Microsoft’s gates all smiles amid new products

By : |June 1, 2001 0

Scott Hillis

NEW YORK: A federal appeals court is expected to soon decide whether to break
his company in two, and sales of its key products have slowed, but Microsoft
Corp. chairman Bill Gates is smiling.

The co-founder of the world’s biggest software company sees plenty to be
bullish about, telling Reuters in an interview on Thursday that updates to
Microsoft’s key products – the Windows operating system and the Office suite of
business applications – were big steps for the company this year.

Microsoft is to launch its new operating system, called Windows XP, this
fall, touting it as the biggest improvement to the product in five years. Gates
said Windows XP will be such a step up that it will roust languishing PC sales.

"We do think that Windows XP will help drive hardware demand,"
Gates said. "It shows off a lot of the new hardware advances that previous
operating systems were not designed for." Gates spoke in Manhattan after he
launched Office XP, the biggest upgrade in two years to the package that
includes the Word processor, Excel spreadsheet and PowerPoint presentation

Looking tanned and relaxed, with a the crumpled wrapping of a McDonald’s
lunch at his feet, Gates’ demeanor was in contrast to that of almost exactly one
year ago, when the distraught billionaire called a news conference to denounce a
federal judge’s ruling that his company was an abusive monopoly that should be
broken in two to prevent further antitrust violations.

‘Huge payback’
Microsoft is trying to reignite growth in sales of Windows and Office, both of
which have slowed in recent quarters from 30 per cent clips.

PC sales have stumbled since late last year as consumers and businesses
tightened their belts amid the US economic slowdown. Corporations also have so
far failed to take up Windows 2000, Microsoft’s current top-of-the-line desktop
operating system for business, with the speed that many analysts had expected.

Now some analysts are questioning whether Office XP offers enough new
features to spur corporations into upgrading, but Gates said he was convinced
the software would more than pay for itself.

"If you look at what people spend on knowledge workers, their salaries,
the network, the equipment, the support, you know, getting them the latest
software with the new features and reliability, then (buying Office XP) is a
huge payback compared to most things that people look at," Gates said.

"You’ve got three parts, Office XP, Windows XP and then PCs themselves,
and advances in Office XP sometimes will motivate somebody to go ahead and
upgrade the operating system or upgrade the hardware," Gates said. "We
see this upgrade as moving very rapidly," Gates said.

XML key to XP
Sales of desktop applications, of which Office is the most crucial, rose less
than 7 per cent in the three months ended March 31, totalling $2.26 billion.
Sales of desktop platforms, i.e. Windows, rose 16 per cent to $2.05 billion.

Gates said Office XP was also a step towards delivering on Microsoft’s .NET
strategy that aims to meld its products with the Internet and eventually turn
software into Web-based subscription services. Key to that strategy is XML, or
extensible markup language, a technology that describes different kinds of data
so different networks can easily talk to each other.

"XP is about the sharing capabilities and the XML support, and those are
making Office a key part of what we’re doing with .NET," Gates said.
"So every release we do, the .NET strategy comes that much more into focus
for all our users," Gates said.

In earlier television interviews, Gates declined to comment on Microsoft’s
prospects for convincing an appeals court to reverse the breakup order. A
decision from the appeals court is expected soon.

(C) Reuters Limited 2001.

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