

, said, "Yes."

"He then added, smiling, 'If that's all it took,'"

Bloomberg News

reported.

A company spokesman called the account untrue, saying Gates would never address questions about the negotiations and said the company was "disappointed."

The dispute reflects the intense interest and mounting speculation that has surrounded the antitrust case since private negotiations began in the fall between Microsoft and the Justice Department. Investors have been confused, and Microsoft's stock buffeted, by reports and rumors of a possible settlement that have emerged from most imaginable places, including a vaguely sourced

report in

USA Today

on Jan. 12 and unsourced rumors that

emerged Dec. 14 from the options pit of the

Pacific Stock Exchange

.

In the case, the Justice Department contends that Microsoft monopolizes the market for operating systems and employs predatory tactics to maintain and expand its monopoly. Judge Thomas Penfield Jackson has issued the first stages of his ruling, and final arguments have been set for Tuesday.

Jackson has named a mediator in the case, a move widely interpreted as intended to encourage a settlement, which could include splitting up the company, opening the source code for competitors to view while designing applications, accepting regulatory oversight or some combination of those.

Never mind, for a moment, whether opening the source code could conceivably sway settlement talks. Matthew Winkler, editor of

Bloomberg News

, said the story was newsworthy simply because the comments were off the script.

According to Winkler, print reporter David Ward and television reporter Dylan Ratigan, who formerly covered mergers and acquisitions for

Bloomberg

as a print journalist, prepared a list of questions together for a filmed interview with Gates for

Bloomberg TV

. Ratigan was brought into a room to interview Gates, while Microsoft officials "didn't want to let Dave Ward near Gates."

When Microsoft employees told Ratigan his time had expired, the cameras were shut off, Winkler said. Ratigan asked the source code question, phrased to elicit a yes or no response.

"They are so careful about stage managing and managing the news, especially with Gates," Winkler said. "Since Microsoft doesn't put people in that situation very often, it's important for us to make the most of it."

Jim Cullinan, spokesman for Microsoft, disputed that account.

"Bill did not say what

Bloomberg

attributed to him," he said.

According to Cullinan, Gates was walking toward the door, signing an autograph for the reporter, when the question was asked.

"That is not even an issue, remotely an issue in this case," Cullinan said, describing Gates' response. He said the company's lawyers have told Gates not to discuss the mediation. "He's all of a sudden going to talk about what we're offering in mediation or what we're willing to offer in mediation?" Cullinan asked.

For a change, investors made little of the latest round of settlement talk. Microsoft's shares opened little changed, although they were later down 2 11/16, or 3%, at 96 15/16 by Friday afternoon, as the overall market declined. They had gained a mere 2% Thursday during the much-hyped, uneventful product release. (Shares closed down 4 7/16, or 4.5%, at 95 1/16.)

Gates said in the televised portion of the

Bloomberg

interview that the company would not open its source code to compete with open-source products like Linux and

Sun Microsystems'

(SUNW) - Get Report

Solaris. But as it relates to the antitrust case, the question is largely academic, analysts said.

"It's too little, too late as far as the government is concerned," said William Kartz, an analyst for

H.G. Wellington

. "They want something more dramatic, even though it may be wrong. The government's too late too. The technology moves so fast." Kartz rates Microsoft's stock long-term accumulate, and his firm has not done underwriting for the company.

Other analysts noted that Microsoft uses the opening of its source code to particular companies as a bargaining chip. If

Bloomberg's

account is correct, "it's kind of like reporters asking

Clinton

about the

Lewinsky

affair; the devil's in the details," said Chris Galvin, analyst for

Chase Hambrecht & Quist

, who rates Microsoft's stock a buy. Galvin's firm has not done underwriting for the company.

The source code is essentially last year's work for the company, Galvin said.

"People, because of

Red Hat

(RHAT)

and others, think there's something magical about open source," Galvin said. "If the government said, 'Show us your source code and you shall be free,' that may be something Microsoft could do. That's what might be behind the smirk."