Microsoft Moves to Polish Tarnished Public Image

By Scott Hillis

SEATTLE (Reuters) - Having suffered a blow in a U.S. federal court, which ruled it was a bullying monopoly, Microsoft Corp. (NasdaqNM:MSFT - news) is taking its case to the court of public opinion.

The software giant took out full-page advertisements in U.S. newspapers such as the New York Times and USA Today on Wednesday, running a letter from co-founder Bill Gates and Chief Executive Steve Ballmer defending the company and touting its successes.

``We respectfully disagree with the court's ruling, and ultimately believe the American justice system will affirm -- as it has in the past -- that Microsoft's actions have been both lawful and good for consumers,'' the letter read.

``We will continue to run our business based on a set of core values that have evolved over the last quarter century: integrity, innovation, customer focus and partnership,'' the letter said.

While their contents mostly repeated statements Gates and Ballmer made in the wake of the ruling on Monday, the ads underscored Microsoft's attempts to polish its image in the mind of a suspicious public.

Microsoft spokesman Rick Miller noted the company regularly publishes such ``advertorials'' laying out positions on hot policy issues such as trade with China or Internet privacy, but confirmed Wednesday's letter was special.

``This is more an attempt to reach customers, partners and shareholders ... so they understand we worked really hard to settle the case and that we think we have a strong message on appeal,'' Miller said.

``Our job is to keep focused on the good job Microsoft does. Our job is to, as loudly as possible, keep telling the values of this company and what this company stands for,'' he said.

The letter briefly mentioned that Microsoft also had ''responsibilities'' as an industry leader, but fell short of striking the humble tone that some public relations experts believe is needed to win over critics.

``My first reaction to the ad would be that it is a small step in the right direction,'' said Paul Holmes, publisher and editor of Reputation Management, a public relations industry magazine.

``I think they've changed a lot of superficial things. They presented a very haughty face, a very sort of arrogant face, to the world, and I think they've tried to be less conspicuously arrogant in the last six months or so,'' Holmes said.

Other signs that Microsoft is trying to buff up its image include a make-over of a once-disheveled Gates, who has usually preferred a sweater and khakis to a suit and tie.

Immediately after Judge Thomas Penfield Jackson ruled on Monday that the company broke antitrust laws, Gates donned more serious attire, appearing at a news briefing in a dark suit and tie, with his hair neatly parted.

Observers have said among the worst moments for Microsoft in the trial was when Gates, in videotaped testimony last year, came across as annoyed and defensive and repeatedly claimed he did not remember key discussions or documents.

Since then, he has become more animated and amicable in his public appearances, smiling and gesturing to his audiences, and cracking self-deprecating

jokes.

Gates -- the world's richest man with holdings in Microsoft worth about $68 billion as of Wednesday -- has also stepped up the pace of charitable donations in recent months.

Contributions to the Bill and Melinda Gates Foundation set up by Gates and his wife top $20 billion. Coincidentally or not, on Tuesday, as the dust from the ruling was settling, the United Nations said the foundation was giving $57 million to help fight AIDS in four African countries.

Public support for Microsoft has been strong in the Seattle area, where tens of thousands of people work at the company. But the company's size and perceived smugness may be changing that. One local coffee shop sells T-shirts emblazoned with the word ''Microsoul'', and protesters at a global trade meeting here late last year accused Gates of undermining the democratic process to promote free trade and enrich his own coffers.

``I think they came across as being very arrogant, and the public hates that. Those are fatal mistakes in public relations,'' said one former public relations officer for a Seattle-based company who declined to be identified.

Even though Gates seems to be truly convinced that he has committed no wrong, Holmes and other experts said he needed to at least appear to listen to his critics.

``I get very little sense that Microsoft is interested in engaging in dialogue with those people,'' Holmes said. ``I think that's a huge mistake and continues to cement the impression that this is an arrogant, insolent company.''

``It's not some huge compromise they have to make, but they have to appear to listen. Communication is not just what you say, it's what you listen to, and one gets the impression that Microsoft doesn't listen,'' Holmes said.