"That wasn't true three or four years ago," Gates told more than 600 attendees at the company's Most Valued Professionals Summit at Microsoft's headquarters in Redmond, Wash. The three-day event, which is closed to the public, started Tuesday. The company released Gates' speech on its site. Microsoft is holding the event to honor 1,300 professionals who are chosen on an annual basis from the ranks of Microsoft resellers, consultants and other business partners.
"We found ourselves a little bit in a strange position where a lot of the hype was talking about things happening overnight, and banking and shopping and all these things would be immediately different," Gates said, referring to the dot-com boom. "And a lot of the focus was on the latest person to do a new Web site and the whole start-up phenomenon."
During that same period, Microsoft faced distractions from its antitrust case with the Justice Department and 18 states. A federal judge approved a settlement of the case in November.
Consistent with his other recent speeches, Gates laid out Microsoft's vision for the "digital decade." He noted that at the beginning of the decade, computers largely were used for creating and editing documents or sending e-mail.
"By the end of the decade we'll add several dozen things to that list, things relating to note taking and reading, things related to bill paying, certainly everything to do with photos, everything to do with music, everything to do with organizing schedules," Gates said. "Those things will become mainstream in a way that it won't be novel at all--that you'll expect those things to work in that fashion."
He noted that there's "a lot of invention still to be done to make the digital decade happen." Gates said new hardware innovations--around liquid-crystal displays (LCDs), wireless and disk storage, among others--would enable new classes of devices.
"We are putting our money where our mouth is on this one," Microsoft's chairman said. "We're increasing our (research and development) again in a fairly substantial way. And that's not because we see some economic turnaround in the next two or three years. We're not experts in that at all. We're doing this because we see the opportunity of better software technology, of a better platform enabling new things."
Gates touted Microsoft's Trustworthy Computing initiative as ato delivering the robust kind of technology necessary for achieving his vision. He also explained the significance of releasing Windows XP, which brought the consumer and professional versions of the operating system to a single code base.
"Windows XP itself has been a very important thing for us, getting Windows to run a strong code base and building in for the first time the feedback mechanism," he said.
Besides the main version, Microsoft in the last year released new versions of Windows XP for embedded devices, for home entertainment and for pen-based tablets. Among other features, lets consumers watch and record shows to the PC's hard drive.
All media, all the time
Microsoft envisions expanding the Media Center technology and the availability of digital content, such as TV shows or music, beyond PCs "and being able to play those back, replicating media out to handheld devices or, say, to storage in your car," Gates said. "Your car pulls in the garage; it's within the range of the (wireless) network so that your tunes and shows and things that you're interested in are automatically just sent out there. And so then it's connecting with all the different devices: the TVs, the PDAs (personal digital assistants), multiple PCs working together in a different way."
Microsoft also plans to heavily focus on new ways to interact with PCs, as it has with. "One of the key areas that we've been investing in very heavily is the idea of how you interact with the computer," Gates said. He predicted that "ink as a data type" and voice and video recognition will "come into play" in the future.
As he has in the past, Gates also emphasized the importance of Microsoft's move into Web services using Extensible Markup Language (XML). He touted XML support in the next version of Office and new Office products OneNote and.
"The bet we've made on XML and the Web services protocols that are used to exchange XML data is a bet on the company strategy," Gates said. "We announced this almost three years ago with our .Net strategy. .Net is easy to think about. It's Microsoft's implementation of these XML Web services."
Microsoft's chairman also espoused the importance of the company's Smart Personal Object Technology (SPOT), which is expected to bein wristwatches and refrigerator magnets. The technology lets people access relevant information, despite the device's diminutive size.
"It's our view there's a form factor even one step smaller than (PCs or handhelds) and that's glanceable information, where you look at an alarm clock or you look at a wristwatch or you look at a little magnet on a refrigerator, and you see information that you care about," Gates said. "And that's what we've created here with the SPOT type concept."
Citizen and Fossil are among the manufacturers expected to deliver SPOT-powered watches later this year.