REDMOND, Wash., – Bill Gates, voiced an optimism over the coming market opportunities for intellectual property in what he termed “the Digital Decade.”
“This next decade is the big one. This is the decade when your involvement with computing will be pervasive,” Gates told a meeting of about 160 Fortune Global 1000 chief executive officers at Microsoft’s fifth CEO Summit this week at Microsoft corporate headquarters.
Gates said that the current state of technology adoption reminds him of Winston Churchill’s oft-quoted comment in 1942, following a crucial Allied victory in World War Two, “Now, this is not the end; it is not even the beginning of the end, but it is perhaps the end of the beginning.”
Said Gates, “What I mean by that is that these digital approaches, as much as they’ve been talked about, aren’t all that pervasive, and yet this is the decade that they will become that way.”
Although many dot-coms never lived up to their unrealistic promises, technology will radically improve how many other companies manage data, customers and partners, Gates said. The next few years will see software and the Internet tie together everything from PCs to handheld computers to new devices like the tablet PC, a folder-sized portable computer with a large-screen that can be written on, he said.
In line with that bullish message, each CEO received a Compaq Computer handheld iPaq computer powered by Microsoft’s Pocket PC platform.
But there was a delay of a few minutes at the start of the conference as the devices apparently overwhelmed the wireless network set up to allow attendees to send messages to one another and submit questions to speakers.
Ironically, Gates said in his address that the only weak link in deploying new technology and services was high-speed Internet access, which was proving too costly to offer to consumers quickly.
“There is no hardware limitation that will affect what you want to do, but there is one exception, and that is the cost of broadband communication, primarily to the home,” Gates said. “That is an area where progress continues to be very slow.”
Gates said it was optimistic to think that 20 percent of US homes would have a fast Internet link within four years.
“So that’s the one thing holding us back. You wish there would be some breakthrough in that, but there won’t be in the next three or four years,” Gates said.
Gates said the past year, in which the value of the Nasdaq index was cut in half, high-flying dot-coms were laid low and spending on technology slowed, provided the insight that the so-called New Economy had not suspended old economic rules.
“Some of the mania about this really changed. I certainly don’t think that the rules of profitability or cycles in the economy have been suspended,” Gates said.
But Gates said he expected retail sales over the Internet to quadruple in the next five years and put his stamp of approval on online auction house eBay and retail giant Amazon.com as examples of Web companies that will survive.
“There’s no doubt in my mind that some companies, like eBay and Amazon, that were created partly as part of this Internet excitement, those are companies that are going to be here for the long run,” Gates said.
“In those cases, because you know it’s a reliable place, you know what to expect from them. And they’ve pioneered those businesses; they will be very successful companies.”
As for his own business, Gates said software was becoming a tough sell. “Intellectual property has an interesting problem, which is that it lasts forever. Your own installed base is serious competition. You have to do better,” Gates said.
Microsoft has seen sales of its core products, the Windows operating system and the Office suite of software, slow down in recent years as sales of new PCs trail off and existing customers find little reason to upgrade.
Microsoft is launching new versions of Windows and Office this year and plans to increasingly convert its products into fee-based Web services that provide a steady stream of subscription revenue.