Gates explains Longhorn changes

When you've spoken about Longhorn in the past, everyone has kind of talked about it as a big bet. With the change, is Longhorn still a big bet, and is Microsoft as a company still really making those kinds of big bets?
Longhorn is a huge bet, and it brings with it the move more and more to use the .Net managed code. And that's not an overnight thing. We started that before Longhorn, and there's more we're doing after Longhorn, but I think you'll always see Longhorn as the milestone in terms of the mainstream -- mainstream acceptance of managed code on the client.

We're pretty unique in what we're doing. The normal kind of thing people talk about in terms of search -- we will have that stuff in Longhorn 06. But the big breakthrough, where you get those things brought together, will ship first off-cycle but then come back around and be built into the next OS release.

How do you feel about morale right now at Microsoft, and what do you think this will do? Is Microsoft at a point right now where you think it has to be shaken up and motivated?
I wouldn't say that. People love having the plan laid out in front of them, and the WinFS group, which is taking on these new features and shipping in a different form -- I wanted to make sure that it understood why we are doing these things. It's enthused about these things.

Some things here are cases where there is a clear competitor. If you take our guys who are competing with Google, they understand exactly what they're measured against and how everybody thinks Google walks on water, and they've got to surprise the world.

Then we have other groups, like WinFS, where we're way out in front, and there's nobody to compare ourselves to. Making sure that they see how we're committed to the vision and how we're going to support it and the way we use it with our other products -- that's important. I think we're doing a pretty good job of that. I'm talking with the WinFS group next week, and I'll hear what their questions are and make sure that there isn't any doubt about our excitement and commitment.

When it comes to offshoring, what kinds of opportunities are there for you guys in developing OS software? Are there opportunities to do more than just kind of the testing and ancillary work that's being done now?
In terms of our development, we're kind of an interesting mix. We do most of our development here in Redmond. We see that as very efficient for us and not something that will change.

We're also global and have been for a long time. We've got the research lab in Beijing, we've got a development centre in India, we've got a smaller group in Israel. Our Business Solutions guys have a big thing in Copenhagen, Denmark, and our Xbox game guys have a big lab in the United Kingdom. We're all over the place, but our big centre of gravity, which lets us really do integrated innovation and redraw the boundaries when they need to be done, is here.

I made a tour of college campuses last spring to talk about how computer science jobs are exciting, important jobs and how and lots of them are ones that smart people should aim for. I think the most interesting software development -- there's a lot more interesting software development than people realise -- will still be done by and large here in the United States.

Now, as you get into things like call centres and stuff like that, I'm not an expert about some of those other activities. I can tell you what Microsoft's up to.

Anyway, none of that has anything to do with Longhorn. Longhorn, you know, is like everything: mostly developed here in Redmond. Some pieces are contributed to by our various research groups and development groups, but the heavy, heavy balance of work is done here.

Finally, you've talked about music in particular as something that Microsoft probably has to do. What, if any opportunities, do you see for Microsoft in the music business? (Microsoft is expected to launch a music download service next week.)
In terms of the music, we'll have some milestones to talk about what we're doing. The simple fact is that we believe in both advertising revenues and e-commerce revenues. And so as you get people online comfortable with spending money, whether it's on music or avatars or the right to send SMS (Short Message System) messages out to their friends who are on the phone, there will be a few -- there will be companies that get to critical mass in terms of having those customer relationships and doing e-commerce.

We wouldn't do any one isolated category of sort of online digital buying by itself, because we believe in having essentially a digital payment system at critical mass that works in all the countries. We're investing in the platform to do that, and at some point, we'll apply that to things like music, and so it's part of a broader strategy.

I think that if you asked Yahoo, it'd also say advertising and transaction and subscription revenue -- all three of those things are important pillars.