Bill Gates kicks of the "D" conference

Updated 11:50 PM PST: Bill Gates held court at the D (all things Digital) conference at the Four Seasons in Carlsbad, Calif., touching on the usual topics (Vista, Office, Google, Xbox) during a Q&A with hosts Walt Mossberg and Kara Swisher. In the middle of the Q&A, the discussion was artfully directed around Office 2007, specifically how the user interface for the venerable suite is getting a major facelift, which led into a demo of the product. Gates described the new UI as a "scary step" and as "risky." The crowd was impressed, as were Walt and Kara, by the improvements to the user experience. They are significant, and one of the first times Microsoft has taken a substantial leap--at least five years in the making--in altering the user experience. The geeky crowd clamored for a look at Outlook 2007, but it wasn't forthcoming.

 

  See D4 image gallery for more conference photos.

Gates was asked about a rumored portable media player (iPod competitor) that the Xbox group is reportedly working on. "I have no announcement to make today," Gates said. "We are looking at various ways to bring more to that space. There is a lot yet that hasn't been done." Of course, this could put Microsoft at odds with hardware makers, like iRiver. While Microsoft stays out of most the hardware side on the PC (except mice and keyboards), it does compete in the Apple-like, end-to-end product with the Xbox versus Sony.

Gates was asked about the profusion of Web-based applications, specially Writely, which as acquired by Google this year. "The [Windows] text controls and WordPad have more features than Writely," Gates said. He isn't an advocate of 'time sharing,' and that for richer applications fetching from servers isn't ideal. "You want local microprocessors, which are getting cheaper and cheaper because of Moore's Law. More storage is going to be in the cloud, a lot for free and what's not will be very inexpensive. Office connects up with Office Live or other cloud storage efforts to have your documents wherever you want to have them," Gates said.

When I spoke to Gates before the interview, he was extolling the virtues of Office Live (which he admitted is misnamed, since it doesn't replicate the functionality of the Office suite) and SharePoint Server 2007, which he has said will be looked upon as the most revolutionary aspect of Office 2007.

However, more lightweight applications, and with increasing bandwidth, are starting to show that much of the functionality in Office can be achieved online. Zimbra has done a good job of demonstrating a rich, browser-based email client. Also, Writely is a sharable application--no SharePoint server required.

 

Gates also talked about Microsoft's cloud storage ambitions, which called "petabytes in the sky." Drives are getting faster and cheaper, and Microsoft will have a variety of services that will connect to petabytes in the sky, including synchronization and backup services. 

 
He got the usual questions about Vista ship dates (on time, but most important is a solid product), Ray Ozzie (a fantastic addition), shipping cycles (different cycles for different things) and next generation UI (speech, ink and vision, which will take  billions in research and dared anyone with an operating system to compete on that front). He singled out Xbox Live as a success story, saying that 5 million pieces of content were download from the service last week. "The stickiness of the product is radically different,  so there is an advantage to an early mover," Gates said.

On the Google question, Gates said that while Google has gained search share and Microsoft has lost a "tiny bit," Google has done less to innovate in this year than smaller, more vertical search engines and Ask.com. "We have lots of work to do to gain credibility, and we are very intent on that," Gates said. "The talent we have hired and what we are working on makes me optimistic...Competitions like that are a five-year battle or trek. Fortunately, we have the patience and wherewithal."

On the subject of the social networking craze, Gates said that the category wasn't well defined. "We are not yet at a point where you can share the appropriate [information]. Email, instant messaging, and social networking are all too limited....There is a lot to be learned and we haven't seen a final model that pulls all those things together." He cited MSN Messenger as a key strength for MSN Spaces, because it alert users to changes on pages. Gates likes YouTube (he recently watched classic Harlem Globetrotter videos), but asked how it will make money and overcome concerns about copyright violations. That said, you can expect Microsoft to get deeper into the video sharing game via something home grown or via acquisition.

Gates also pronounced the traditional broadcast model dead, joining an already large chorus. He noted that the broadcast networks are trying to have their cake and eat it, trying to keep affiliates and advertisers happy at the same time they are pushing a la carte programming and feeling the impact of IPTV. "There is a
difference between what technology enables and what historical business practices enable."

Update 5:28 AM PST: Steve Sinofsky,  SVP for Windows and Live engineering, commenting in a Talkback to this post:

 

Just wanted to let folks know that we had only a short time to show off all of the new stuff in 2007 Office. We wish we had more time!!
We did show a glimpse of Outlook -- of course the beta is available by registering on http://www.microsoft.com/office/preview and on http://blogs.msdn.com/jensenh you can read all about the user experience. Also you can see a video on http://www.microsoft.com/office/preview/ui/video.mspx.

See also: Coverage by Barrons' Eric Savitz