GO
Loading...

Regrets and Resentment in Microsoft Partnership

Miguel Helft|The New York Times
Thursday, 31 Mar 2011 | 8:03 AM ET

SAN FRANCISCO — Paul G. Allen, the Microsoft co-founder, may be one of the world’s richest men, with a fortune pegged at $13 billion. But he still resents his former partner, Bill Gates, for not sharing enough credit or giving him his due financially.

In a memoir due out next month that is tinged with bitterness and regret, Mr. Allen accuses Mr. Gates of whittling down his ownership in the company and taking credit for some of his contributions.

Paul Allen
Paul Allen

The accusations surprised some in the small circle of early Microsoft alumni, as Mr. Gates and Mr. Allen have known each other since high school and have remained on friendly terms until recently. What’s more, Mr. Allen’s wealth soared largely because of Microsoft successes that came well after he left the company in 1983.

“I find the argument that you were cheated financially difficult to make when you ended up being so wealthy,” said Vern Raburn, who worked at Microsoft from 1978 to 1981 and ran its consumer products division. Mr. Raburn said he was friends with both founders and had not read the book or an excerpt from it that was published on Vanity Fair’s Web site Wednesday.

Mr. Raburn added that Mr. Allen played an integral role in the company’s early days, and that “Bill has gone out of his way to acknowledge that.”

In the excerpt, Mr. Allen also takes swipes at Steven A. Ballmer, whom Mr. Gates recruited as Microsoft’s first business manager in 1980 and who replaced Mr. Gates as chief executive in 2000.

Mr. Allen writes that in December 1982, after he learned he had Hodgkin’s lymphoma, he overheard Mr. Gates and Mr. Ballmer plotting to rob him of his due.

“They were bemoaning my recent lack of production and discussing how they might dilute my Microsoft equity by issuing options to themselves and other shareholders,” Mr. Allen said.

Mr. Allen said he burst into the room and confronted the two men, shouting: “This is unbelievable! It shows your true character, once and for all.”

Mr. Allen said that they later apologized, but that he had already decided to leave the company. The book, “Idea Man: A Memoir by the Co-Founder of Microsoft,” is to be published by Portfolio/Penguin, an imprint of Penguin Group USA.

In a statement, Mr. Gates said: “While my recollection of many of these events may differ from Paul’s, I value his friendship and the important contributions he made to the world of technology and at Microsoft.” A Microsoft spokesman said Mr. Ballmer declined to comment.

A "lowball" offer ...

Mr. Allen, through a spokesman, declined to comment. The spokesman, David Postman, said the memoir was not meant to be an attack on Mr. Gates. “We are going to let the excerpt that is out there stand, and hope that people take the time to read the book and get the full picture,” he said.

The bitterness and sense of betrayal echo more recent complaints against Mark Zuckerberg, the youthful founder of Facebook, by Eduardo Saverin, a Facebook co-founder and Mr. Zuckerberg’s Harvard roommate, over Mr. Saverin’s reduced role and diminished stake in the company.

Bill Gates
AP
Bill Gates

In a series of recollections that paint Mr. Gates in an unflattering light, Mr. Allen said that after he decided to leave, Mr. Gates made a “lowball” offer of $5 a share for Mr. Allen’s stake in Microsoft. Mr. Allen asked for at least $10 a share, and Mr. Gates refused. That decision eventually turned Mr. Allen into a billionaire.

“From the time we’d started together in Massachusetts, I’d assumed that our partnership would be a 50-50 proposition,” Mr. Allen wrote earlier in the excerpt. “But Bill had another idea.”

During Microsoft’s early years, Mr. Gates pressured Mr. Allen to reduce his stake to 40 percent and later 36 percent as Mr. Gates’s own stake rose to 60 and then 64 percent, Mr. Allen wrote. “Bill knew that I would balk at a two-to-one split, and that 64 percent was as far as he could go,” he wrote.

Stephen Manes, co-author of the book “Gates: How Microsoft’s Mogul Reinvented an Industry — and Made Himself the Richest Man in America,” said that much of what Mr. Allen recounts in the excerpt, including the fact that his ownership of Microsoft was reduced significantly, was reported in his book and others. He also said that while Mr. Gates and Mr. Allen collaborated closely, the two often argued vociferously.

“People told us about shouting matches,” Mr. Manes said. “There was an epic one that began in the office, continued in the elevator and went on in the parking lot for half an hour.”

After leaving Microsoft, Mr. Allen, who is 58, became known as one of the most aggressive investors in technology, though his record has been mixed. He is also the owner of the Seattle Seahawks and the Portland Trail Blazers.

People who know the two men said that they had remained friends until recently, and that Mr. Gates visited Mr. Allen frequently two years ago, when he was recovering from chemotherapy to treat non-Hodgkin’s lymphoma.

“Paul is a creative, charming and likable person,” said Carl Stork, who worked at Microsoft from 1981 to 2002 and held several executive positions. “I don’t know what Paul is trying to accomplish by trying to take something away from Bill. I am puzzled and disappointed.”

—Christine Hauser contributed reporting from New York.




  Price   Change %Change
MSFT
---

Featured

Contact Technology

  • CNBC NEWSLETTERS

    Get the best of CNBC in your inbox

    › Learn More
  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.