Close Encounters of the Microsoft Kind

But so it was at the opening night of Fall Comdex 99 in Las Vegas when George Lucas, the creator and vanguard of the Star Wars franchise, and Francis Ford Coppola, who built his reputation on the success of his three Godfather movies, were ignored by a crowd of thousands.

The reason was simple: Microsoft chairman, co-founder and CEO Bill Gates was about to take the stage - and no-one was interested in anything else but what he had to say.

The crowd's interest was intensified in the wake of the 'finding of fact' by US District Judge Thomas Penfield Jackson in the historic antitrust case between Microsoft and the United States Department of Justice. Users, developers, partners and Microsoft investors all wanted to know how Gates would react.

With the eyes of the world on him, Gates avoided the issues of the week. "It's great to know that all over America, there are entrepreneurs working in their garages [and that] also there are lawyers working in their 20th floor offices, both groups working to do what they do best," he joked, before launching into his keynote.

In fact, the closest Gates has come to making any direct and serious comment to investors on the impact of the ongoing legal battle he faces with the government was during a press conference he held on 5 November.

"Microsoft is not a prognosticator on the stock market, not up, not down, not sideways," he said. "We're in the business of creating software. That's our expertise. I'm not going to speculate on the market one way or the other."

During his keynote speech, however, Gates tantalised industry experts and investors alike with some bold predictions about the impact of the Internet, demonstrations of the company's upcoming Windows 2000, and a host of new Internet-based devices that support Microsoft technology.

"The opportunity for new ideas has never been greater," he said. "Venture capitalist funding is up 70 per cent from a very high level. It's been growing way beyond expectation to over $12 billion in funding in the first half of 1999."

Opportunity knocks
He continued: "That creates an atmosphere of expectation, an atmosphere of fast movement, an atmosphere where every CEO is asking themselves, what is my Internet strategy, why do I have to learn about all these things and redefine my business around that? But a lot of people then say, hey, that's a great thing. That means we can reinvent the company. So, it's a time of opportunity for businesses of all sizes."

Gates also admitted that the success of Windows 2000 will have a lot to do with just how well Microsoft grows in the next year.

"Windows 2000 is important for us. It's not just that we've been working hard for the last three years to build this product, but it's feedback from customers that has made us prioritise what the key features are here," he told the Las Vegas audience.

"Reliability is top of the list. People don't want to reboot systems ever. They don't want to change configurations or deal with software problems, they want those systems to be rock solid. They want richer management. They don't want to visit desktops, they want to be able to see what's on the desktop, deploy software, control the policies, without a visit there.

"Cost of ownership is still a big issue. When you give people all that empowerment, you need advanced software tools to do the management. And that's one of the key things we've built in here," he said.

Following the keynote, Gates seemed relaxed and at ease. In fact, he unexpectedly took about half an hour to banter with reporters after the speech and found an audience of only about a dozen scribes [including Investment.com writer Geof Wheelwright] to cross swords with.

Game on
As you might expect, the conversation started with questions about his competitors - and their recent crowing about the results so far of the antitrust suit against Microsoft.

"People always take potshots - it goes with the territory," said Gates. "The first day we founded Microsoft there were no other microcomputer software companies. That was the only time that people didn't take potshots at us. But as soon as there were two companies, the game was open."

Despite today's trials and tribulations, Gates declines to get caught up in much of the hype about the increasing number of year-end lists that include him as a "man of the century". Yet he is also aware that modesty is a vastly overrated virtue.

"We had the vision of hardware independence," he says. "That founding thought created the [PC compatible] platform. That's our greatest contribution."

One of the secrets of Microsoft's success is that Gates never forgets he is running a software company - and that writing good software is all about hiring (and keeping) smart and innovative people on his payroll.

Gates recalls fondly his own days as a programmer, which stretched well into 1983 when he worked on the Model 100 portable computer for Texas-based Radio Shack. This was a battery-operated mobile system that was a workhorse for many travelling journalists for more than a decade, since it featured a quite usable word-processing application as well as onboard telecommunications and modem support.

"The Model 100 was the last computer for which I wrote most of the software personally - myself and a guy named Jay Suzuki," he says, also remembering Tandy's earlier Color Computer on which he worked.

Squeezing the code
"Those were cool projects because I know every byte of code in that 32K ROM in the case of the Model 100. And it was a 16K ROM in the case of the Color Computer and I was just squeezing code into it," Gates recalls.

"I said to people that 'if you can save a byte in this code, I'll pay you $10' - and I can still go through and write out the listing of what the code was, because I would go to sleep at night thinking I've got to save another K [kilobyte] and I don't think I can. So we would come up with some crazy scheme to do it."

It's no surprise that the detailed machine language instruction for an extinct home computer still exists in the brain of Bill Gates. Yet it was instructive to be reminded of that fact in pondering the future of Microsoft.

The right stuff
We should remind ourselves that Gates and Microsoft did not get where they are merely because he is a good business manager. He knows his limitations and surrounds himself with the right people, the right teams, and the right acquired companies to accomplish his goals.

"In the sense of craftsmanship, my job today is more fun in other ways - with what we do, and the number of smart people we hire," he says. "I just go to the research group we have in Beijing alone - which is about 10 per cent of our research group - and it just blows my mind, the calibre of the people we have been able to hire there.

"With what these guys understand about Chinese speech, Chinese handwriting, MPEG4 [a highly effective compression standard for video and audio]. If you get a few smart guys, then they hire other smart guys and soon you are known as the place where a bunch of smart guys want to go. We have that in Beijing and we have that in Cambridge [England, where the company established its first major European research group two years ago]."

Gates says that Microsoft does not put immediate pressure on its research groups to produce commercial technologies quickly, yet he says that is what has happened in a number of cases.

"In Beijing, we really shouldn't expect anything yet. But in fact, they have produced a couple of things that will be in products in the next six months," he reveals. "When we start a research lab like that, we aren't really expecting to use anything they come up with for about three years. You have to do the hiring (and get it going)."

www.investment.com is a partner of VNU