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Microsoft says it has room to grow

But with Longhorn still far afield, the company has to find a way to get more people to buy more PCs.

REDMOND, Wash.--Microsoft may already dominate several key markets, but the company says there's still plenty of room for growth.

That was the message executives from Microsoft's seven business units delivered at a meeting for financial analysts here on Thursday.

Concerns over long-term growth have taken center stage after Microsoft's long-anticipated announcement last week that it will offer a $3-per-share one-time payout as part of a plan to return up to $75 billion to shareholders over the next four years.

Each of Microsoft's key units tried to make its best case for growth. In the desktop Windows business, Microsoft has a long dry spell in its product pipeline until Longhorn, the next version of Windows, arrives in 2006 or 2007. But the company still sees a chance to boost business if products such as Tablet PC and Media Center can convince more people to buy additional PCs. Also, Microsoft is hoping to convert some of the estimated 36 percent of Windows users globally who have unlicensed copies on their PCs.

With Office, Microsoft's desktop application suite, the company is trying to tailor its products for different locales. In Japan, Microsoft is testing a feature that allows business cards to be electronically exchanged and automatically updated via e-mail. In China, the local version of Office has an English writing assistant that helps business workers translate their documents and allows them to look up words from the Internet to find out their meanings and the proper ways to use them in a sentence.

"You can see us expanding that to a large number of markets," said Steven Sinofsky, a senior vice president in the Office unit.

Selling more software into emerging markets has proven to be tough, but Microsoft said it remains a key opportunity. The company estimates that in the coming years some 400 million people in developing markets will have both the financial resources and the necessary infrastructure to buy a PC.

The company's biggest move so far has been its Windows XP Starter Edition, a cut-rate version of Office and Windows that the company has been trying out in Thailand, Malaysia and Indonesia.

"You'll see more of that from us coming out this year," said Will Poole, senior vice president of the Windows Client unit.

On the server side, the company wants to expand into high-performance computing areas such as clustering. Server and Tools boss Eric Rudder reiterated that Microsoft plans to release a separate version of Windows Server, known as Windows Server 2003 HPC Edition.

"We will aggressively go after the high-performance computing market," Rudder said. He also outlined the features planned for Windows Server 2003 "R2," an interim release of the server operating system due some time next year.

Earlier in the day, Chairman Bill Gates spoke of the growth possibilities in a more abstract way. He said Microsoft can continue to grow if it can continue innovating.