Gates wants strong ties to hardware makers

NEW ORLEANS -- Ever since IBM Corp. asked a small company founded by Harvard dropout Bill Gates to build an operating system for its first personal computer, the PC industry has evolved in a dual universe. Hardware firms engineer faster systems, while software companies race to take advantage of that speed.

More than 20 years later, Gates' Microsoft Corp. dominates the software side with the help of aggressive -- if sometimes questionable -- business tactics.

Gates said he believes the software and hardware camps need to work even closer as computers become more integrated into our lives and we interact with them more naturally than by typing into a keyboard.

Gates describes the relationship between the two technology branches as a partnership, not just Microsoft dictating to the hardware industry designs that meet its specifications.

'Best of both worlds'

The end result, said Gates, is to maintain the competition and diversity that have defined the yin and yang of hardware and software for more than 20 years.

"What we're doing is saying let's have the best of both worlds," he said. "Let's not give up the PC model of many people making different choices and putting those into the marketplace, but let's get rid of some of the impedance created by the organizational boundary between us and those partners."

During a recent interview, which took place minutes after Gates' keynote at the Windows Hardware Engineering Conference, Gates also discussed a new version of the Windows operating system planned for 2005, Microsoft's aggressive secure-computing plans, online music as well as antitrust troubles.

Dressed in a shirt monogrammed with his initials WHG, the Microsoft chairman and chief software architect sat at a table in a cavernous meeting room, bobbing with energy as he answered questions.

He had just unveiled a prototype PC that Microsoft designed with Hewlett-Packard Co., one of the first incarnations of that closer relationship between hardware and software firms. Gates touted its deep hardware-software integration, though the result was sometimes as simple as the music player switching to mute when an integrated Internet telephone is answered.

The next generation of Windows, which has been code-named Longhorn, will requires a close relationship with hardware makers, particularly graphic cards companies whose chips will enable Longhorn's advanced user interface. That interface will demand the same firepower that drives today's graphically intensive games.

A virtual vault

The upcoming operating system is also expected to include Microsoft's "Next Generation Secure Computing Base," which seeks to create a virtual vault in a computer's hardware that can protect data in specified ways. For example, programs could be written to be read only on certain machines -- out of reach of hackers and viruses -- but also potentially frustrating corporate and government whistle-blowers.

Gates seemed frustrated when asked about critics' concerns that Microsoft might strengthen its already considerable control over the high-tech industry with the new technology. Microsoft, he said, is merely providing a mechanism, and others will develop programs or distribute protected content to take advantage of it.

Though some details were revealed about the technology at the conference, many have yet to be hashed out. In hallways outside the sessions, some engineers declined to comment on whether they think Microsoft's behavior amounts to issuing edicts or just making suggestions.

Others said Microsoft needs to start paying more attention to security.

"We have locks on car doors, house doors, any door that we need to protect," said Melih Abdulhayoglu, chief security architect of Comodo Group, which demonstrated a secure keyboard with Fujitsu. "Anything of value is important, and it's about time we start protecting that. And Microsoft is starting to play a great role in that."

Still unclear is how Microsoft and its chosen partners might decide to share new technical standards so that they are compatible with other operating systems that run such devices as cell phones and TV settop boxes, said Martin Reynolds, an analyst at Gartner.

Gates was less expansive when talking about the company's antitrust troubles. He said he had not read the latest legal filings of the two states that still have active cases against the company. He also did address the European Union's accusations that Microsoft's bundling of a media player with Windows might constitute monopolistic behavior.

"I don't think there's anything new about what's going on in Europe," he said, before a Microsoft spokesman cut off the line of questioning.

On another topic, Gates applauded what appears to be a thawing of the music industry's frosty relationship with the high-tech industry, specifically the more liberal licensing of music through Apple Computer Inc.'s new iTunes Music Store.

Gates said Microsoft looks forward to creating services on the same terms through its MSN online service.

"We think we can help the labels and shift behavior toward the legitimate purchase," he said, "now that flexibility has gone up."