 It's my great pleasure and a real honor this morning to introduce our keynote speaker for the day, the General Counsel and Senior Vice President of Microsoft, Brad Smith. I first met Brad right after the case settled, and we were going before Judge Coler Catelli to try to begin the process of getting it approved. He stood up as the new face of Microsoft, the new courtroom face, and it really began what has been, I think, a very different approach and a very different tone by the company to antitrust issues and other compliance issues here and in Europe, one that's really focused on being constructive and positive and moving forward in trying to make the best of what is obviously a difficult situation for the company. At Microsoft, Brad oversees not only antitrust and compliance, but also intellectual property and all of the other fascinating policy regulatory issues that a company like Microsoft finds itself in the middle of. It's obviously been heavily, heavily involved in all of the dealings with the Europeans and the other international enforcers as well as the ongoing efforts with the Justice Department and the states here in the United States. So we're very fortunate to have Brad with us today, and I ask that you welcome him warmly. Brad? Well, thank you, Phil. Thanks to all of you. Let me first, second what Dave Heiner was saying and say we are really pleased to be included in this event this weekend. It does give us the opportunity to relive those wonderful memories of that trial. I will acknowledge that some people have spent the better part of ten years trying to forget some of those days and some of those images that we saw again on the screen yesterday. I mean, let's be honest, using the political discourse of the day, if you're from Microsoft, there's just no way to put any lipstick on that trial. Occasionally at Microsoft, people who are involved get together and they reminisce about their own sort of highlight reel from the trial, if you will, and 28 seconds later they go back to work. It does remind me of the real story, a real story, when the findings of fact were issued and the next day we had that document, all 414 paragraphs, and is often the case in this kind of situation. Someone very senior said to someone more junior, take this and go highlight the paragraphs that are helpful for us so we can talk about them. And so people went away and they came back and they said, well, we've highlighted one paragraph. And the answer was one paragraph, you're saying out of 414, you only found one paragraph to highlight, and well, not quite. And a more senior person said, well, that's good, what are you saying then? Well, the answer was we found one sentence in one paragraph. Well, I hope it's a good sentence. And the answer was, well, it depends. It depends on what? Well, if you read the sentence by itself, it's good. But if you read the sentence before it and you read the sentence after it and then put it in the middle, well, it's not so good. So we had a lot to address as time went by. And in all seriousness, with Phil here, with so many of you here, we had our days as adversaries, the people who worked for the DOJ, for the states, the economists, the experts, they were all people who we quickly came to respect. And as we've had the opportunity to work more and more over the years with some who have continued, they've been people we've come to appreciate even more. It is interesting, I will say, because the trial was 10 years ago. And for some people here, you stopped working on this matter 10 years ago. And yet for others, it's a matter of ongoing daily life to this day. Because the Court of Appeals decision was seven years ago. The entry of the judgment was six years ago. The Court of Appeals decision finally putting the Massachusetts appeal to rest was five years ago. And it was just literally eight months ago that the European Commission opened an investigation that, among other things, focused on whether it was appropriate to integrate the browser into the operating system. So the issues have come and gone and in some ways are still here in many different respects. You can't necessarily be quite as candid talking about something that is a part of ongoing daily life. But nonetheless, I will be as candid as I can as I try to look back from Microsoft's perspective about a trial that took place 10 years ago and that continues to have so many important effects today. If you think back to that trial, there's a lot of questions I could ask myself. What were the mistakes we made? What were the lessons we learned? How did we change? And I think it's the third question that I'd like to focus on the most. Because I think that's the real test. Lessons that are learned but not applied that don't really lead to any change are of some academic interest but little practical import. And I think the real question for us as we look back is how did we change and why did we change as a result of this experience? And then more broadly, how did the industry change? And how did things even beyond our industry change? In part because of the events that took place in that courtroom. Certainly for us, it was clear that we needed to change. And it was clear from the top of the company that we needed to change. It was clear from the chairman, Bill Gates, and the CEO, Steve Ballmer. And it was clear to me when I was given the opportunity to start this job in 2002 that I not only was being given a job but I was being given a mandate to drive change. And that was an important part of, in fact, my enthusiasm about moving forward. We did so with a strong support of the company's board of directors. It was certainly interesting that one of the things that Judge Catelli did in her decision in 2002, I think in part because of the issues that were being discussed in the business community in the wake of the Enron debacle, if you will, was to require that our board of directors create a special committee, an antitrust compliance committee that would be filled exclusively by independent directors. And so Dr. Jim Cash, then at the Harvard Business School, who's here with us today, assume the chairmanship of that committee, a position that he's held ever since. Yesterday, Ray Gill-Martin, who's now at the Harvard Business School, who is part of that committee, was here as well. And so we really focused on making a series of changes from the top of the company down. And as I look back after six or seven years, to me, the changes that we made really fall into three principle categories. The first is that you don't see us anymore saying, we don't have to do that because we're not a monopoly. We don't have to do that because we don't have a dominant position. Without even trying to debate with myself whether that was a successful or unsuccessful tactic in the trial, it was clear that the industry, the government, the world at large, expected us to step forward and assume more responsibility without appearing to quibble, if you will, about whether that kind of responsibility was required by the law itself. When we got to Brussels and had our case before the European Commission, we simply conceded that we had a dominant position in the desktop operating system market. And while there sometimes have been debates around the fringes, we've typically been prepared to sit down with the DOJ or the states when we're talking about the consent decree and say, look, we actually don't think that what you're suggesting is required by the consent decree, the final judgment. We don't think that this particular category of software is covered by this, but let's figure out what it makes sense to do nonetheless. And even this year, when we took a number of steps to license communications protocols for new products, we did it for a number of products that many people would say are certainly not a monopoly, perhaps don't even have a dominant position, products that are becoming popular like SharePoint and Office Communication Server. But we said, let's just focus on what seems like the right thing to do given the kinds of expectations that people have of us. So we've really tried to put one set of possible debates, if you will, to the side and move forward to focus on what it makes sense to do. The second thing we really focused on in starting in 2002 was this approach of just sort of getting out and working it out, getting out and frankly, more than anything else, taking the first step of just listening better to what other people had to say. And using that listening to try to understand what people wanted and build a more relationship-based approach to dealing with a number of these issues. It started with improving relationships with governments themselves. Even before we had Judge Cattelli's final decision, I had started to fly around the country and go to Des Moines and go to New York and go to Sacramento and go to other places. And I think for us, an important day was the day that Judge Cattelli's decision was issued. It was November 1st, 2002. And I remember that morning. We got together, as we always did, as I'm sure those of you in the government did, on a day when you knew a decision was going to come out and you had all your PR scenarios. Here's the scenario if we win, here's the scenario if we lose, here's the scenario if it sort of comes out in between so that we were already. I was there with Bill Gates and Steve Ballmer and Dave Heiner and Mark Murray and others and Steve turned to me and he said, you know, this isn't going to come out for another six or seven hours. Why don't you give Tom Miller a call and tell him that regardless of whether we win or whether we lose, we're going to want to work with him tomorrow. And I did. And I called Bill Lockyer. And then after the decision came out, even though we had won, we got on the road again. I'll always remember in January of 2003, trooping through the snow in Des Moines with Steve Ballmer as we went to see Tom Miller in his office. And I think people thought, what are you doing? People only come here in January if you're running for president. But it was a great thing to do. And Steve said to General Miller, look, I can't promise that we'll never have a disagreement. But I can promise you that as long as I'm the CEO, it won't be a disagreement that results from the lack of communication. And then I got on a plane with Bill and we went down to California and we're able to have that same conversation with Bill Lockyer. And that has been a touchstone of the approach that we have tried to take ever since. It's not realistic to assume that communication and conversation will eliminate every disagreement. But they can solve a lot of them and you never want to have a disagreement simply because of poor communication. By 2003, it was clear that this was something that we needed to do not only with people in government but with others in our industry. If you look at the list and if you look at the products and as you know, behind every product there was a company. At that time, behind the browser, there was AOL, Time Warner. And so in 2003, I had the chance to start talking with Paul Capuccio who is and was the general counsel of Time Warner. And at first we just sort of debated what had happened. And as Paul has mentioned, mostly I listened to what he had to say. And we said, well, let's see if we can start to get people together. Maybe there's something that we can do here to address the concerns that you all still have. And we did. And it was, you know, a big step for us that by Memorial Day 2003 we were able to settle the private lawsuit that AOL had Time Warner brought against us, sort of the vestiges of the browser wars. And then we had the chance to start talking to Sun, really about all of the Java issues. And if there was a lack of trust between Microsoft and AOL Time Warner, I think it's probably fair to say there was even a bigger lack of trust between Microsoft and Sun. And actually one of the things that we learned from that experience was that sometimes it is your differences that divide you, but sometimes it's also your similarities that separate you. We were both companies that were heavily driven by an engineering culture. Most of the companies in our industry are. It's one of their great sources of strength. But fundamentally what engineers like to do most is sit down and invent things. Flying around and talking to people and really admiring what the other person is doing rather than praising what they've done themselves is not necessarily part of an engineering culture and virtually any engineering-based company. And part of the problem that we had between Microsoft and Sun was not just that we saw some things differently, but in other respects we were too much alike. Neither of us had spent enough time talking with each other. And so we had the chance to start to move that forward so that finally by the beginning of April 2004 we were able to resolve all of those issues. And then by 2005 we were able to do the same thing with real networks and put to rest their issues relating to the media player. It hasn't always worked. We spent an unbelievable amount of time in the first few months of 2004 trying to reach an agreement with the European Commission. And it was only when we actually thought we had that in fact we found that the agreement had slipped through our grasp, if you will, and instead we headed off to court in Europe. But by and large I think you could ask any of us at Microsoft and we would say that we feel that we're far better off and it's far more responsible for us as a company to basically spend as much time as we do on the road with people in government and with people in our industry trying to find common ground wherever possible and trying to solve in many cases small problems before they become much larger. So this focus on getting out and working it out had become that second part of what we sought to do. The third conclusion we ultimately came to was one that we started to apply externally in 2006. But it was actually one that a number of us inside the company had been discussing for a significant period of time. The basic premise that we started to come to is that in the world as it exists today it's really not enough for a company to just tell others what it's doing. You have to explain why. You have to explain why so people can have the ability to predict what you're going to do next, especially if they rely on you. And so what we came to was a view that said, you know what we have to do is actually put together some principles that we're prepared to put down on paper and publish and stand behind that will tell people that as far as we can see into the future and absent any changes which we would announce in advance this is what you can expect us to do. So as Dave mentioned in July of 2006 we published the Windows Principles. In a lot of ways they did two things. First they said even if this judgment expires we are still going to operate our business in accordance with these principles many or most of which really are derived from the judgment itself. And we're going to apply them not only to the categories that are spelled out in the judgment but we'll apply them to some other important areas as well. And beyond that we recognize that the world is continuing to change so we'll add to our principles some tenets that are not in the final judgment but that people are asking us about today so that you can see and you can test us by whether we live up to these words. And generally I think that was a very positive thing for us to have done. We learned more from doing that and so we followed it in other instances. We actually applied it in the non-antitrust arena in 2007 last year when we issued privacy principles and then earlier this year we issued a set of interoperability principles principles that originate in part from the antitrust experiences that we've had but go far beyond it and really reflect not only what the law and governments have been pushing us to do but where the market and where technology is going as well. And I think one of the great things about this experience is that it forces us and it helps us inside the company to get everybody together and ask ourselves what are the things that we are prepared to say we will do knowing in advance that we are going to do them. Before we finish the interoperability principles Steve Ballmer said he wanted to have a meeting and we did. He said I want all of the engineering vice presidents in the company to get together. We've been working on this for two months everybody's seen it everybody has had input into it now I want to know two things does anybody have any last minute objection so I can hear it before I decide and does everybody understand that once this goes out the door this is how we're running our business. So the principles have served an important role inside the company to help foster decision making as well as externally in enabling us I think to work more collaboratively with others in the industry. So when you add up this focus on stepping forward getting out and taking a more principled approach it has I think enabled us to do business in a different way. Like all things it has its works it has its imperfections it has its downsides but on balance it's an approach that we feel has served us well and served the industry well and an approach that we're certainly very committed to pursuing as we continue to move forward. At the same time that we've been changing the industry has been changing. Ten years later it's a very different industry. That shouldn't be a surprise what would be a surprise is if ten years later the industry were exactly the same when you look at how dynamic everything is it would be simply almost bizarre for everything to have remained the same. But it is interesting to look at some of the changes in our industry especially in the context of the discussion that we're having here in this last panel discussion which I thought highlighted a number of these things. The reality of course is that the industry has changed for lots of reasons it's changed because of advances in technology it has changed because of market economics and it has changed because of the remedy in the antitrust case. And what is probably most interesting is that a lot of these changes have reinforced each other I mean one can have the debate which change was most important it's an interesting debate but ultimately the question is imponderable no one can know and at one level it probably doesn't even matter I personally think that a well designed government intervention whether it's an antitrust context or any other is probably an intervention that reinforces the trends of a healthy market rather than fights against them but it is interesting I think now to look back and highlight a few of those changes that are most significant. First I think much as Ed started to point us towards the changes in technology the changes in the internet are probably changes that are bigger than anything else I mean Bill Gates wrote his memo in 1995 and called it the internet tidal wave and it has been a tidal wave it would be very difficult for anything certainly almost impossible for anything from any single company or any single government to be as strong as the internet tidal wave has been now when you think about the issues in the lawsuit ten years ago one of the concerns that the government had was that the OEM channel the PC manufacturing channel was a primary perhaps the primary vehicle for competitors to use to distribute their software and get them out to consumers and indeed it was a very important channel of distribution it is less important today than it was ten years ago precisely because ubiquitous internet access and increasing broadband distribution have made it so easy to get new software on to consumers' machines simply by offering them for downloading over the internet and when you look at the ubiquity not just of applications that people talk about like Facebook but the software tools that people use whether it's Java or Flash or others internet distribution has just profoundly changed the equation it's also the case as Ed was pointing to that more and more people are writing their applications for the web which means they can be run on any operating system on any computer it's interesting as we sit here today a number of you have laptops if you have a laptop in front of you raise your hand if your laptop is not running windows raise your hand it was ten years ago that Jim Barksdale asked those questions in the hearing before the Senate Judiciary Committee and everybody raised their hand in response to the first and no one raised their hand in response to the second in part the ubiquity of the web the nature of the internet has transformed computing in so many ways that the role of the operating system is in a somewhat different place today but a second change that has been unfolding over the last ten years one that hasn't been talked about so far in the last day and a half is also important I think and that's the changes in the nature of the PC market when the trial took place in 1998 there were hundreds of companies selling significant numbers of PCs in the United States and thousands of companies doing so around the world now by and large the PC market has consolidated two companies by themselves account for over half of all of the PCs sold in the United States by the time you get to company number seven or eight you've covered about 80% of the PC market what does that mean in this context well it means the following ten years ago people were concerned including people in government that the suppliers of critical components for PCs whether it was the operating system or something else had a superior negotiating position when they sat down with a PC manufacturer if that was the case when Microsoft was negotiating with hundreds of OEMs it's quite a different dynamic today when a company like Microsoft is negotiating with a much, much smaller number and each of them has such a large market share so that's the second thing that really has been a significant change in the industry a third change that I would point to is the remedy in this case the remedy has had an impact I don't know whether it's the most important or how to gauge it but it has clearly had an impact and think for a moment if you will about the slide that Jonathan Zittrain showed us yesterday the notion that in part what this case was about was ensuring that Microsoft wouldn't control all of the aspects of the desktop on a new PC that it would remain open that PC manufacturers would be able to install and promote even promote exclusively other categories of software the consent decree that was put in place had many provisions all reinforcing each other that ensured among other things that that remained the case and indeed PC manufacturers have been quite enthusiastic about installing other software on new machines so much so as Dave alluded to earlier that it actually raises some interesting issues for consumers but the market I think will have the opportunity to work through that the way the market works through lots of other things as well one of the interesting things about the remedy was that it wasn't designed to address only the issues with respect to the browser it identified four other areas of so-called middleware as well messaging software, media player, email the Java virtual machine in each of these categories Microsoft has invested, Microsoft has done well and so have lots of others AOL remains the market leader for messaging software in the United States while Windows media player is very broadly distributed Flash from Adobe is actually the most ubiquitous media player found on the planet and since a lot of what people care about when they talk about media players is really not even the media player, it's digital media the reality is that Apple more than any other company has really established the leadership position in that space so if the one goal of the remedy was as I think it clearly was to ensure that there would be clear rules and vibrant competition in all of these areas one can look back a decade later and see that vibrant competition is alive and well and indeed even in the browsing space I don't think that navigator from Netscape ever really died, it just transformed itself into a new product with a new name called Firefox that is gaining market share and it's certainly interesting that a decade later there's a new entrant into that area with Google watching its own browser and indeed I think one of the interesting things about the remedy is that while it was confined to five specific areas the implementation of it, the enforcement of it has not been confined only to those five people in government have raised with us issues and questions and at times concerns about other categories the most notable perhaps over the last couple of years being desktop search and even though it's nowhere mentioned in the remedy we did sit down and as Steve Hauke said yesterday we did make changes in order to address the concerns that people were raising I do think that some of that reflects something which some people have remarked upon from time to time and which I think has at least a certain dose of validity to some degree the trial itself was part of the remedy it was a powerful experience to have to go through not just for Microsoft but for every company in the country that also watched what Microsoft experienced it certainly is a sobering reminder I think of the importance of solving small problems before they get bigger every once in a while we have a new executive who joins Microsoft and the person has a bright idea they want to go do something and somebody says yeah but oh my gosh you know this is going to anger a large part of the industry there could be real questions about whether this is an appropriate thing to do and the person says oh come on the company I was at this is no big deal we can go do that let's just go fight and Steve Ballmer sort of says you weren't here when we had that trial were you you have to appreciate how the world thinks about and expects us to act so it does have an effect to this day and with all such things there are days when one might feel that the effect is positive and days when one might feel that the effect is less so but I think it would not be credible it certainly would not be candid to stand here and deny that it doesn't continue to have an effect so the industry in my view has changed and it has changed for reasons that are unrelated to the case and it has changed for reasons that are but the reality is a lot of these changes have reinforced each other and it has created a very different dynamic a decade later finally to me some of the most interesting aspects of the trial looking back after ten years really are not related to antitrust law they're not related to software or information technology they are in part a reflection of how the world has changed the trial itself was in part a reflection of certain aspects of a changing world and the trial in part contributed to a changing of the world certainly we all live in a world today with far greater transparency than existed fifteen years ago we live in a world today where a higher percentage than ever of what people say and do is recorded in some form maybe it's an instant message maybe it's a photo on a Facebook page maybe it's a search history in Google or maybe it's something else the world started to see more of that transparency in that trial and if you look at every legal case that has ensued since every case has had more transparency quite possibly than the cases before in a lot of ways I think it really calls upon people to just recognize certainly if they are in any position of responsibility in any institution of importance that they do live a public life and they will be scrutinized in accordance with the expectations that people have of them and so if you're going to choose that life you should choose to live it well because if you don't there will come a day when you will regret it that is a difference I think about our society compared to fifteen or twenty years ago a second aspect of the trial that I have always found in some ways particularly fascinating was the role of the media and if you think about this trial in 1998 it was unfolding at a time when the pace of media coverage was accelerating and the media itself was fragmenting and we saw both of those phenomena playing themselves out and in many ways both of them have continued and even gained more momentum in the years since we'll all remember I think the immediate news coverage that was resulting in part because cable news channels had airtime for the middle of the day and in part because internet news services wanted to push out news immediately so one no longer had the simple luxury if you can think of it as even a luxury of waiting until the end of the day to have a longer conversation with journalists before they published what they were seeing we all had to move faster the other thing that was interesting was the fragmentation of the media that was starting to unfold it wasn't just the principal daily newspapers it wasn't just the principal traditional network news channels there were the cable channels there were the sea nets the new internet news sites that were springing up and of course a decade later the media has fragmented so much more than was the case then that that too has had quite a substantial effect certainly for us we learned some very important lessons I think in part we learned that if you want to make your case in a court of law you better figure out how to make it in a court of public opinion at the same time if you actually look at a lot of the high profile cases of this decade they never get to a court of law if a company cannot make its case in the court of public opinion it gets the message quickly and it basically folds up its tent and so I think that in addition to living your life as a public life you have to get out and be accessible and engage and share more information about what you're doing and why so that people at least have that as context when they're evaluating what they think about you and the last thing that I think has really changed in the world certainly something that in some respects we've been at the forefront of experiencing is the enormous forces of globalization including the globalization of legal and regulatory proceedings the IBM case in the 70s and 80s was handled by the DOJ and it was handled by the European Commission and so in a sense that was a step towards the internationalization of antitrust issues but the Microsoft case really went a lot farther as it became a global matter of regulatory review at its height we had cases in over 20 countries around the world some of them were public, some of them were not and indeed as we look back a decade later that process is still not over and this is an issue that I think the world is going to have to grapple with one can have differing views about what government should get involved and why and how but it is clearly no matter what your point of view a real challenge when government after government wants to take up the same issue it certainly leads to a very lengthy proceeding and requires a large investment of resources that would otherwise be devoted to engineering or marketing or something else it certainly leads to potential inconsistency as companies are then asked to do different things in different places what is most challenging in my view is when governments start to do something that conflict with each other and especially when multiple governments seek to regulate the world I've been struck at times sitting with government officials in various parts of the world and sometimes they say this is not only what we want you to do for our jurisdiction this is what we want you to do in the world they say well you know we had this case in the United States and the US government and the US courts decided what they wanted us to do in the United States and the answer is I don't care that was then this is now you answer to me when you're in my office I say well that's good but tomorrow I'm going to be in somebody else's office who am I supposed to answer to then this is an issue not only for antitrust it's an issue for virtually every important field of the law and it's just so clear that as the years and decades progress the world and people in government in particular will need to find new and better ways to manage these kinds of issues that so clearly cross borders so when it comes to this greater transparency and broader media focus and globalization the world as a whole is quite a bit different from a decade ago and in some respects the experience a decade ago provided us a glimpse of where things were going and in some ways it maybe wasn't even all bad for us to get that glimpse and have the opportunity to learn some of those lessons when we did you know in conclusion I think we can all look back at the trial and everybody naturally inevitably will look at it from their own perspective and everybody went through it from a slightly different position from a slightly or sometimes more than slightly different point of view and for each person you can look back and you can say you know the trial meant many things when I look back at it from Microsoft's perspective it did mean many things but I also think when I try to prioritize it in my own mind it's one thing more than any other it was a part of the maturing of Microsoft I will always remember a conversation I had in Redmond with one of our senior executives when the trial was starting and he said you know I don't understand why the government is suing us we're just this little company in this remote corner of the country you realize that perception takes time to catch up with reality and in the same way self-perception or self-awareness takes time to catch up with reality in 1998 people at Microsoft still thought of themselves as working at a little company in a remote corner of the country but the world was no longer looking at or thinking about Microsoft in that way we were an important company creating an important product that was affecting the rest of the industry and touching the lives of consumers around the world part of our maturation really required that we start to see ourselves the way other people had already begun to see us it was not necessarily an easy thing to do I think it seldom is when you have to go through that kind of process it has made us more mature even when you're more mature you're not perfect and we certainly are not a decade later but I do think that we are ten years older I'd like to think we're at least ten years wiser as well so thank you very much we take a few minutes for questions while we have Brad this is a pretty prosaic question after that pretty inspiring speech but another thing that hasn't happened much in the last ten years is the stock price hasn't done squat and maybe it's just coincidence but I wound up wondering if internally at Microsoft the aftermath of the trial both made it a more bureaucratic and sluggish place because so much has to be run through lawyers and you have to think about the stuff that you did not have to think about and secondly when you talk about change do you think the trial actually changed the business model of the company since so much of it was built around as the government folks like to say leveraging windows to the max and now you seem to be saying and it seems pretty true to any observer that doesn't happen anymore and Microsoft has to make its way with new products with a slight advantage instead of a huge advantage great points Joe and I'd sort of distill it down into three questions the first one is has the company's business or business model or business practices changed and at times the answer is yes we definitely know when new issues arise that there are certain options that are simply not possible to contemplate because they would not be permitted under the rules of the remedy it's also the case as Dave was pointing out earlier that there are times when we sit around we sort of sweat bullets about this rule of reason test for time we sweated a lot of bullets over antivirus protection we really thought, gee, if we add antivirus protection to windows there's going to be clear benefits to consumers because the reality is a great many consumers let the antivirus protection that comes with their PC expire when the trial period runs out so we have all these PCs that are unprotected so we've got this great consumer benefit argument under the rule of reason test and we also know that there are a number of antivirus companies that are making a couple of billion dollars a year from subscriptions that consumers are paying who are going to argue that there is great competitive harm and it's a little bit like comparing apples and oranges as Dave and I often remark if you've got six apples and no oranges it's easy to know how to answer the question but if you have about the same number in each hand it sort of comes down to well do you prefer apples or do you prefer oranges so there are times when clearly we've had to think in different ways as we've been dealing with new opportunities or new challenges and I think that is a fair thing to point out the second question that I think you raised is in effect has it made us more bureaucratic that too is something that we worry a lot about one of the things that we sort of concluded when we look back at IBM's experience from their antitrust experience was that a lot of people who had been at IBM said it made them a lot more bureaucratic some level of an institutional organization is required to have an effective compliance regime and yet we've also tried to design it in a way so as to minimize the bureaucracy especially for engineering decisions so we have quite a complex compliance machinery if you will part of it is prescribed by the remedy ultimately folds up in reports to the board of directors we've got online training and people who work in a compliance group certainly in the area of technical documentation something that became part of the remedy that wasn't part of the liability trial at all the fact is we've had hundreds of people working on creating documents we have at the same time tried to remain as nimble as possible especially when it comes to engineering creativity and that is one thing we have I think reasonably found a way to do because ultimately decisions can be made at the senior levels as to whether a new feature is incorporated in a product and how so you can let the engineers go dream up great ideas and then try to build a step into the decision-making process that really looks at that with a small number of senior people hopefully in a nimble way and I think we've done a reasonably good job of that the third question you asked is basically well in ten years your stock price hasn't moved actually for three years it moved and then in one year it moved down and then for six years it's been remarkably stable shall we say that part actually was a joke so you don't have to answer it but I will say in all seriousness the company has grown when Steve Ballmer became the CEO it was a twenty billion dollar company in revenue now it's a sixty billion dollar company it was generating eight billion dollars in profits now it's generating twenty and we hope that people who buy stocks will take note of that growth I do think that we've grown the industry's grown and it's harder to get investors excited than it used to be I was particularly interested in some of your comments about the PR aspects and winning in the court of public opinion one of the things that I've been following closely is what goes on in the public opinion concerning music file downloads where I think that in the late 90s about ten years ago when Napster first came out most people that you spoke to saw the technological development as a positive thing and didn't really have much of a problem with downloading music files and over the ten years that have been there unfortunately with the technology charge led by Napster and Grokster who were let's say less than perfect corporate citizens you've seen a complete flip in public opinion to the extent that very few people seem concerned when a third of the Supreme Court seemed ready to shut down an area of technology because of concerns over copyrights and I was wondering whether you'd felt that the European investigation into Windows Media Player had hamstrung Microsoft from participating in some of those debates because the technologists are getting their clocks cleaned I don't feel that the European case has restricted our ability to invest by and large in new technologies for digital media and we have made investments and sometimes they've been more successful and sometimes they've been less successful which is probably true for any diversified technology company I do think that the question you're asking raises a number of interesting broader points to me I thought it was in a way a watershed moment when you saw stories about Napster and Grokster showing up in Time and Newsweek and the very mainstream press 15 years ago when I joined Microsoft or 20 years ago when I started working as an outside lawyer with the company being an intellectual property lawyer was a little bit like being an anesthesiologist people thought well we like it but no one else really talks about us on a day-to-day basis and you know what has really happened over the last two decades and the last decade in particular is the ubiquity and importance of technology has thrust a lot of these technology policy issues into the center of debate and that makes perfect sense it's not the first time in the nation's history that that has happened in the 1870s and 1880s one of the biggest political issues in the country was patent reform as farmers in the middle west were up in arms protesting against the patent laws so I think technology goes through these waves over time and when it does it can start to take center stage in the broader public eye I actually think that in many respects and for the most part it's really good for us they have these broader public discussions because these issues do affect people as you point out sometimes the short-term impact looks one way but the longer-term impact looks another way and I just think that that's why it's so important for people who work in this sector and many others to just get out and spend more time making themselves available articulating their views and answering questions from people who are trying to synthesize all of that and provide some digest for the mass media talked about how the remedy has affected Microsoft and how the trial was such a sobering had such a sobering impact I wonder if you could comment on the damages that were paid both to the private plaintiffs and to the European Commission and the extent to which that has had an effect on your thinking it has been a source of frustration to be honest in part because the nature of the class action system in this country really works against in my opinion a single company who's a defendant when you have many cases in many states because if we win on an issue it will not have collateral estoppel against a different class in a different state but if we lose on an issue it may or you might even say it will and that fact plus several others really stacks the deck in a lot of ways against companies in managing this kind of litigation and in my opinion it is a factor in driving up the settlements that are paid and my real point here is not the collateral estoppel effects of the issues in the DOJ case it's not that at all it basically meant that as the class action lawyers brought new issues to the table that went beyond it there's a risk-reward equation that is very asymmetrical that I think is just a factor for businesses handling litigation in general so that has been a source of frustration the European Commission's fines have been rather large even unprecedented in many respects and at times in our view out of proportion to some of the issues that were being addressed but I understand and respect antitrust enforcers who want to ensure that large fines have a deterrent impact I think that that is really what your question is when you think about things what affects you most and money matters you can't deny it reputation matters I think in the world today you might say that one's reputation is even more the coin of the realm and I think companies have to and should take that very seriously and ultimately the new precedents that are created may matter the most I look back at the remedies in this case and there are remedies that relate to one's ability to do something by contract with someone else and there are remedies that relate to the change of the technology by oneself and I think that the Court of Appeals decision and the remedy that ensued was more focused on contractual restrictions that might be created with others ultimately than it was on engineering although there are, as Dave was pointing out clear rules with respect to engineering as well but if one cares about innovation and the economy I think that's a smart approach for the government to take and when you're thinking about what might come next if you're a company that lives or dies on your ability to innovate anything that might touch innovation alone rather than an agreement with another company is just pretty much in a category all by itself As much as I hate to do it I think we better cut things off there or we'll get very far behind Please join me in a huge thank you to Brad Smith