When the original Xbox came out it was widely thought that the inclusion of a hard drive is what gave the
console a competitive edge over the PlayStation 2 and the GameCube. What is going to be the next Xbox's competitive
edge? Even though the PlayStation 3 is debuting later, it seems likely to include more advanced components like a
That'll be interesting to see. Sony is sort of committed to that, but if you look at the cost and complexities and
timing of that, we'll have to see. With the Xbox, remember what we're delivering is the experience, and so when you
have better tools, better software, and this better live experience where all your friends are up there on Live, that's
where you can connect to them and compete with them, it's going to be pretty phenomenal. We want to have the best
experience there, and we obviously saw with something like Halo 2 that when you get the pieces together it's amazing
the phenomena you can create around that.
How is the next Xbox going to fit into the rest of Microsoft's home entertainment strategy? Will it be able to double
as a digital entertainment hub?
I'm not sure what you mean by the word hub there. Often we would think of the Media Center PC as being the hub and
then the living room being able to connect up to all the music on the PCs in the house, all the photos on the PCs in
the house, and having remote display capabilities so that if you've got video up on that PC, then great you can watch
it, connect to it, set up to record it right with a remote control in the living room. So the high-end scenario for us
is you've got Media Center PC, that's where your state is, but then you've got your Xenon out that are connecting up to
that. Xenon itself will have some neat capabilities, but we're in pre-introduction here, and that group is brilliant
about the unveiling. They've been very coy up 'til this point and I wouldn't want to steal any of their thunder.
But what if someone doesn't have a Media Center PC, will the Xbox have some of that same
It won't be a Media Center PC, so there's some things you won't be able to do. You'll be able to do a lot of media
things including storing music, playing music, connect up your player. There's an overall media vision, and we
certainly see households that just have Xenons in them, and we see households that have normal PCs and Xenons, and we
see households that have media center PCs and Xenons. We're going to make all those do what you'd expect.
Have you had a chance to play with the PlayStation portable?
Actually yeah. Because we both work with Sony and compete with Sony, Kutaragi and Idei were here some months ago, and
they sent me one even before it was in the marketplace. We're not in that segment of the business. I don't know if he
would have done the same with the PS3, but so he sent a PSP and that was very nice.
I know that in the past you've indicated that Microsoft wasn't planning to introduce a competitor into the
portable gaming space, but has your position changed at all? What would make Microsoft get into portable
Right now our entertainment group is very
focused on Xenon and doing an absolutely fantastic job on Xenon, and it's very exciting to see how that is coming
together. In the portable space you have to think of okay what will the phone become over time. The phone is sort of
trumps everything. It trumps media players, it trumps cameras, it trumps GPS-mapping devices, digital wallets, and even
entertainment. And obviously we're in the phone software space. We have partners who build the hardware there. And so
I'm not sure that you'll ever see us do something that's a game-only device. I think you'll see us do flavors of the
phone that are better for gaming and have an affinity to PC gaming and Xenon gaming, but and we're doing a bit of that
now. Nothing dramatic. We see a generation of phones coming that really can do this without too much compromising being
available in the two to four year time frame. So at least in that sense we'll roll out some portable gaming. Right now
we don't see a dedicated device on our road map.
The next version of Windows Mobile is due out later this year, what is Microsoft going to do to overtake
Symbian as the dominant operating system for smartphones?
You really wouldn't say Symbian, they're really just an ingredient provider to a few people. You really have to say
Nokia, because they're the ones who take that and add a bunch of things to it and change it, who create a user
interface around it. Really you can say it either way.
If you ask our mobile phone guys, when they do a comparison, they're comparing what Nokia's getting in the market, and
what Treo [palmOne], and RIM are getting into the marketplace. They look at those end products and think of those
services. Obviously there's a business market where connecting up to Office and Outlook is a very big deal and as we're
making Office better we can have the phone evolve—essentially what's the best Outlook in the phone... we ought to be able
to do a really great job of that. You also have down in the consumer space this idea that as you get camera features in
and data browsing in it plays much more to our strengths. It's much more of a software device, and so setting it up so
that every photo you take just shows up on your MSN Space without any work, or everything you've got on the phone just
shows up on your PC in a simple way.
You mention the consumer space, but so far there hasn't been much emphasis on hardware running Windows Mobile
as consumer-centric devices. It seems like so far it's positioned almost entirely towards business users. Is Windows
Mobile 2005 going to be more consumer-friendly?
Our mobile phone strategy includes consumer up to business users. It's fair to say that we've sold a lot more to the
business user. It's very typical for Microsoft, we anticipated hardware getting more powerful and so we hit a high
hardware design point. For example saying, "Hey, let's go for 32-bit." And then we couldn't even run on the 16-bit
devices. Now everything we require [in terms of specs] is coming down into the consumer price point. So, yes, in terms
of getting a high share of the volume that we're ambitious over time to get we need to have consumer phones and
business phones. The taxonomy isn't going to stay so static, where those are so isolated. Remember the PC; part of its
beauty is that when you go home you use the same interface that you use at business, and so you can do your family
planning while you're in the business, you can do your work while you're at home.
With phones over time you won't have to think, okay the trade-ups are just to make this a business device or just to
consumer device. And some of the really interesting stuff, like where you take a photo and it recognizes that that's a
sign you want translated or that's an address you want to see a map related to, or it's an expense report so you just
OCR it and get it into expense software. The kind of automatic behavior that can come out of deep software running on
the phone, that plays to our strength. I'd say the same thing to you about the phone as the video game. Why did we get
into video games? Because we saw a huge software component in tools, run times, and applications. Likewise on phones
we're able to get our partners' hardware capability from many different partners— Motorola, Samsung, a lot of companies
around Asia—and then we bring the connection to Office, the connection to the PC into of that. So we're just at the
beginning of our mobile phone thing, because speech recognition, visual recognition, and data is just beginning to be a
meaningful thing in terms of phone usage. Mail, yes. That's started. But data is just getting reasonably priced.
But how do you get Windows Mobile to that mass market acceptance? Does the interface have to become dramatically more
simple, more intuitive for people who don't necessarily need the expanded capabilities a business user or power-user
looks for? If I gave my mom the Audiovox SMT 5600 I think she'd probably have some trouble figuring everything
Well, automatic provisioning is a very good thing for all user classes, not just consumers. And so we will do that for
all user classes. In fact, in some cases sometimes you'll want to actually go to a PC and pick your preferences and
things like that and then have that just show up on the phone. So you could do it. If you want to help her you could do
that on your PC. There's a lot of simplicity, but I don't see that as only a consumer thing. There's no nothing
inherent about Windows Mobile that impedes us in anyway from competing for the full spectrum of phone users. These
phones are rich 32-bit data-oriented and you want to connect up to the Internet and the PC so that plays to our
Is the goal to have a Windows Mobile phone in every pocket just like the goal is to have a Windows PC on every
Well there'll always be tons of operating systems. There'll always be tons of software stacks in mobile phones. We're
trying to make the best software we can and we have no shortage of ideas where we can make that phone way better than
it is today.
What comes after Windows Mobile 2005? Is it just further refinement and evolution of the
When you get visual recognition in there is that an evolution? When you get speech recognition in there is that an
evolution? When you get the kind of mapping GPS stuff that's so powerful? When you get the "Are my friends near me,
then notify me" type of stuff? There's so much happening in that mobile phone space that we've had to get super
reliability, super testing stuff, get the foundation, get the credibility. I'd say in some ways the mobile phone space
is a little bit like Xbox, where it took many years to get the foundation and get the credibility where you've got
hardware relationships, where you've got higher ARPU on your device and you can show you're connecting up to different
things, and so we're poised now with the phone thing to have more of an impact.
Check back tomorrow for part two of our interview with Bill Gates, where we discuss HD-DVD vs. Blu-ray, IPTV,
Windows Media Center, and why Tablet PC has struggled so much.
UPDATE: If you're looking for part 2 of our interview, it's right