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Saturday, September 3, 2005 - Page updated at 12:20 AM

Microsoft plans to outsource more, says ex-worker

Seattle Times technology reporter

Microsoft is on track to outsource more than 1,000 jobs a year to China, according to blistering evidence released yesterday in Microsoft's increasingly nasty spat with Google over an employee who jumped ship in July.

In a revelation that highlights the complexity of China President Hu Jintao's visit to Seattle and Microsoft on Monday, legal filings detailed claims of how Microsoft had offended the Chinese government by not outsourcing as many jobs as promised to Chinese technology vendors.

Chief Executive Steve Ballmer visited China in 2003 and promised to step up the pace, from $33 million worth of work a year to $55 million a year, according to a statement by Kai-Fu Lee, a former vice president who left to work for Google in July. Lee was charged with smoothing over relations with China and finding jobs that could be shifted to Chinese contract workers.

"At the time of my departure, MS was on track to outsource over 1,000 jobs a year to China," he said in a court declaration. A Microsoft spokeswoman said the company has transferred some projects to China "in order to free up teams here for other work."

"We are growing our work force there and will continue to do so; however, that growth has not and will not replace jobs here in Redmond," spokeswoman Stacy Drake said.

Microsoft continues to hire thousands of new employees a year in Redmond, but the pace of hiring has slowed. Simultaneously, it has increased work in China, India and other technology hubs.

Google is likewise extending its reach, and Lee was hired to start a Google research center in China. Microsoft immediately sued to prevent him from working there for a year, citing a noncompete agreement he signed in 2000. King County Superior Court Judge Steven Gonzalez granted Microsoft a temporary restraining order in July and is set to review the case in a hearing starting Tuesday.

Drawing on thousands of e-mails, notes and other material, Microsoft filed a motion with the court that painted Lee as a bit of a schemer. It said Lee removed "Microsoft confidential" labels from a strategy document on China and sent it to Google while pursuing his new job. It also said Lee continued to attend China strategy meetings after he began talking with Google.

Google said Microsoft doesn't have a case and that the confidential material was already made public by Chairman Bill Gates and Microsoft's Web site. It also released a statement from a former employee portraying Ballmer as a foul-mouthed fit-thrower.

It remains to be seen how the back and forth will affect the lawsuit. But the filings provide the deepest look at Microsoft's internal tensions since its antitrust trial in the late 1990s.

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In his declaration, Lee contends Microsoft's China research center was disorganized and needed to be unified, but his proposals met resistance from managers who wanted to continue making key decisions in Redmond. Lee said he decided to leave after disagreements with Senior Vice President Steve Sinfosky, head of the Office operation, and research chief Rick Rashid over his plan for China, and after Ballmer's "inadequate" response to his plan.

Microsoft said Lee apparently reached out to Google the day after interviewing a Microsoft job candidate who let on he was talking to Google about opening its China lab. In his statement, Lee said he found out about Google's plans for the lab from a Chinese news Web site. He also denied sharing confidential materials, and downplayed his significance to Microsoft's work on search products.

The details about Ballmer were in a declaration by former Distinguished Engineer Marc Lucovsky, who in November 2004 told Ballmer he was leaving for Google. Lucovsky said Ballmer threw a chair across his office and cussed out Google Chief Executive Eric Schmidt, saying, "I'm going to ... bury that guy, I have done it before, and I will do it again. I'm going ... to kill Google."

Lucovsky said Ballmer encouraged him to stay at Microsoft and told him that "Google's not a real company. It's a house of cards."

After Google sent the Lucovsky statement to reporters yesterday, Ballmer issued a statement denying the account.

"Mark Lucovsky's account of our conversation last November is a gross exaggeration of what actually took place," he said. "Mark's decision to leave was disappointing and I urged him strongly to change his mind. But his characterization of that meeting is not accurate."

Lucovsky's declaration says nothing about Lee, but Google lawyer Nicole Wong said it's relevant.

"Microsoft is trying to stop employees from trying to come to Google — that's what this case is about," she said. "The Lucovsky declaration shows a pattern of behavior that supports this."

Brier Dudley: 206-515-5687 or bdudley@seattletimes.com

Copyright © 2005 The Seattle Times Company

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