Gates Tells Audience: Watch This SpaceGates Tells Audience: Watch This Space

Microsoft plans to train more software development this year on products that make Windows capabilities available to users in more places, Bill Gates said at the Consumer Electronics Show Wednesday night.

In his opening speech at the industry trade show in Las Vegas, Microsoft's chairman said the company is developing an Internet-powered wristwatch that will be on the market this fall, as well as a portable digital music player due this Christmas. Earlier in the day, Microsoft said it had struck a deal with No. 3 U.S. cable operator Charter Communications to offer Microsoft's MSN service to Charter's 1 million broadband subscribers.

With PC sales forecast to grow only slightly this year, and the great majority of Microsoft's profits supplied by its Windows and Office desktop software, according to its last quarterly earnings statement, the software company is looking to products that rely on subscription payments to help future growth. "Services will be a huge, growing element of what people think about as their personal computing experience," Gates said.

The quest for new markets is taking Microsoft in some curious directions. During his speech, Gates wore a digital wristwatch based on Microsoft software called Smart Personal Objects Technology (Spot). The watch, which can automatically change time zones, receive instant messages, and display appointment reminders and current traffic conditions, runs on a 28-MHz processor from National Semiconductor, contains its own memory chips, and can receive updates from the Internet. "It's really a platform," Gates said. "It's about glance-able information." If Fossil, Citizen Watch, and Suunto deliver watches based on the technology this fall, as planned, customers will be able to use the Web to update the type of information displayed. Spot devices can be programmed via .Net byte code transmitted over a one-way network called Microsoft DirectBand, which adds data to the FM radio band, according to Gates. He also showed a prototype of a Spot magnet that can display traffic conditions and progress reports on sports games.

Advances in computer hardware, networking technology, and subscription services will lead to the development of more "smart" products, Gates said. But cellular phones, PCs, and televisions need to be complementary, rather than viewed as substitutes for one another. "The big transition that's taking place isn't from one form factor to another," but toward more computerized products, he said.

One of Microsoft's goals this year will be making Windows PCs' capabilities "available everywhere in the home," Gates said. Microsoft is building into Windows better ability to automatically detect Wireless Fidelity and 3G networks, and Windows technology is showing up in more consumer electronics. Thomson Consumer Electronics has licensed Windows technology for use in televisions, and Panasonic and Polaroid are using Microsoft technology in some DVD players, Gates said.

Microsoft has also designed a prototype portable digital music and video player called Media2Go. Vendors including ViewSonic, Samsung, and Sanyo plan to deliver products by Christmas. Microsoft has also released a version of its Pocket PC Phone Edition that supports cell phones on CDMA networks.