Bill Gates biographer suggests Microsoft has ceded key format victory to Adobe PDF
Had proposed direct competition in infamous 1995 'Tidal Wave' memo

4 April 2002

By Kurt Foss, Planet PDF Editor

The lingering Microsoft antitrust case is a major technology news story pretty much everywhere, but certainly nowhere more than in Seattle, Washington, the metropolitan home for the software goliath based in Redmond. The Seattle Times newspaper has been providing special, extensive coverage of the trial.

Gates bio

Earlier this week the Times coverage veered from the blow-by-blow, inside-the-courtroom proceedings -- nine states currently are seeking greater sanctions against Microsoft than were levied and accepted by the U.S. Department of Justice (DOJ) and other involved states -- to look at a seemingly noteworthy consequence of the prolonged legal wrangling.

Free-lance technology writer Paul Andrews, author of "How the Web Was Won: How Bill Gates and His Internet Idealists Transformed the Microsoft Empire" and co-author of "Gates: How Microsoft's Mogul Reinvented an Industry-And Made Himself the Richest Man in America" [shown at right] suggests in his Seattle Times business and technology column that Microsoft failed in its mission to derail Adobe Acrobat and PDF in favor of an Internet standard format of its own.

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In an April 1 Times column titled 'Microsoft can't topple Adobe Acrobat,' Andrews surmises that contrary to its once-stated intent, "Microsoft has all but ceded a significant Internet function to Adobe Systems." Due to an allegedly failed Microsoft strategy, Andrews concludes that "Adobe Acrobat and its familiar .PDF (portable document format) have become the de facto standard for distributing and displaying richly formatted documents over the Internet - a function that may grow in importance as paid content expands on the Web."

On his personal Web site -- a Weblog named "The Paul Wall" -- Andrews plugs the column, adding:

"Adobe's success in the face of Bill Gates' clear 1995 directive to crush Acrobat has largely gone unremarked upon. Yet it occurred to me the other day as I downloaded my umpteenth .pdf file that somehow the Evil Empire had let one get away. As the antitrust debacle yawns on, everywhere else you will read about how Microsoft victimized Palm and Linux and AOL and Novell and yada yada yada. The truth is that Microsoft has also benefitted from inept competition, and where its foes have been as clever and persistent as the Boys from Redmond, they've often managed to prevail."

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Tidal Wave memo

Andrews cites the now infamous "Internet Tidal Wave" memo -- Bill Gates' once-confidential 1995 directive to Microsoft executive staff imploring that the company needed to make the Internet (and Netscape) its primary focus -- as evidence that Adobe, its Acrobat software and PDF were among the companies and technologies poised to cause competitive problems for Microsoft's OS and software products. And which therefore needed to become targets for Microsoft.

Microsoft trial exhibit

In Gates' nine-page Tidal Wave memo -- that has since become Government Exhibit 20 in US v. Microsoft, filed in 1998, available for download in PDF from the DOJ's Web site -- you can sense the dire situation the co-founder foresaw for his company if it missed becoming a major Internet player. He admits spending some 10 hours browsing the 1995-era World Wide Web, only to report that he'd found "almost no Microsoft file formats."

Apparently among the file formats Gates did discover online was PDF, noting in his detailed treatise that "even the IRS offers tax forms in PDF format."

"The limitations of HTML make it impossible to create forms or other documents with rich layout and PDF has become the standard alternative," Gates wrote some seven years ago. "For now, Acrobat files are really only useful if you print them out, but Adobe is investing heavily in this technology and we may see that change soon."

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In perhaps his most telling comment, Gates underlines the importance of the mission to his management team in emphasizing that "once a format gets established, it is extremely difficult for another format to come along and become equally popular." [Several plaintiffs in the ongoing antitrust trial might argue that it helps significantly to have an industry-dominant operating system to lessen the difficulty.]

Accordingly, among the topical 'action items' on Gates 1995 shortlist was one related to file formats, which includes the passage:

"We need to decide how we are going to compete with Acrobat and QuickTime since right now we aren't challenging them. It may be worth investing in optimizing our file formats for these scenarios. What is our competitor to Acrobat? It was supposed to be a combination of extended metafiles and Word but these plans are inadequate."

Andrews notes in his recent Times' article that Microsoft's long, still-underway efforts to defend itself against allegations of monopolistic practices have certainly worked to Adobe's benefit, providing the San Jose-based company time to focus on its own strategic efforts to establish PDF as a de facto standard while occupying Microsoft's financial and logistical forces elsewhere. [Adobe faced a different challenge and challenger in 1998 when rival Quark attempted a hostile -- and ultimately unsuccessful -- takeover.]

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MS Office for Mac OS X

Viewed from a distance, Microsoft and Adobe appear to have established some common ground, cooperating where and when it makes sense, competing on other fronts. For example, Adobe participated in Microsoft's launch of its latest XP operating system release, and develops special PDF-creation utilities -- Acrobat PDFMaker -- that integrate with Microsoft's popular Office products. They compete directly in the eBooks arena, where Adobe's PDF is pitted against Microsoft's LIT format, and free Reader versus free Reader, each seeking industry adoption as a standard. While PDF clearly isn't the default file format on Microsoft's own Web site, it is used for a variety of purposes, such as recent datasheets about its Windows XP OS, its XML-based .NET initiative and user guides [shown at right] for its MS Office for Macintosh OS X software and other products.

During an audience Q&A session following a rare appearance by Gates at the 1997 Seybold Seminars Publishing Conference in San Francisco, he was asked about Microsoft's propensity for attempting to create its own solutions rather than adopting and working with external ones favored by a particular industry. Following Gates presentation, which he began by citing "a renewed partnership between Microsoft and Adobe," a member of the predominantly print publishing audience posed the following to him:

"Currently, this industry is in the process of retooling its business process, its content streams around PDF. PDF is the successor to postscript. Now XML is very important for the very reasons you mentioned, but in terms of the kinds of standards that are needed to integrate commerce, the content streams, the media streams for both print and non-print media, and the process models that work in the graphic arts would imply getting together with the standards activities to relate to these kinds of business concerns. Question: Do you really, really love us, and will Microsoft be involved in publishing related and printing related standards activity, and what kind of integration of effort between Adobe and Microsoft might we expect to see relative to, say, XML meets PDF over a cup of Java?"

Considering his intended-to-be private thoughts in the 1995 Tidal Wave memo, Gates seemed almost enthusiastic in his public comments about PDF and on Microsoft's relationship with Adobe:

"Well, the answer is yes, absolutely. Microsoft's a company that, once we get involved in something, we're very serious about it. And this is a market that's really going to drive our technology, push it to the limits. In a lot of the high-end Windows NT workstations, the need for graphics performance, the need for a richer software base, the need for document management -- it's going to come out of the publishing industry. And so it's valuable to us not only as a big market, but also as something that improves our products for an even broader market that we're involved in. In terms of PDF, I agree PDF is important. I don't see it being the sole standard of importance. We are working with Adobe on PDF. PDF is where you've done your layout; you've decided to be print-based; and when you have material that that's the only way you're going to deliver it, then, great, you can transmit it in that form. And so it should have a close relationship to the other standards, to HTML and XML. And our relationship with Adobe is very complementary. They do high-end publishing tools; we do not do high-end publishing tools. And so we're able to sit down together, and say, hey, how can we grow the market very easily, and that's the dynamic you've seen over the last 18-month time period."

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On the other hand, Gates' assurances and the recent Andrews article not withstanding, Adobe by no means takes for granted Microsoft's potential as a competitor for several of its own software products, including the Acrobat family within its ePaper Solutions Group. In its 2001 annual report, Adobe notes in a section on "Factors That May Affect Future Results of Operations" that:

"The market for our graphics and ePaper applications is intensely and increasingly competitive and is significantly affected by product introductions and market activities of industry competitors. Additionally, Microsoft has increased its presence in the low-end consumer digital imaging/graphics market and the electronic document sharing markets. We believe that, due to Microsoft's market dominance, any new Microsoft products in these markets will be highly competitive with our products. If competing new products achieve widespread acceptance, our operating results would suffer."

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In another section of the annual report describing "Competition" for Adobe's various product segments, Microsoft is again referenced in regards to perceived challenges to its ePaper products and applications:

"In electronic document delivery, exchange, collaboration, and archive markets, the electronic forms market, and the PDF file creation market, our Adobe ePaper product family faces competition from entrenched office applications and increased competition from new emerging products and technologies. Current office applications and Internet content creation/management tools that use Microsoft Word, XML, HTML, and Tagged Information File Format ("TIFF") file formats compete with Adobe PDF and Adobe's ePaper product family. In addition, Microsoft's new Office XP suite targets business users that want improved collaborative document review, scanning/optical character recognition ("OCR"), and security capabilities, in competition with similar features offered by Adobe's ePaper products family.

In the PDF file creation market, our Adobe ePaper product family faces competition from clone products such as the Jaws product line from Global Graphics (formerly Harlequin), and other smaller PDF creation solutions that can be found for free on the World Wide Web. In the area of electronic forms solutions, we face competition from Cardiff and Microsoft, as well as from Accelio (formerly Jetform) unless and until our proposed acquisition of Accelio is consummated."

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One of Adobe's markets of greatest Acrobat penetration and continuing focus is within the various branches of government, as its major presence at the recent FOSE conference made clear. Yet Microsoft hasn't surrendered that key market to Adobe or PDF, as "Government Computer News" reported last year in its "Microsoft stakes e-gov claim on XML" article:

"Seeking to stake out a large chunk of territory in electronic government, Microsoft chairman Bill Gates declared the Extensible Markup Language the language of government and Microsoft's Windows .NET initiative as the best way to build e-gov applications."

While you await the final (?) outcome of the current Microsoft antitrust hearings, you can read more about the company's latest .NET-centric intentions in another Gates memo from June 2001. In the four-page, public message addressed to Developer and IT Professionals, Gates elaborates on what the next generation of the Internet will look like: "at the heart of the solution is eXtensible Markup Language," Gates says; industry watchers will know where to insert the phrase 'Microsoft's endorsed version of ...' in that sentence.

It's all spelled out and available for download from Microsoft's Web site -- in Adobe PDF.

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