March 30, 2011, 12:37 PM — Bill Gates was guilty of "mercenary opportunism" when he schemed with Steve Ballmer to dilute Microsoft co-founder Paul Allen's equity in the company while Allen was recovering from Hodgkin's disease.
That's according to Paul Allen in his upcoming autobiography, "Idea Man," which is excerpted in Vanity Fair.
Allen paints a portrait of Gates as brilliant, focused and driven. From the Vanity Fair excerpt:
Microsoft was a high-stress environment because Bill drove others as hard as he drove himself. He was growing into the taskmaster who would prowl the parking lot on weekends to see who’d made it in. People were already busting their tails, and it got under their skin when Bill hectored them into doing more.
Then there was ruthless. According to Allen, Gates in the early days twice sought larger equity in the company on the grounds that he "did more." Allen says he acquiesced each time, both because he understood his partner's reasoning and to avoid major conflict. (You can see where this is going.)
For Allen, a major betrayal of trust occurred in 1980 when Gates wanted to hire Steve Ballmer, a former Harvard classmate, to run the business while Gates worked on sales and Allen on software development. The two had agreed to offer Ballmer 5 percent equity, but Allen says Gates instead offered Ballmer 8.75 percent of Microsoft. Confronted with the obvious "breach of faith," Gates agreed to take the extra 3.75 percent out of his equity, Allen writes.
A couple of years later, Allen discovered he had Hodgkin's lymphoma and began treatment. He writes:
One evening in late December 1982, I heard Bill and Steve speaking heatedly in Bill’s office and paused outside to listen in. It was easy to get the gist of the conversation. 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. It was clear that they’d been thinking about this for some time.
Unable to stand it any longer, I burst in on them and shouted, “This is unbelievable! It shows your true character, once and for all.” I was speaking to both of them, but staring straight at Bill. Caught red-handed, they were struck dumb. Before they could respond, I turned on my heel and left.
Allen said Gates and Ballmer both apologized for the incident, but Allen left the company months later, as he previously had told Gates he intended to do.
According to Wednesday's Wall Street Journal, Allen's portrayal of Gates "in the book is already making waves within the tight circle of early Microsoft alumni, with several people who know both men privately expressing confusion about Mr. Allen's motivations for criticizing his old business partner and questioning the accuracy of Mr. Allen's interpretation of certain events."
We haven't heard the end of this, that's for sure.
Chris Nerney writes about the business side of technology market strategies and trends, legal issues, leadership changes, mergers, venture capital, IPOs and technology stocks. Follow him on Twitter @ChrisNerney.