Microsoft's gates all smiles amid new products

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

application.

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.