Microsoft tries soft sell, plays hardball with DOJ

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[redmond, wash.] Microsoft Corp. faces more than a barrage of bad publicity as it approaches a May 10 deadline set for its response to the Department of Justice's breakup proposal.

The beleaguered software giant, now the high-tech world's whipping boy, has a more daunting challenge than managing the next round of public relations spin. It must guide its business operations and marketing strategy while under the scrutiny of lawyers knee-deep in the antitrust case.

The result thus far? An image strategy, including advertising, that evokes a warmer, more accessible Microsoft (AA, April 24).

Besides new corporate image ads illustrating how the company's software innovations improve people's lives, the company in recent weeks has placed top executives in TV spots trumpeting a mild-mannered message about innovation.

GATES AS SPOKESMAN

The presence of Chairman Bill Gates and President-CEO Steve Ballmer in TV spots via McCann-Erickson Worldwide, represent the company's reassuring message to the American public that "the best is yet to come." The spots don't mention the case.

"We've taken out similar ads at several mileposts throughout the case," said Mark Murray, Microsoft's public affairs director. "We view them as an opportunity to talk directly to our customers and policymakers."

Insiders said Bob Herbold, the company's chief operating officer, is likely to be the next executive tapped to address the public in a TV spot. The spots, along with newspaper ads, have so far been strategically timed to coincide with key events in the case.

`UNPRECEDENTEDLY POSITIVE'

Microsoft's tracking of the spot featuring Mr. Gates yielded "unprecedentedly positive" results, said Mike Delman, general manager, advertising and events. "What Bill had to say, and the fact that Bill was delivering the message was received very, very positively."

While most image, brand and PR consultants agree with the approach, they suggest that the company had little choice in the matter.

"If they admit to being a little bit of a bad guy, they're dead," said one brand consultant.

"I'm sure the lawyers are doing more ad writing than the marketing people," he added.

Besides lawyers managing the brand, Microsoft is up against a more inherent truth: Americans like underdogs. Microsoft, due to the protracted antitrust battle, now carries the label of a monopolistic corporate behemoth. It's doubtful the kinder, gentler stance evoked in the new corporate image push and executive ads will be swallowed wholesale by a public that's been inundated by harsh government rhetoric.

"It's the biggest risk that they face," the consultant added.

NO SPIN CONTROL

Because the case has been in the news for more than two years, analysts and insiders alike said Microsoft can no longer exert effective spin control.

"Anything else they do won't make a difference in terms of spin management," one analyst said.

That the company has vowed to win the case at all costs presents a paradox: The aggressive giant puts on a humble face, even as it sharpens its wits to slay the Department of Justice dragon.

Despite the benign tone of recent corporate image advertising, both observers and Microsoft employees say the company continues to conduct business as usual -- aggressively. But in an April 28 telephone news conference with analysts and the media immediately following the Justice Department's recommendation to break up Microsoft, Mr. Ballmer said, "Microsoft will continue to move forward in a responsible way to resolve these issues and to develop new products and solutions."

"If they keep on trying to satisfy customers, that's the best way to build the brand no matter what the government does," said Allen Adamson, managing director, Landor Associates, New York.

Insiders said that while there are pockets of demoralization in some quarters of the company, its intrinsically hard-charging and ambitious culture acts as a shield.

`A DISTINCTIVE CULTURE'

"Microsoft has a distinctive corporate culture and, regardless of how prevalent their share is, everybody is out to get them," said a consultant who works with several Microsoft divisions. The company whose flagship product, the Windows operating system, runs on 90% of the world's desktop computers, still believes it's fighting for share even in markets it clearly dominates.

"They are overly aware of the criticism and the potential criticism, the competitors' moves, comments and statements," the consultant added.

Al Ries, chairman of consultancy Ries & Ries, said Microsoft should have moved to settle the antitrust case two years ago.

"There's a huge risk to tarnishing the Microsoft brand, and this is the period that will measure how capable Microsoft is of understanding the delicate balance here."

While Microsoft seeks to change the timetable leading up to the planned May 24 court hearing, the battle to win share of mind and market continues.

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