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Microsoft: Innovation key to PC profits

Company executives tell the crowd at the WinHEC computer conference that it'll take more than a color change to persuade customers to part with their money.

SEATTLE--To revive flagging PC profits, the industry must focus on building improvements compelling enough to persuade customers to part with their money, Microsoft exhorted business partners Tuesday.

"Innovation is the way to profit," said Jim Allchin, group vice president of Microsoft's platform group. "We haven't spent enough get (customers) to take that next step, buy the next machine, buy the next peripheral, buy the next software."

Allchin gave the opening speech here at Microsoft's Windows Hardware Engineering Conference, or WinHEC, where the Redmond, Wash., software colossus propagates its agenda to the hardware designers on whom Microsoft depends. "We're all interdependent," Allchin said.

One major direction Microsoft is steering partners is to have the PC take over jobs currently handled by CD and DVD players, personal video recorders, TV sets, and telephones. It's a growth path that pits Microsoft against consumer-electronics powerhouses such as Sony.

Cosmetic changes or cheaper PCs with the same abilities won't be sufficient to woo buyers, Allchin said. "Innovation to me isn't just changing the color of the bezel. We have to do more than that," he said. "The result will be a healthier ecosystem, happier customers and more sales."

Specifically, Allchin urged cooperation with Microsoft plans to make home PCs less crash-prone, faster to start, quieter and cooler, simpler, and imbued with powerful video and audio abilities.

As for plans with the more powerful networked servers, he pointed to work that's being done to make computers easier to manage; to let administrators swap processors and memory, or update software without shutting down the computer; and to group servers and storage into pools of "virtual" resources to which new systems can be added or removed easily.

Much of the attention at WinHEC is aimed at home computers, which Microsoft wants to make an inextricable part of people's lives.

For average consumers, though, the computer industry needs to meet consumers' higher expectations. "The TV doesn't have to be rebooted, and you've never installed a service pack on your VCR," Allchin said.

Allchin updated engineers on several Microsoft product plans:

• The first Windows XP service patch--a collection of bug fixes and other improvements--will be distributed midway through 2002.

• Microsoft's version of Windows for the Tablet PC, a portable PC with a touch screen, will arrive shortly after the service patch.

• The Mira remote display technology--touch screens that don't have much computing horsepower but rather connect wirelessly to a PC "base station"--will debut by the end of the year. Later versions will support streams of video sent from the PC.

• Around the same time that Mira debuts will come "Freestyle," which turns a PC into a remote-controlled combination of a CD jukebox, slide-show presentation screen, DVD player, personal video recorder and TV channel guide. Hewlett-Packard, NEC and Samsung will sell PCs with the Freestyle enhancements, said Mike Toutonghi, corporate vice president of Microsoft's eHome division.

• The next version of Windows Media Player, code-named Corona, will emerge near the end of 2002, featuring better video and audio abilities.

• The successor to Windows XP, code-named Longhorn, will debut in the second half of 2004. "We're going to synchronize a tremendous amount of our technology behind that," Allchin said.

Allchin also described some improvements to Microsoft's next server version of Windows, called Windows .Net Server. Administrators will be able to add more memory to a system without shutting it down, and in future versions they'll be able to swap components such as processors, memory and PCI cards without shutting down. Microsoft is also working on management software called iBIG that makes it easier to install software on legions of servers at once.

However, the .Net Server schedule has been slipping. The latest delay pushed the release back into the second half of 2002. While Allchin said Tuesday that the product would be done by year's end, he said "it probably will be in customers' hands sometime early next year."

In the consumer realm, Toutonghi announced that Microsoft has embarked on an effort to create Windows-branded remote controls to direct Freestyle PCs. The remote controls have a conspicuous "Start" button similar to Windows'.

The remote will use infrared technology from Philips Electronics, Toutonghi said, and companies that use the Windows logos on the product will get free access to Philips' infrared designs.

In a demonstration, pressing a remote's Start button brought up a basic menu that showed a simplified view of the Windows file directory: my photos, my music, my videos. Selecting the menu options led to simplified interfaces to Windows Media Player and other software for watching TV, videos or photos, or for listening to music.

Allchin and Toutonghi also demonstrated new audio and video technology coming in Corona. A new compression algorithm and file format for audio, Windows Media Audio Professional, uses 20 percent less space than the current WMA 8 format, Toutonghi said. Similar improvements come with new Windows Media Video software.

In addition, the new audio technology will support very high-fidelity audio, with more detailed 24-bit samples taken at a sampling frequency of 96 kilohertz, better than the 44.1KHz used in CDs today.

Microsoft has made inroads in getting Windows Media to supplant the prevailing MP3 audio standard. A total of 110 devices such as portable music players, car stereos and DVD players now support WMA, Toutonghi said.

Microsoft also believes strongly in home networks: wireless Bluetooth; 802.11b, 802.11a and 802.11g networks; and cable networks using ordinary Ethernet cables, home phone lines and those that piggyback on IEEE 1394 "FireWire" lines, Toutonghi said.

However, Microsoft fears that current wireless networks aren't fast enough to support streaming video, and future 802.11a and 802.11g versions have a harder time dealing with physical blocks that hamper wireless networks. Microsoft is working on technology that would let PCs boost existing wireless networks, he said.