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Friday, April 10, 1998

Microsoft Plans Stealth Blitz to Mend Its Image
Public relations: Times finds media strategy meant to give look of public support. Firm says it's only a proposal.
By GREG MILLER and LESLIE HELM, Times Staff Writers
 


 Microsoft Plans Stealth Blitz to Mend Its Image
 
 Gates Scoffs at Assertion Microsoft Is Monopoly
(March 4, 1998)

 
 Microsoft to Offer Windows Without Internet Browser
(Jan. 23, 1998)

 
 Microsoft Reports a Surprising 52% Increase in Income
(Jan. 22, 1998)

 
 COMMENTARY: Don't Let Gates Railroad the Antitrust Laws
(Jan. 16, 1998)

 
 Everybody has an opinion about Microsoft. What's yours?
 
 Microsoft Corp.
 
 Edelman Public Relations Worldwide
 
Stung by the public relations fallout from antitrust investigations of its business practices, Microsoft Corp. has secretly been planning a massive media campaign designed to influence state investigators by creating the appearance of a groundswell of public support for the company.
     The elaborate plan, outlined in confidential documents obtained by The Times, hinges on a number of unusual—and some say unethical—tactics, including the planting of articles, letters to the editor and opinion pieces to be commissioned by Microsoft's top media handlers but presented by local firms as spontaneous testimonials.
     The stated targets of the campaign are attorneys general and politicians in California and 11 other states that may be considering antitrust action against Microsoft, which is already battling a suit filed last year by the Department of Justice.
     When asked about the campaign Thursday afternoon, Microsoft spokesman Greg Shaw initially said he was unaware of such a plan.
     "I'm not sure what it is," said Shaw, whose name appears throughout confidential documents—some of them labeled as draft copies—that are part of a large binder of materials distributed under Microsoft's name to the campaign's regional coordinators.
     Later in the day, Shaw amended his remarks, acknowledging the plan exists but saying it is merely a proposal and "not something we are moving on." He acknowledged attending a meeting in Chicago on Monday during which the plan was scheduled to be discussed in detail.
     Shaw's characterization of the campaign was also contradicted by knowledgeable sources who said it was presented to regional PR firms as "a done deal" and that the firms were expected to come to the Chicago meeting with detailed plans for their states.
     Even if Microsoft has now decided to abort the plan, the documents and the activities they describe reveal a great deal about how serious the company considers its plight and the measures it is willing to consider to protect its dominance of the software industry.
     The entire effort is "geared to generating leveragable tools for the company's state-based lobbyists," positive press clippings that "state political consultants can use to bolster the case," according to documents.
     In fact, the Redmond, Wash.-based company has taken the unusual step of arranging for one of its top media agencies to recruit a dozen public relations firms known for their strong political connections in targeted states.
     A printed list of regional coordinators includes Jeff Eller, former director of media affairs for President Clinton, a firm in Michigan run by the former head of the state's Democratic Party and an Illinois company that has played a central role in gubernatorial campaigns.
     Other states targeted are Arizona, Florida, New York, Pennsylvania, North Carolina, Ohio, Texas, Virginia and Wisconsin.
     When told of the planned campaign, state officials said such an effort would succeed only in aggravating investigators.
     "I've been battling this type of PR gimmickry for a long time, and I can smell it 40 yards away," said Michigan Atty. Gen. Frank J. Kelley. "It represents arrogance, and it's personally demeaning to me. [Microsoft Chairman] Bill Gates would have been better off if he or one of his representatives had picked up the phone and called me."
     Even in the modern world of corporate spin control, the proposed plan is unusual in its scope, tactics and targets.
     The campaign is being choreographed by Edelman Public Relations, a giant PR firm with close ties to Microsoft. But sources said it is designed to appear not as a major thrust by Microsoft or Edelman, but as an eruption of grass-roots support.
     "They're trying to plant stories about how wonderful it is to do business with Microsoft," one source said. "I just find it outright wrong that Microsoft and Edelman are trying to hide their involvement in this."
     According to the documents, local PR agencies are scheduled to begin submitting opinion pieces to the media next week, followed in the coming months by waves of other materials including glowing accounts from Microsoft partners, consumer surveys and studies designed to show the company's impact on each region's economy.
     Letters to the editor are to be solicited from regional business leaders. Opinion pieces are to be written by freelance writers, and perhaps a "national economist," according to one document. The writers would be paid with costs "billed to Microsoft as an out-of-pocket expense."
     The campaign, which could cost millions of dollars, is designed to generate positive stories at critical junctures in Microsoft's legal battles. One round of stories, a document says, "will coincide with April 21 oral arguments before U.S. Circuit Court of Appeals on Microsoft motion to disqualify Lawrence Lessig as special master in Microsoft antitrust case."
     Microsoft is not the only company working behind the scenes to influence these antitrust matters. Rivals including Netscape Communications Corp. have cooperated extensively with investigators, supplying documents and technology demonstrations designed to show that Microsoft is abusing its monopoly position.
     The various investigations center on Microsoft's attempts to extend its monopoly in computer operating systems to Internet-browsing software. The Justice Department accuses Microsoft of illegally trying to bundle the two products, while Microsoft claims it has the right to integrate the browser into the operating system as a new feature.
     Sources close to Microsoft said the proposed campaign is an outgrowth of the company's growing fears that it is being outgunned in the media by rivals and perhaps even hostile state officials.
     One stated goal of the campaign is to counter "negative, reactive coverage that is driven by state attorneys general."
     Media experts said many elements of the campaign seem clumsy, adding to a perception that for all of Microsoft's prowess in software, the company has little skill with public relations.
     "Companies like Microsoft are run by engineering types who don't understand the public," said Ian Mitroff, director of the USC Center for Crisis Management, who added that base attempts to manipulate the media and shape public opinion often fail.
     "It's cynical," Mitroff said. "It assumes we're dumb."
     This wouldn't be Microsoft's first public relations misstep. The company was forced to try to soften its image in January after suggesting Department of Justice lawyers were incompetent. Microsoft also appeared to be thumbing its nose at the court by insisting it couldn't carry out an order to separate its browser from its Windows operating system.
     As part of a subsequent publicity tour, Gates was unusually candid about his family life and stressed Microsoft's contributions to schools in interviews with Barbara Walters and other journalists.
     On Thursday, the company began placing ads in a handful of newspapers around the country, stating its case against regulators. "At Microsoft," the ads read, "the freedom to innovate for our customers is more than a goal, it is a principle worth standing up for."
     The proposed multi-state campaign represents another component of this broad media blitz.
     The campaign appears to have been crafted by Rory Davenport, Edelman's director of "grass-roots and political programs" in Washington. Davenport is listed as an author of confidential documents, but in a brief telephone interview Thursday, he would say only that "there is no agreement for a campaign like that."
     Another Edelman official whose name appears on the memos, Neal Flieger, also responded to questions about the campaign by saying, "I'm not prepared to amplify on that at all."
     The Chicago meeting, attended by many, if not all, of the regional coordinators, focused on the campaign. An agenda for the meeting indicates that Shaw and Flieger were to be key speakers and refers to the "Microsoft multi-state plan."
     Both men acknowledged they were in Chicago on Monday, although Flieger said it was merely to visit family. Other participants said the meeting went forward as scheduled, and that regional coordinators flew in from around the country to attend.
     Shaw said elements of the plan may ultimately be pursued, but the company has no intention of targeting attorneys general or states.
     A number of state investigators, who are reportedly considering filing within a month a suit against Microsoft for anti-competitive practices, said they are prepared anyway.
     "When it comes to knowledge of computer technology, I take my hat off to Mr. Gates," said one attorney general. "But if he wants to enter the field of political intrigue, I say welcome to my world, Mr. Gates, I'm ready to do battle."

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