September 21, 2000 3:41 PM PDT

Gates sketches "third phase" of Internet for CEOs

REDMOND, Washington--Microsoft chairman Bill Gates has seen the future of the Internet, and it has little to do with selling goods to consumers.

Gates sketched a vision for a "third phase" of the Net that will largely be driven by businesses hoping to create a better relationship with their customers--an "entire matching of the buyer and seller," he told a throng of chief executives gathered at his company's headquarters.

He also said the combination of wide dissemination of high-speed network connections, the prevalence of alternative devices to a PC and new innovations, such as digital publishing and use of XML (Extensible Markup Language) to tie older corporate systems together, all will play a pivotal role in the future of the Net and how businesses operate.

Gates spoke to a cadre of more than 160 chief executives representing 37 different industry sectors based in 28 countries, according to Microsoft. The company's annual CEO Summit, held on the company's campus, is in its fourth year and is intended to offer a peek at technological advances that could alter the way executives run their businesses.

Among the executives in attendance are John Chambers of network equipment company Cisco Systems, Jerry Yang of Yahoo, Meg Whitman of eBay, Richard Branson of Virgin, and Martha Stewart of Martha Stewart Living Omnimedia.

The broad-brush comments will be followed up with a detailed strategy by Microsoft to tackle the changing nature of computing in the Net era at an event called Forum 2000 scheduled next month.

While Gates spoke here, Judge Thomas Penfield Jackson was mulling the possibility of breaking the company into three parts during a Washington, D.C. hearing in the ongoing Microsoft antitrust case.

Gates' opinion on how his company's technology efforts could be altered by government action was left unsaid.

At a press conference following Gates' remarks, Microsoft executives and summit attendees declined to discuss the ongoing antitrust case against the software firm.

Noting that "technology is not standing still," Gates said the Net is entering a more "rational" phase in which businesses are questioning how Internet technology relates to profit. As a result, relationships between buyers and sellers, consumers and Net companies will grow more personal, allowing individuals to choose from a wide array of interests rather than relying on a particular company for their content or commerce, he said.

Gates also noted High speed pipe dreams?that high-speed network connections and innovations in wireless technology will allow workers and device users to do much more complex tasks on the Net. Microsoft's chief software architect said deployment of "broadband" high-speed connections by phone companies and cable operators remained "slower than expected," but he predicted better times going forward.

"I don't think the stumbles of the last year will continue," he said.

Microsoft executives predicted that eBooks and "tablet" PCs for note taking, for example, will represent a $1 billion business by 2005. eBook content will overtake printed books in many cases by 2008, they predicted. "It's not yet a book, but it's getting very close," Dick Brass, vice president of eBooks, said in an interview, alluding to the current state of the company's digital publishing technology.

Gates also promoted Microsoft's internal use of digital video technology to record meetings on its campus and stream them to employees, allowing them to watch meetings as they happen. He also plugged XML as a tool to tie disparate corporate systems together for use in back-end Net tasks.

Compaq chief executive Michael Capellas said sharing ideas and best practices were a primary benefit of his attendance at the summit. He also responded to a question concerning potential roadblocks-- in the abstract--to the ongoing growth of the Internet and the high-tech industry: "Anything that gets in the way of allowing us to build complete solutions, in my mind, is a problem," he said.

"We're all under attack by somebody somehow," Capellas said.

Microsoft's CEO Summit continues through tomorrow, highlighted by a dinner at Gates' house on Lake Washington outside Seattle this evening, followed by a "fireside chat," according to a company agenda.

 

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