At his keynote address here to open the annual Comdex trade show, the Microsoft chief executive showcased the MSN Web Companion, a design for a scaled-down Internet computer. The device was announced in September, but few details about it had been made public.
The Web Companion is a book-sized device that runs Microsoft's Windows CE operating system and connects to the Net using the company's MSN Internet service. Other companies will manufacture the box, including Acer, Philips Electronics, Thomson Consumer Electronics, and Turkish electronics company Vestel.
The machine, which is expected to cost less than $200 and be available in the second half of next year, is Microsoft's spin on the network computer concept of years past. That idea, championed by Larry Ellison--chief executive of Oracle and archrival of Gates--called for a "dumb" terminal with limited functions for Internet use at an affordable price.
To its peril, the idea of a network computer was largely thought to be ahead of its time. Today, at least some analysts believe that Microsoft will find a niche with its Web Companion because the market and Internet usage has changed vastly.
However, Microsoft faces some potentially problematic timing of its own, in the legal arena. Although its federal antitrust trial is far from over, U.S. District Judge Thomas Penfield Jackson has already decided that Microsoft is a monopoly--a finding that calls into question the company's aggressive business practices.
Whether that has any bearing on future Microsoft strategies remains to be seen--Gates insists that it won't--but it could cast a pall over new business initiatives, such as its surprise deal with RadioShack last week and planned products such as the Web Companion.
Gates did not refer specifically to his company's legal woes in his keynote address--but he did defend the actions of his company, touting the progress and popularity of the computing industry and taking most of the credit for today's mainstream appeal of technology.
In addition, Gates discussed a recent report indicating that PC penetration in U.S. homes is now at 54 percent, outpacing earlier projections. "The PC has gone to new heights, and I believe it will continue to do so," he said.
PC prices are still dropping, more than half are connected to the Internet, and holiday e-commerce sales are expected to beat expectations, he said. "That creates an atmosphere of expectation, where every CEO is asking, 'What's my Internet strategy?'"
Although the heart of the Justice Department's case focuses on Microsoft's monopoly in the desktop operating system market, Gates predicted that eventually a combination of hardware devices will run a variety of software applications and platforms, contradicting the company's strategy to date.
Discussing the computing options for e-commerce companies making decisions about which hardware and software to use to power their Web sites, Gates pointed to the failures and outages of popular sites that relied on powerful Web servers as an indication of the fallibility of single-point computing. Gates contrasted these large computers with low-cost PCs, which offer low barriers to entry and broader choices in terms of application and software, but less scalability.
Gates proposed that companies use software rather than hardware to create large networks with high reliability and scalability.
"Reliability and scalability are primarily software problems," he said, because software can create more capacity or distribute load throughout a network more seamlessly than methods that rely solely on hardware.
Windows 2000, the company's upcoming corporate operating system, will solve many of these problems, he said.
"For us, it's a major milestone. The most comparable thing we've done in our history is Windows 95," because that operating system was upgraded from 16 bits to 32 bits, he said.
Gates and a Microsoft product manager tested the Ford.com Web site, which was designed to run on Windows 2000. Because it uses Windows 2000, the Ford site can stream video commercials, configure and preview models, check availability at local dealers and complete the sale, Gates said.
Segueing from Ford.com to a preview of an online trip planner, which integrates outside services and devices into a typical map application, Gates demonstrated how the trip planner uses the Internet and some desktop applications to calculate the time of the trip, locate gas stations, store music and schedule reminder calls to a cell phone via MSN. The service is synchronized and downloaded to Microsoft's Auto PC.
Shifting focus from consumer applications to the needs of corporate employees, Gates promised to make information easier to find within a company.
"The values of those corporate memories are really lost," he said. "We can change that by having rich storage and searching capabilities...we can really give people a fantastic corporate memory."
Sharing and accessing information from any geographic location will become easier as wireless Internet connections become more widely available, Gates said.
"Knowledge workers will be operating in a different way," he said, promising the same changes in private homes as DSL, cable and wireless Internet access become available. These high-speed connections in homes will be used to download and share high-quality videos, music and photographs, he said.
"The PC will be more than just a client--it will actually be a server," he predicted. "It will be able to use the network to project all the information on the PC disk to any device in the home."
In addition to showing the MSN Web Companion, Gates discussed the company's other Internet efforts. One that he mentioned is Office Online, a new service that allows users to access Microsoft's productivity software via the Internet without storing the applications locally on their computers.
Gates opened his wide-ranging speech with a thinly veiled reference to the federal antitrust case that has enmeshed his company.
"Has anybody here heard any good lawyer jokes recently?" the Microsoft cofounder and multibillionaire said. "Shoot," he added when the raucous laughter died down.
"On a serious note, I want to say how much I appreciate the people who've sent letters and emails during the last week," he said a few minutes later in the speech to a packed house at the Venetian Hotel.
The sentiment "from the people who've written is that the PC industry, and Microsoft's role in it, have benefited consumers immensely. And the sentiment is also that instead of doing less innovation in Windows, we should do more innovation in Windows. Thank you for your support," he said.
After the speech, Microsoft president Steve Ballmer reiterated what the company has been saying about the antitrust trial. "I just want our company to be able to innovate with the rest of the industry," Ballmer said. "There's lots we need to do to make [Gates's] vision of the future come to true."
News.com's Wylie Wong contributed to this report. Stephanie Miles and Wylie Wong reported from Las Vegas and Tom Dunlap from San Francisco.