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Gates May Be Shifting its Consumer Computing Strategy
Associated Press
REDMOND, Wash. — Until now, Microsoft's strategy toward consumer electronics and the Internet has been a slapdash affair that did little to leverage the company's real talents.

But as chairman Bill Gates prepares to address his first Consumer Electronics Show in Las Vegas on Wednesday, there are signs the 25-year-old company is taking its consumer computing strategy in a new direction.

Microsoft is not abandoning its core computer software business, but is recognizing that newer versions of everyday electronics, such as stereos and appliances, will have special requirements — data processing, Internet connectivity, home networking — that Microsoft is well positioned to provide.

Microsoft Expected to Unveil New Mobile Operating System

Gates is expected to introduce a new version of The Microsoft Network's mobile operating system, which will allow users to get e-mail from cell phones. Gates' primary focus, though, will be on trying to sell electronics manufacturers on his vision of interconnected VCRs, stereos, cell phones and appliances — all connected to the Internet and managed through the PC.

"This is a new class of software and a new way of connecting people to the information they need," said Craig Mundie, group vice president for consumer strategy at Microsoft. "The Microsoft home, which Bill will discuss, is basically how a home would look with all of these interconnected devices."

The rhetoric isn't new, but the approach is far different from Microsoft's past efforts.

Microsoft's consumer electronics software, running on the Windows CE operating system, was considered too bulky and required too much battery power on portable devices.

Critics said Windows CE, which looked and felt like Microsoft's larger PC operating systems, tried to do too much, but accomplished little. Sales of handheld computers running CE lag far behind those of the leading manufacturer, Palm Computing.

The company's consumer Web strategy was even less successful. The Microsoft Network was originally designed as a competitor to America Online. But while AOL has 20 million members today, MSN has a little less than 3 million. Meanwhile, only a few of MSN's multitude of Web sites, such as Expedia.com's travel service and the MSNBC news site, have prospered.

"Once they wandered away from their core computing business, Microsoft did not do well," said Rob Enderle, an analyst with the Giga Information Group. "They don't have any other choice but to try something different."

Focus Has Changed

The changes first started coming together a year ago, but solidified when senior vice president Brad Chase took over MSN in October and changed its entire focus.

"We are not a media company, but we certainly produced a lot of media Web sites," Chase said. "That's not our strength. Our strength is in building great software, and now we're bringing that software to the Web through MSN."

Today, MSN is designed to provide Internet access not just to PC users, but to users of interactive TV set-top boxes, to cell phone users, to voice-activated computers inside cars — the list goes on. By linking a wide variety of devices to MSN, they will have a common communications channel, Chase said. Through instant messaging and e-mail, they will have a common language.

The latest MSN Mobile software will allow users to send e-mail, get news and even trade stocks from their cell phone. While other cell phones have that capability, MSN's system features a connection to the Hotmail e-mail system, which lets users check a single e-mail account for all of their devices.

For example, instructions could be sent from a cell phone, through the PC, to an appliance in the home. Stocks could be traded from an AutoPC, Microsoft's entry into the automotive market, and the results could be read at home on an easy-to-use "Web companion" device.

As for the devices themselves, the Windows CE system fades into the background and quietly manages the device's hardware. In its place is a simple browser which draws all it needs to know not from the device's memory, but from the Internet via MSN.

Because of that, the devices don't need a lot of memory, are cheaper to produce and tend to have longer battery life.

Gates will kick off the CES show Wednesday night, while Mundie will speak Thursday to outline how Microsoft and its partners plan to launch this new strategy.

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