Gates: Get U.S. schools in order

SEATTLE--Six years ago, Microsoft CEO Steve Ballmer caused a mild panic in the stock market by telling a group of business writers that, in his blunt opinion, share prices were wildly overvalued.

Speaking Monday to the same group of journalists here, Chairman Bill Gates avoided any such immediately inflammatory words. Instead, he prefaced a quick tour through technology trends with a warning that the United States is in grave danger of losing its economic advantages to fast-growing nations like China, unless the country restores its lead in education and other policies supporting growth.

"If you look at the trend 10 years ago, the U.S. and China were not that different in terms of the number of engineers graduated," Gates said. "Now we have one-quarter the number of engineers, and the trend is continuing, with the U.S. number going down, and China going up quite a bit...We need to improve our own game, to make sure own slice of the pie stays very large."

Gates is among a handful of technology executives who have issued periodic warnings that the United States is in danger of losing its mantle as high-tech center of the world as the skills of other countries catch up or even surpass those of American workers.

Cisco Systems and Intel executives also have cast recent spotlights on the need to improve schools, and particularly math and science education, in order to remain competitive.

In his speech to the Society of American Business Editors & Writers on Monday, Gates noted that post-Sept. 11, 2001, rules have made it harder for foreign students to come to the United States, and have resulted in as much as a 30 percent drop in enrollment from some areas--another factor he said would ultimately hurt U.S. competitiveness.

He has previously called for an increase in the number of foreign citizens who are allowed into the country to work under so-called H-1B visas.

Alongside the warnings, Gates gave business writers a short list of technologies he thought would fundamentally change computing--and the broader culture--at least as much as the first stirrings of the mainstream Internet changed life during the boom years.

Falling fiber-optics prices, the ability of any companies' software to talk to any other's through XML or Web services interoperability standards, the next generation of 64-bit computing, and improvements in

computing security all will have substantial effects on the way people interact with technologies, he said.

More visible to average computer users, the advent of high-definition screens and applications, the widespread use of powerful portable computing devices of all kinds, and changes in personal communications toward an instant messaging-like model will drive considerable change in the coming years, he predicted.

As to the writers' business itself, the technology industry is not far from developing a portable reading device that will become popular, replacing the use of paper magazines and newspapers for many people, he said. That will in itself drive a shift in advertising and other media business models.

"We have no crystal ball as to how soon that will happen, but every advance in technology is moving things in that direction," Gates said.

He also touted the upcoming unveiling of the company's next-generation Xbox video game machine scheduled for later this month, and the Longhorn operating system to be released next year.

Asked about blogging, he said he had been experimenting with keeping one, but hadn't written in it often enough to let it go live on the Internet.

The chairman said Microsoft is more sophisticated from a corporate perspective than it has been in the past. He said he regretted ever having begun issuing stock options to employees, and that today's policy of issuing stock grants instead is better.

He danced around the topic of stock valuation.

"I think any statement about stock prices is always suspect," Gates said. "I would say there's as much overvaluation as there is undervaluation."