Gates Bullish on Tech, But Sees Broadband as Weak Link
Wednesday May 23 6:37 PM ET
By Scott Hillis
<<REDMOND, Wash. (Reuters) - The spectacular bursting of the dot-com bubble is not the end of the technology boom only ``the end of the beginning,'' Microsoft Chairman Bill Gates (news - web sites) said on Wednesday.
``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 140 corporate leaders at Microsoft's fifth CEO Summit.
Although 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 machine with a large-screen that can be written on, he said.
In line with that bullish theme, each CEO received a Compaq Computer Corp. (NYSE:CPQ - news) handheld iPaq computer powered by Microsoft Corp.'s (Nasdaq:MSFT - news) Pocket PC platform.
But there was a delay of a few minutes in the start of the conference as the devices apparently overwhelmed the wireless network set up to allow attendees to send messages to each other and submit questions to speakers.
Ironically, in his earlier remarks made moments after the wireless network problem, Gates said the only weak link in deploying new technology was high-speed Internet access, which was proving too costly to roll out quickly.
BROADBAND PROGRESS VERY SLOW
``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. It was optimistic to think 20 percent of U.S. homes would have a fast Internet link within four years, Gates said.
``That is an area where progress continues to be very slow,'' Gates said.
This year's gathering included old Microsoft friends like Michael Capellas of Compaq, new partners like Meg Whitman of online auction house eBay Inc. (Nasdaq:EBAY - news), and non-tech attendees like lifestyle guru Martha Stewart.
In a media briefing, several chief executives offered their views on the economy, technology spending, and how they planned to use computers and the Internet to boost their businesses.
``We're seeing some stability come in to the market,'' said Sanford Weill, chief executive of financial services giant Citigroup Inc. (NYSE:C - news). ``We're going along a sort of muddy bottom, and hopefully it turns out to be the bottom, but it's a little too early to tell.''
Weill said the series of interest rate cuts combined with a $1.35 trillion tax cut could add as much as 1 percentage point to economic growth this year, but corporate technology spending could show further weakness as companies focused on profits.
``Most CEOs are very focused on the numbers for Wall Street and there's been a lot of postponing of technology spending where the payback couldn't happen at the same time as the expense,'' Weill said.
Gates said investment outside of the dot-com and telecommunications sectors appeared strong, but joked that last year's gathering of top business minds had failed to predict the current slowdown.
``The CEO conference's record at economic forecasting is not super strong,'' Gates said.
LESSON FROM CHURCHILL
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 rewritten old economic laws, Gates said.
``How could a technology that reduces barriers to entry allow the creation of companies whose value is greater than ones that created assets in the real world where you build stores and there are barriers to entry?'' Gates said. ``That paradox has now been resolved -- there was no reason for that to take place.''
But, sticking to his message that the connected computing era has only just begun, Gates said the situation reminded him of remarks by Winston Churchill during World War Two.
``He said, 'Now this is not the end, it is not even the beginning of the end, but it is perhaps the end of the beginning,'' Gates said.
He said he expected retail sales over the Internet to quadruple in the next five years, and put his stamp of approval on eBay and retail giant Amazon.com Inc. (Nasdaq:AMZN - news) 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.
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.
Sales of Microsoft's core products, the Windows operating system and the Office suite of software, have slowed in recent years as new PC buying trails off and existing customers find little reason to upgrade.
It will launch new versions of Windows and Office this year and plans to convert its products into fee-based Web services that can provide a steady stream of subscription revenue.>> |
