"The kind of things that we dreamed about in the past are happening now, and the reason is software," he told the audience at PC Expo here.
After January 1, 2000, Microsoft will not advertise on any site that does not clearly state its privacy plans. The company will release a Privacy Wizard that will enable sites that do not have privacy statements to easily craft them.
"Our aim is to make it easy for Web sites to offer privacy policies that give people control of their personal information and make the Web a safer place to get things done," Microsoft said in a letter to its advertising partners posted on its Web site.
In addition, Herbold introduced Microsoft Passport, which allows users to take their privacy preferences from site to site without having to redo their choices for each site.
Microsoft has come under fire for gathering information about Windows and Office users without their knowledge, although the company did not sell the information or use it for marketing purposes. Herbold's privacy announcements did not appear to cover these issues.
The PC evolution
Moving on in his keynote, Herbold compared today's PCs to those released 20 years ago, emphasizing the rapid price declines of the entire sector. Setting the scene with a photograph of the youthful faces of Microsoft cofounders Bill Gates and Paul Allen, Herbold noted that a typical computer released in 1990 ran on a 386x processor and offered only 2MB of memory, and a 60MB hard drive, for upwards of $3,000.
Herbold compared these systems to sub-$600 PCs released in 1999 with Intel Pentium II processors, 64MB of memory, 4GB hard drive, and a monitor.
Breaking it down even further, Herbold predicted that if current patterns hold, the cost per MIP will drop to 1 cent in 2012, down from $9,600 per 0.25 MIP in 1975.
At this point in his speech, Herbold's slide show presentation apparently became out of synch with his remarks, and the executive was heckled by a member of the audience.
"You run the largest technology company in the world, but your slide show doesn't work," the audience member shouted. Herbold laughed off the glitch, noting that "you can please some people some of the time, but you can't please all of the people all of the time."
After resuming his presentation, he argued that computers are becoming a commodity because of price declines. For example, 100 million PCs shipped last year, equal to the number of bikes shipped worldwide. "You can't hardly imagine doing work anymore without a computer," Herbold said.
Software and high-speed access
Microsoft and its partners are looking to extend the "digital nervous system," from computers to wireless portable systems, enabling users to access the Internet from any device. Widespread high-speed Internet access is the key to this plan, Herbold said, adding that contrary to common wisdom, software will be the true enabler of high bandwidth.
The 40 percent increase in capacity per year is due to software, not larger wires, he argued. "The wire isn't changing--the technology moving data through the wire is changing."
Turning from the past to the future, Herbold predicted that upcoming computers increasingly will target smaller and smaller audiences. "All markets fragment," he said. "Individual entries occur that fit single purposes."
These single-purpose devices will be appliance-like in their simplicity and ease of use, he said, and will likely include flat-panel displays and different form factors and include wireless high-speed Internet access.
"The pressure is on to make it simple, and the pressure is on to make it reliable," he said. "This is truly an exciting time to be in this industry--creativity is the big winner."
The non-PC explosion
Herbold outlined the company's plans for its Windows CE operating system for non-PC devices and demonstrated how the platform already is being used in fast food kiosks, gas pumps, and washing machines.
More typical uses include palm-sized and handheld PCs running on Windows CE. These devices include MP3 audio players, as well as expanded applications and games, he said.
During a demonstration of Windows CE handwriting recognition, Herbold and Microsoft product manager Brian Shafer took a jab at rival Palm Computing's Graffiti alphabet.
With Windows CE, "I don't have to learn any fancy way to write letters," Shafer said, drawing laughs from the crowd. "What I learned when I was 6 still works."