Newsmaker: Gates: Ushering in Zune, spiffing up Office

Bill Gates knows that when it comes to the Zune, Microsoft has some catching up to do.

The success of the iPod has been described as "phenomenal, unbelievable, fantastic." And that was just Gates talking about it on Wednesday.

But despite coming from behind, Gates thinks that Microsoft can win some pocket share for its own media player, over time. While today's music players are largely islands, the Microsoft chairman paints a picture of a future in which all manner of devices--from cars to music players to digital cameras--all share data.

And as Gates told a crowd at Stanford University this week, Microsoft has no intention of being No. 2 at anything for too long.

"We want to either be No. 1 or on our way to being No. 1," he told the crowd.

In the first part of a two-part interview, Gates talks about the Zune and some of the things that its wireless connection makes possible, as well as about the sweeping changes Microsoft is making with Office 2007, the revamp of the ubiquitous software package. In the second part of the interview, published Friday, Gates talks about Windows Vista and more.

There's a ton more that we can do with Wi-Fi. In that sense, (Zune) is future-proof, in that we can download software onto these devices to do a lot of those new things.

Q: The Zune went on sale Tuesday, and people weren't exactly lining up at midnight to get them. Was the reaction, both in terms of sales and critical acclaim, something that's a concern?
Gates: No. It turns out the stores weren't open at midnight, so we're glad that they waited to come in. The Zune is something we've done a really great job on the manufacturing piece, so there isn't this need to say, "Boy, I've got to get it," because we actually have quite a bit of volume.

We expect to do quite well this holiday season. The orders from the retailers have been great. And then, well, who knows what the regularity will be? But, certainly at least every year, you can do more, including things that work on the existing hardware, and then new hardware as well.

Apple Computer has built a pretty big lead with the iPod. Why is it a market that's important to go after? Why develop the Zune at all?
Gates: You're going to have entertainment capability built into the car, and we're working on that with the car manufacturers. You're going to have it in the new-generation set-top box. You're going to have it in your phone, you're going to have it in your PC, and you're going to have some dedicated devices--dedicated media devices.

We thought to really fulfill our vision of connected entertainment that we wanted to have a device that had the wireless connection. Obviously, the iPod doesn't let you do third-party software, doesn't have a wireless connection--so, the connected entertainment vision, we can build on Zune and do some new things.

The wireless connection is the main thing that stands out about the Zune. Right now, that's just for beaming media files to another Zune. What kind of doors does it open down the road?
Gates: They'll figure out--the product group--exactly what to do. But (it'll be) things like just listening in or, as you go into a sports stadium, being able to see replays and information; as you go into a store, being able to listen to things, see what's on special there.

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Singing a new Zune

Will Zune emerge as a cool kid in the media player crowd? Or is that just a rock 'n' roll fantasy for Microsoft?

There's a ton more that we can do with Wi-Fi. In that sense, the device is future-proof, in that we can download software onto these devices to do a lot of those new things.

What about beyond wireless? You guys have talked about this being a first device and there being a lot of other things that you want to do. Is there room for a device beyond the cell phone that does things that we don't really think about doing on a portable device today?
Gates: We'll do more things. But, you know, we're vague and mysterious about what that is. I mean, but we're not just going to do media; we'll do more.

Now then, again, you may want to have a great user interface so whatever single thing you're doing, the device can still be great. Like if you just do music and no video, (that) can be great. If there are things that are more interactive you want to do, those can come onto the device.

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