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MS lays groundwork for Net boxes

Microsoft doesn't second-guess itself very often, but the Internet juggernaut appears to have the company doing just that.

Microsoft doesn't second-guess itself very often, but the Internet juggernaut appears to have the company doing just that.

Microsoft has had to backpedal on three recent Internet-related strategies. First, it changed the business model for its Microsoft Network (MSN), which started out as a proprietary online service competing with the Net. Now MSN has been transformed into a branded content provider that lives on the Net. Second, it changed its corporate mind about having a separate Internet division, an idea that chairman and CEO Bill Gates once said would be like forming an "electricity division." The company yesterday opened the Internet Platform and Tools Division. And third, the company is acknowledging that the Internet computer soon to appear on the scene might have a role to play in the computing world after all.

The reorganization announced yesterday also created a new Consumer Platforms division charged with providing software solutions for "non-PC consumer devices," a category that could include Internet computers.

Up until now Microsoft executives have steadfastly maintained that such Net computers--touted by Oracle and Sun Microsystems--are unnecessary or at best attractive to a very small slice of the consumer public. Microsoft officials still maintain that such devices offer little competition to PCs, but they now concede that the machines could serve as adjuncts to PCs.

And furthermore, Microsoft has two operating system kernel projects in the works that could be adapted to run on Internet boxes, said Dwight Davis, editor of Windows Watcher newsletter. The first is for a set-top box, code-named MMOSA. The second, code named Pegasus, has been designed for handheld devices and combines the features of two early projects, WinPad and Pulsar, Davis said. Pegasus is being designed as an embedded OS for different kinds of devices, such as PDAs, Wallet PCs, and intelligent devices that hook up to the Net, Davis added.

According to Davis, Microsoft will release a Pegasus SDK by the end of the year. "They didn't have a great incentive to push WinPad because the handheld market didn't mature, but maybe the Internet PC market will evolve much faster, and [Microsoft] is getting set to respond," he said.

With these projects, Microsoft is laying the groundwork to participate in the Internet terminal market--if it takes off--but in a way that wouldn't undermine Windows.