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From: Ben Waldman
Sent: Monday, July 06, 1998 2:05 AM
To: Bill Gates; Eric Rudder
Cc: Greg Maffei; Eric Engstrom
Subject: RE: Steve Jobs meeting regarding QT this last Monday

I am gone all this week at MacWorld (I'm speaking at the keynote), and we're doing a bunch of PR with Apple (working with greg shaw and corporate PR on this), around the 1 yr anniv of the Apple/MS agreement, talking about what we've accomplished and what's coming up next. Apple's big push at the show is the iMac, and we're doing a lot around this. We're announcing a $100 rebate for people who buy the iMac and Office, and I am actually going to spend most of my time talking up IE, since that's what I think needs the most attention.

I should fill you on some of my recent discussions with Steve(we've been emailing/talking on the phone/meeting quite a bit recently), and some stuff has been tense, as I have really been pushing them on a few issues, and I am forcing Apple to do a lot of stuff they'd rather not do (using Office as leverage). This is just a brief summary -- there's a lot more detail if you want it.

Note that Steve may not be at the conf -- his wife is due to have a baby any day (their fourth), so he may be at macworld, and may not (it's in NY in July this yr).

IE -- getting them to say nice things about it publicly (instead of "you can always switch to Nav"), and talk about it more in the context of the iMac. The iMac will be the first Mac with IE 4.01, and will be the only browser on the HD. We had a bunch of discussions around their use of our referral server, and they are breaking our agreement from last summer, but I'm letting them do it. A lot of issues came up regarding Apple's ownership of the start page and other customizations (vs. our ISPs), and we spent a lot of time working with ISPs to do special stuff for Apple, and then Apple dropped our internet connection wizard and referrral server. But, this is ok -- no need to bring it up with him.
Office -- they are putting ClarisWorks on every iMac, saying that they need to in order to compete with PC manufacturers. Yet they insisted that they didn't want to hurt Office, so I got them to promise to stick our office rebate in the box, and also stick an office upsell video on every machine. They tried to backtrack on this, and I called them on it. The coupon is in, but they're not doing the video. What Steve is really trying to do here is force us to lower the price of office, and I've told him we won't do it, and that's it.
Future -- I've told Steve that Encarta and bookshelf are dead unless I pick them up (he was concerned that I'd be "distracted"), and that additional investment in the Mac (i.e. new apps) will depend on our business results, and how supportive Apple is of us. I've told him that I am emphasizing end-user/consumer features in Office over LORG ones, and that that's the market we're targeting with the next version of Office because their LORG sales are dying. And so I've told Apple that they need to support us here. I told them that you and PaulMa questioned my headcount at the budget review (to scare him). Truth is we are doing a ne mail/calendar/PIM app using the Mac Outlook Express code base (but I only told him we're considering/researching it)

There are some other issues regarding use of OEM credits from Europe, USB hardware, announcing that we will port apps to Mac OS X(I said really, really nice stuff about it at the dev. conf. in May, but won't commit to do Office for it, because it's vaporware right now, and we don't have enough details).

Though I've talked about the negative/tense stuff above, I've also spent a bunch of time with Steve telling him what our partnership means to me, and how we are determined to do greate stuff in IE and Office to support their goals, and help them sell machines.

I suspect that they are starting to get a bit uncomfortable with me running all the Mac stuff, because now they can't play off different parts of MS against each other, and I am holding them to their commitments (they care a lot about Office, and I'm using that to get them to be more supportive of IE).

I am not very optimistic about Apple's future -- I think that the iMac may well fail -- it's not clear to me that it will add to their units -- it either won't sell ($1299 price is still too high), or will just cannibalize their existing units (they have an almost identical machine for $1699). I tried to talk to them about this months ago, talking to them about declining avg price/PC in the industry, and I guess they thought they were immune.

I suspect their quarter won't be good -- they had to do a promotion (with Virtual PC) because their G3 units were below plan.

Steve is the most supportive person we have at Apple, and I often escalate stuff to him to get stuff done.

So stuff I'd ask you to emphasize with Steve:

Thanks for all his support of us so far
BenW really cares about doing great software, and working closely together will get Apple great stuff from MS
We're concerned about the Office business, given Apple's decline in LORG and consumer market is critical for us. Additional investment in the Mac will be determined by our business results with office, so it's in Apple's interest to work with us.
The ClarisWorks stuff is really worrisome, and was a source of problems in the past, and if we can't get iMac customers to buy Office, then that will be really bad for Apple.
We're going to do great stuff in Office and IE that will make Apple happy.

This is some (really long) mail I sent to Steve a few weeks ago. Some stuff is outdated (we are working together on Macworld and the iMac, and came up with an OEM credit proposal for them that helps cannibalization).