Microsoft’s Gates bullish on future of technology

David Strow

Monday, Nov. 12, 2001 | 10:55 a.m.

Bill Gates, the most powerful man in the information technology industry, knows this isn't an easy time to be in the information technology business.

The Nasdaq Stock Market index has plunged from its all-time high of above 5,000 to around 1,800. Consumer confidence is plunging. Sales of personal computers are declining. A sense of wariness pervades the business world.

"This has been a challenging year ... probably one of the toughest years for the last several decades for the world at large and for our business," Gates said at a Sunday night Comdex keynote address. "All of these things, put together, have people saying, 'Has technology played out? Was the hype ever justified? Is there more to come, or is this it?' "

For the answer, the chairman of Microsoft Corp. drew on the words of former British Prime Minister Winston Churchill from the height of World War II: "This is not the end. This is not even the beginning of the end. It is, perhaps, the end of the beginning."

And that new phase of development in IT, Gates predicted, will be as stunning and sweeping in scope as the technology boom of the 1990s. By decade's end, Gates said, new innovations in computer technology will have doubled the productivity of every worker

"I find myself particularly excited about this decade, about the things we've not yet delivered," Gates said. "The potential we have is barely started. We have not really scratched the surface of what we can do. The impact of this will not be limited to our industry. During the '90s, every industry was energized by the type of productivity our tools provided. That will happen again."

The enthusiasm for the technology industry's future wasn't confined to Gates.

"Technology is getting back our roots (of) innovation," said Tim Bajarin, president of Creative Strategies Inc., a Campbell, Calif., consulting firm. "We hope that will spur our industry back to profitability, and moving forward again.'

And what will be at the center of this revolution, the engine of this technological surge? Windows XP, Gates said -- the latest generation operating system released by Microsoft just weeks ago.

"XP is as important a launch we've had since the initial launch of Windows," Gates said.

Gates said sales numbers prove the importance of the new system. About 7 million copies of XP have been sold since its introduction two weeks ago, breaking all records for early sales of new software.

XP is being touted in tech circles as an important advance for several reasons. It's much more stable than older versions of Windows. It is far more secure against hacking -- an important consideration in the post-Sept. 11 world. And it has greater capabilities than any versions of Windows that have come before.

Because XP requires a lot of computing power to operate, it could -- in theory -- spur a new wave of growth in the PC industry, as users upgrade to use XP.

"It (XP) is not the trigger, but it's certainly part of the gun," said Crawford DelPrete, senior vice president of hardware research with International Data Corp., a technology market research firm based in Framingham, Mass.

The PC industry has been in decline since the fourth quarter of 2000, and DelPrete projects that decline will continue through 2002.

XP will help that revival, he said, as businesses will be attracted to XP's stability and upgrade their systems.

But another factor in spurring PC sales back to a cycle of growth, DelPrete said, will be the "Y2K refresh refresh." Many businesses purchased new computer equipment in 1998 and 1999 as the Y2K deadline approached. Since computers generally have a three-year life cycle, that bodes well for the PC replacement market going into 2002 and 2003, he said.

There's a new kind of computer on the horizon, however -- the "tablet PC," a machine set for widespread introduction in the United States in the second half of next year. It's a machine Gates predicts will become the hottest selling personal computer within five years.

In appearance, a tablet PC resembles an overgrown PDA, or the computer pads often used by Capt. Kirk or Capt. Picard on "Star Trek." There's no keyboard -- the user operates the legal notepad-sized machine with the use of a stylus.

But the tablet PCs Gates showed off showed the concept of a traditional laptop isn't vanishing with the first wave of tablet PCs. One machine had a detachable keyboard. Another was a hybrid of the laptop and the tablet -- twist the screen around and fold it over, and the laptop transforms into a tablet PC.

Microsoft is heavily focusing its software development efforts on making the machine into a useful business tool, starting with a special version of XP designed specifically for tablet PCs. Microsoft executives showed attendees a program called "Journal" -- a program that recognizes the user's handwriting and transforms it into text, then places it into easily searchable files.

Handwriting recognition software has been introduced with little success in the past 10 years, but Microsoft's demonstration of the technology went off without a hitch, setting off applause in the audience.

"This is a technology that's ready for prime time," Gates said.

Another program combined wireless technology and Microsoft's Messenger program to allow tablet PC users to send each other instant, written messages and drawings.

"Next year, a lot of people in this audience will be taking notes with their tablet PCs," Gates said. "There's no doubt breakthrough hardware and software are coming together for some neat new things."

The widespread use of wireless technology will be critical in enabling the tablet PC a true alternative to reading paper documents, Gates said.

The full implementation of wireless technology, particularly in the home, "will make many years to be fully in place," Gates said. But eventually, he said, "this will be something we just take for granted."

"Reading is enabled by having a device with great resolution and great software," Gates said. "The tablet is fundamental to that.'

This technological revolution will eventually spread even to the home, "the last frontier," Gates said. One day, Gates predicted, PCs, wireless networks, the Internet and even home video game systems will come together in a single home computer system, all revolving around XP.

The key to that, he said, is that the technology be affordable.The system must also be capable of instantly recognizing new devices through wireless technology.

"The story is about integration, about all the pieces working together in very synergistic ways," Gates said.

As part of its strategy to become involved in every component of this home computer system, Microsoft is developing the Xbox, a home video game system designed to make the experience of playing a video game rival anything a person could watch on TV. The XBox comes with an Ethernet port, which allows players to use a broadband connection to play games with other users over the Internet.

The XBox is set for release this Thursday.

How long will it take before the technologies described by Gates become an accepted part of everyday life?

"They're taking a step in the right direction,' said Daniel Kenady, a portfolio manager with Provident Investment Advisors of Cincinnati. "The question is, when do the economics support the technological innovation? We're in the middle of a dead spot."

There will always be early adopters that are willing to pay the price for new technology but the key to widespread sales of products like the tablet PC is market acceptance, Kenady said -- the step that transforms interesting new technologies into a crucial tool.

"You have to get to that stage of critical mass," Kenady said.

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