Microsoft is betting on mobile phones to bring computing to developing countries. 

"The phone is going to be the PC, and the PC is going to be the phone," Microsoft chairman Bill Gates declared in his opening keynote at the Windows Hardware Engineering Conference in Los Angeles.

Craig Mundie, chief research and strategy officer at Microsoft, stressed that the mobile phone will become a key part of the company's strategy to bring technology to developing countries.

"People in those rural environments are already buying computers," he said. "They happen to call them cellphones."

Mundie suggested that, as smartphones continue to evolve into personal computers, the current mobile phone system could become the preferred platform for connecting to the internet while performing tasks that users typically associate with a traditional desktop environment.

Mundie demonstrated a system in which a smartphone environment was used to remotely unlock access to medical care in remote rural areas.

In an attempt to overcome patient illiteracy, the system uses a series of icons to allow the patient to describe symptoms and receive an instant diagnosis and instructions through video clips.

The mobile phone could also become an avenue for entertainment, according to Mundie.

"You may be able to bootstrap a lot of people into an internet-based experience with music and video and some type of creativity application even before we find that they can afford [traditional PCs]," he said.

Microsoft appears to be hedging its bets for emerging economies, however, as the company is also pushing its traditional desktop operating system.

Redmond has teamed up with Intel for its Classmate notebook computer, for example, and unveiled a $3 software bundle of Windows XP and Office applications earlier this month that will be available in selected markets. 

Microsoft is facing fierce competition from Linux, however, most notably the One Laptop per Child project to ship low cost notebooks to schools in developing nations. 

Linux vendor Red Hat unveiled a Global Desktop last week targeting computers at small and medium sized businesses as well as governments in third world nations.