Business Times Web Event One-on-one interview with Bill Gates, Chairman of Microsoft Corporation JOHANNESBURG                                     Thursday, 6 March 1997

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Bill Gates, Chairman/CEO of Microsoft Corporation, recently undertook a tour to South Africa and India. Business Times had a one-on-one interview with Mr Gates on 6 March 1997. Browsers were invited to submit questions to Mr Gates which Business Times incorporated into its interview with him. BUSINESS TIMES: So far the computer revolution has accentuated the differences between rich and poor, the developed and the developing world. In broad terms what plans does Microsoft have to widen the use of computers among the world's developing communities? What is your involvement in countries such as South Africa, India and Vietnam to broaden the use of PCs, the Internet, and so on? GATES: Computers are a lot like books when they were first utilised. Initially they are used only by a narrow set of people but to the advantage of everybody - for example, medical researchers. But what you really want is to have a concept of computer literacy like you have for normal literacy. You can achieve this, for example, by providing every library with a PC that is linked to the Internet. As part of your school curriculum you should be exposed to the Internet. Many countries aim to get PC access in their schools. The US and Israel have a larger number of PCs per school than any other country. Even better is to provide every pupil with a laptop - a project we are supporting with software in 50 schools around the world. At government level there are some innovative ideas such as a public kiosk where people can use PCs to fill out forms and other tasks linked to local government. This is already true in the UK where terminals at post offices, accessed by cards, allow users to run applications. These are just some of the ideas we encourage governments to utilise to widen the use of computers.

BT: Why are you involved in Africa? Even South Africa provides only 0.75% of your global revenue. The situation is worse in other African countries such as Uganda, Cameroon and Kenya which are fraught with difficulties, such as trademark theft, and provide a mere 0.2% of your global income. GATES: Doing business around the world brings its unique challenges, such as software piracy, the particular state institutions you have to deal with and who you seek partnerships with. One thing we keep in mind about our products is that there is a huge R&D (research and development) cost of developing products, such as Windows. But once we have done that development, the cost of making it available on a global basis is very low. So even in countries like Kenya we break even after two to three years. The expansion into Africa is a long-term approach. If you are optimistic even Nigeria can one day develop into a significant market, although that takes some real optimism. Our approach is also to target very sophisticated users in each of these countries, in effect pioneering customers who make our entry a bit easier. These could be universities or, in the case of Africa, multinational corporations. That has the added advantage of serving our traditional US or European customers. For example we can tell Shell that we operate in Nigeria, Indonesia and Saudi Arabia. BT: Microsoft does not provide a breakdown of geographical financial figures. In broad terms how does South Africa feature in the MS profit league? GATES: South Africa accounts for about 0.75% of global revenue, which puts it at number 27 in our income rankings. But the rankings are insignificant to us. In broad terms our sales growth correlates to the number of PCs sold in the country. South Africa is well placed in numbers of applications sold per PC. Certainly, it outranks India and China, where the number of PCs sold is significantly higher. However, our software sales in India and China are only a third and a fifth respectively of what they are here. Now that is also a reflection of piracy in those two countries. BT: Is South Africa one of your high growth areas? GATES: It definitely is. In 1991 we were not even in the country and had no market share at all, whereas companies like WordPerfect and Novell had been established for some time. In other countries we had already eaten into their share pretty significantly and it was our job to do the same here and get strong momentum going. Since 1992 our growth here has been about 50% a year but that is a benchmark we can obviously not maintain since it came from an artificially low base. In the future we would expect to grow at the rate of PC sales and a little bit better because of NT and our back-office products. Furthermore, what people used to do on Unix and mainframes we would expect them to move down and use on PC servers, which is a profitable area for us. On balance we are very optimistic on PC sales and expect earnings growth in excess of that. BT: Can you quantify your SA investments? GATES: We cannot give you exact numbers, but it certainly runs into millions of US dollars in terms of financial investment. We have also invested significantly in skills training, in our infrastructure, as well as in the partnerships with our customers in this country. BT: In your dealings with government officials have you found a true understanding of the benefits of IT developments for areas such as education? GATES: I have met (deputy president) Thabo Mbeki at the World Economic Forum in Davos and we discussed issues such as low-cost IT solutions for education. We also believe that governments should have some showcase Internet projects and Microsoft is willing to back this with investment hours. It is an ongoing, open dialogue. We did not have to evangelise the basic IT concept but the question was on how we really could get going in promoting the information society. BT: Are there niche software development opportunities for Microsoft SA, particularly products suited for developing markets? GATES: Software development at Microsoft is focused at our head office in Seattle, but the big opportunity for software programmers in this country is education. Developing useful educational products could make South Africa a niche exporter of software products, while at the same time filling the vacuum that exists in the local educational market. BT: Apart from piracy, high tariffs and duties can be a problem for software providers in Africa. Are you raising the issue with government officials during your visit? GATES: South Africa is not a big problem in that respect, although you have one anomaly - a high 76% duty on educational software. I'm sure that is not what you want to do and it must be a mistake. Once you move into Africa the tariffs are very high and getting our products through customs is fraught with difficulties and delays. The costs though do not seem to deter our customers in those countries. BT: How do you deal with piracy, which in some countries in the Far East accounts for about 80% of your products sold? GATES: Most countries have a good legal framework to combat piracy. But even after you have a legal framework we often ask the police to get involved. Our approach depends on how educated the marketplace is. The most common aspect of piracy are dealers who sell PCs with pirated software and charge the buyer for the software. As soon as we discover a culprit we charge him. Large users, who should be the most honest, will be given plenty of warnings before we proceed with legal action. Our approach towards smaller companies is educational rather than legal. We also expect some strong benefits to emerge from the current World Trade Organisation talks on copyright protection. BT: What has the impact of Windows NT been in developing countries, such as China? Since the Internet should provide uncensored and unfettered information, what has the reaction of governments been and how has Microsoft responded? GATES: Many countries have restrictions on content that appears in print, mostly against pornography, but Germany, for example, also restricts fascist literature. Clearly the Internet is not restricted by boundaries but governments will have the right to apply the same moral and legal codes to the Internet as they do in print and other media and they will ask Internet service providers to block material that contravenes these codes. As tool providers we are not put into that situation but service providers clearly are bound by the laws of a country. BT: Recently Microsoft expanded into consumer products and media businesses, such as last year's joint venture with NBC. What potential do you see for these businesses on the Net? GATES: Our primary business is Windows 95, which is a phenomenal growth area. We have Office and Windows NT, which are huge and profitable businesses compared with even the largest publishing houses. We will continue to invest in them and they will remain the mainstay of our business. The fact that we are also being an entrepreneur and trying to explore new businesses on the Internet gets a lot of visibility. Why are we doing it? We are not trying to become media specialists but the new interactive world provides some new opportunities which we can explore. We have the financial strength, technology and the skills to explore these opportunities on the Internet, which will be accessed by more and more consumers. We are taking a risk in these new businesses but many of them have enormous upside. BT: When can we expect Windows 97? GATES: We have not yet named the product and we are vague about when to launch it. We are currently beta-testing the product. We are looking at a number of new features but soon we will have to put a stop to the new features in order to launch it in fall (October/November) this year. The new product will not be as unique as Windows 95 as it will not require more memory or provide new applications. It will not stretch computer systems requirements much beyond what is required for '95. NT5 will commence in early 1998 and we are considering whether to release the upgraded Windows before or in conjunction with NT5. BT: What line will you be taking with MMX in future releases of your operating systems, software and application software? GATES: We are committed to MMX. In future we are going to ship software that will work better if you have MMX but that will also work well on the older machines. MMX mostly affects multimedia applications such as 3D graphics, videos, games and certain Internet sites. You will clearly note the difference in these applications with MMX. BT: Is there is going to be a Web browser feel to a lot of your software in future? GATES: Future software will have a distinct Web-browser look and feel. People like working within that context. In the past software has been hierarchical. With a Web-browser look, users can move backwards and forwards between components and use links to get where they are going. We believe it's easier to learn and makes it easier to customise your desktop.

Question 1 The question relates to the cost of Internet access in South Africa where, at present, suitable hardware is not cheap, neither is the cost of the service and the cumulative cost of the necessary local telephone calls is, in fact, exorbitant. Accordingly, only those in the corporate environment or, the relatively wealthy, can obtain access. With time, the situation can only become worse. Can Mr Gates envisage any means whereby economically disadvantaged people in this country will be able to obtain use of the Internet at a reasonable cost? From: s00009 @ PIX Question 2 If Bill were a budding entrepreneur with less than $5 000 in resources, but knowing what he knows, what would he set as his business idea, objective, and target projections for the coming year? From: Growth @ GIA Question 3 If Bill were a poor township entrepreneur - with no spare capital - who has just heard about the power of internet, how would he set about generating wealth from this exciting medium? From: Growth @ GIA Question 4 Why does MS not assume responsibility for bugs in media (diskettes) distributed by them. If a dealer, who originally sold and installed the software, ceases to operate, the registered end-user cannot get help from Microsoft to overcome a fault on a stiffy distributed by them. From: Peter de Walder Question 5 There is an old Yiddish saying: "Business is Business" :-) One of the reasons that IBM PC family has been so successful, is because all the players can generate revenue by selling standard hardware, software and/or service components. Is there not a possibility that Microsoft will kill the golden goose(as in the US railroads of the early century), by attempting to monopolise most of the PC components for itself. An example is the current battle of Netscape verses Explorer. From: Stephen Tatham Question 6 (edited for brevity) Would you please bring my request for structured help to the attention of the Microsoft authors responsible for the VB for Applications "Help" facility and the corresponding manuals? I know that I am not alone. There are many scientific users who will greatly benefit from such an improvement, and I am sure - in return - this will strengthen Microsoft's hand in this important niche market. From: Dr Nico F Laubscher Question 7 After all the aclaim I eventually ended up with a Microsoft Office 97 Standard Upgrade. Outlook is all that it is cracked up to be (?) but I have one serious problem with it. It is not listed in Explorer nor is it listed in the Back-Up list. All I want to do is to back up my Contacts,Events and Appointments but so far I have been unable to do this. All that Microsoft, South Africa have been able to tell me is to look for an or a file, but neither of these options has solved the problem. To me, it looks as if Microsoft has slipped up rather badly in this respect, but perhaps Bill Gates can throw some light on the situation. From: Solomon J Rosenberg Question 7 Microsoft once consisting of a few university students, now a multi billion dollar organization. With the above in mind what advice would Bill like to share with young aspiring computer enthusiasts in SA ? From: Cassim Vanker Question 8 We all know the value of Internet and can thank the ``high tech=rich'' people for the development thereof. Do you foresee that the third world will enjoy this ``tool'' or wil they be left behind? It is difficult to believe that the governments of some of these contries will have the initiative to establish internet in the schools etc. Will Microsoft, or do they, have programs to help these countries out of the dark? From: A.G. Smith Question 9 South Africa is a developing country with established scientific and technological expertise and, as such, has a role to play in not only pedestrianising the 'Information Superhighway', but also in its construction. Can you identify any special niche areas in which South Africa could make meaningful contribution to the development of this fast-expanding network? From: Dr. Mike McGetrick Question 10 Are you planning to take over the world? From: Markus M Marte