This week in Microsoft

At the Professional Developer Conference, Microsoft Chairman Bill Gates sat down with CNET News.com and said his company intends to expand its hosted software offerings by blurring the lines between the company's server products and online Web properties.

The software giant will expand its "software as a service" line, particularly for businesses, he said. The idea is that customers can choose to either purchase server software, such as mail or portal applications, from Microsoft or get it delivered as a service over the Internet.

Gates also reflected on software innovation and on the extent to which he feels his company is in competition with Web companies like Google. He doesn't see the search king as being in the same game when it comes to offering development capabilities.

Google has "this slogan that they are going to organize the world's information. Our slogan is that we are going to give people tools to let them organize the world's information," Gates said. "It's a slightly different approach, based on the platformization of all of our capabilities and not thinking of ourselves as the organizer."

Reader Nick Tomkin challenged that notion: "Not in the data collection business? What the hell do you call Passport," he said, speaking of Microsoft's authentication technology. "You, Mr. Gates are in any business so long as it's trailing a momentous invention. If digital pet rocks was the next 'blog' or 'IM,' Microsoft would be setting up 'petrock.msn.com' in 10 minutes."

In other big news at the PDC, Microsoft appears to be considering a product lineup with its newest version of Windows--Vista--that would include several new high-end editions of the operating system.

Microsoft has discussed plans for an edition for corporations and is also evaluating both a small-business version and an "ultimate" edition of the operating system that would combine the best of Microsoft's corporate and consumer features.

The company has not yet said how it will sell Vista, and an announcement is not expected for some months. However, buried within the test code handed out to developers at the PDC was a reference to six separate versions of Vista.

Microsoft had earlier announced plans for a community technology preview version of Vista that was also handed out to developers.

Also at the confab, Microsoft revealed initiatives that will help it muscle its way into two markets next year--work flow and enterprise content management--using its time-tested techniques of exploiting its desktop dominance and appealing to developers.

The company announced Windows Workflow Foundation, software plumbing that tracks the different steps in a wide range of work flow processes, such as handling the flow of one Web page to the next or passing electronic forms between two systems.

The software, which will be built into Windows Vista when the new operating system ships in the second half of next year, will be used extensively in Office 12 as well as in future versions of BizTalk and the company's Dynamics packaged applications, according to Microsoft executives.

Though company executives are cagey on packaging and pricing details, Microsoft also intends to provide enterprise content management capabilities with Office 12, which will be available in the second half of next year as well.

Both initiatives have the potential to shake up the competitive landscape in markets where there are several specialized vendors.

Back in the halls of justice, a Washington state judge ruled Tuesday that former Microsoft executive Kai-Fu Lee can continue to work for a Google development center in China--but with restrictions. The court barred Lee from working on technologies such as search or speech. It has also prohibited Lee from recruiting Microsoft employees or using any confidential information he gleaned from his work at the software giant.

But following the ruling, Microsoft proposed settling its lawsuit by asking Google to agree to limit the executive's duties until July 2006, when the noncompete agreement he signed with Microsoft expires. Click here for a roundup of this week's Google news.