Communications Technology

Microsoft co-founder Paul Allen has accused his former business partner Bill Gates of plotting to dilute Allen’s stake in the world’s largest software company before he left in 1983, and tried to buy his share of the company on the cheap.

Allen, who now runs a Seattle-based investment firm and philanthropic foundation, makes the claim in a forthcoming book of memoirs, excerpts from which were published in Vanity Fair magazine this week.

Allen, 58, says he overheard a heated conversation between Gates and now Chief Executive Steve Ballmer in December 1982, shortly after Allen told them he was thinking of leaving the company.

“It was easy to get the gist of the conversation,” writes Allen in the memoir as reproduced in Vanity Fair. “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.”

Allen, who at that time was receiving treatment for Hodgkin’s lymphoma cancer, and was scaling back his work at Microsoft, says he later received apologies from both Gates and Ballmer over the incident.

Allen, who made up the name Microsoft, co-founded the company with Gates in 1975. Two years later, he and Gates agreed to take 36 and 64 per cent shares in the company respectively, Allen says in the book, owing to Gates’ greater contribution to their first coding job for the new Altair computer, which turned out to be the company’s first big break.

The two men’s holdings in Microsoft were later diluted as more people joined the company and it issued shares publicly in 1986.

As the company grew, the two clashed over the hiring of Ballmer - a friend of Gates’ from Harvard - to lead sales and marketing efforts in 1980.

Allen claims in the book that they agreed to give Ballmer no more than 5 per cent equity in the company, but says Gates went behind his back to offer Ballmer 8.75 per cent.

“It was bad enough that Bill had chosen to override me on a partnership issue we’d specifically discussed,” says Allen in his book. “It was worse that he’d waited till I was away to send the letter.”

Allen says Gates eventually made up the extra equity given to Ballmer from his own share. Ballmer became CEO in 2000, and is the second-largest individual shareholder behind Gates.

Before he left Microsoft in 1983, Allen claims Gates attempted to buy his shares from him at a bargain price.

“As it turned out, Bill’s conservatism worked to my advantage. If he’d been willing to offer something close to my asking price, I would have sold way too soon,” says Allen in the book.

Gates, who has recently been traveling in India working on his own philanthropy projects, did not directly contest Allen’s account, but sought to play down friction.

“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,” Gates said in an emailed statement.

A Microsoft spokesman declined to comment.

Allen is ranked the 57th richest person in the world with a fortune of $US13 billion, according to Forbes magazine, largely due to his Microsoft holdings. Gates is ranked No. 2 with $US56 billion.

Allen’s book, titled Idea Man, is set to be published later this month by Portfolio.

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A website that sold Beatles songs online for 25 cents apiece before they became legally available has agreed to pay record companies nearly $1 million to settle a federal lawsuit.

US District Judge Josephine Staton Tucker signed off on the settlement between BlueBeat.com and music companies EMI Group, Capitol Records and Virgin Records America on Friday. The judge ruled in December that the site violated the music labels’ copyrights and presented unfair competition.

A trial to determine how much BlueBeat owed the companies was scheduled to begin on Tuesday.

BlueBeat streamed and sold music by the Fab Four and other top-name acts, including Coldplay and Lily Allen, for several days before music companies sued to shut it down in November 2009. By then, the site had already distributed more than 67,000 songs by The Beatles.

The posting of Beatles songs came shortly after the release of the group’s re-mastered albums and a pricey box set. A year later, Apple announced with great fanfare that it was selling Beatles music on its popular music service iTunes.

Within the first week, more than 2 million Beatles songs were purchased online for $1.29 apiece and 450,000 albums were sold.

BlueBeat had denied wrongdoing, claiming owner Hank Risan had pioneered a method called “psycho-acoustic simulation” that resulted in unique versions of copyrighted music.

The judge rejected his arguments and explanations of his technique in her December ruling, noting that Risan’s recordings were based on copies of CDs that he had purchased.

Risan said the settlement amount was a fraction of what the companies sought. He said the site, which is still active but doesn’t have any Beatles music available, is still working to register copyrights for 800,000 recordings

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When the iPad was launched last year, it was pilloried as a device that no one needed with a design that evoked sniggers of derision - to some it looked like an iPhone that had been flattened out by a rolling pin.

Barely a year later, and with almost 15 million iPads sold in the nine months to the end of December, tablets are now a multi-billion dollar business for Apple and one of the fastest-selling consumer electronics products in history.

When Apple reported its quarterly result in January, iPads, together with the iPhone and the iPod touch, accounted for $US17.3 billion in sales. Placed in context, that means two-thirds of Apple’s revenue is being generated by products which only came into being a little over three years ago.

For a company that was founded 35 years ago next Friday, that’s a major change of direction in a short time.

Now, as Apple kicks off its worldwide rollout of the iPad 2, competitors are scrambling to play catch-up and analysts are predicting that the market for tablets will treble in the coming year.

“Last year, Apple’s take on the iPad seemed to be that they believed they had something good,” wrote long-time Apple watcher John Gruber on his Daring Fireball blog. “This year, they seem to know they have something enormous.”

Apple’s co-founder, Steve Jobs, spoke of that sense of epochal change at the unveiling of the iPad 2 in San Francisco three weeks ago, declaring that the world was entering a “post-PC” era - one in which we are no longer tethered to the desktop (and to Microsoft) but linked to the “cloud” using tablets and smartphones.

And with a dozen or more rival tablets primed to hit the shelves this year, the market is set to go mainstream and iPad 2 - which went on sale two weeks ago in the US - is already leading the charge into that new era.

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