Microsoft to Shift .Net Effort to Big Companies

Acknowledging that his 2-year-old vision of an Internet-based computing system has yet to catch on with consumers, Microsoft Corp. Chairman Bill Gates said the firm is shifting focus toward big companies that use the architecture internally.

Gates said the company had been too vague about the strategy to support Web services with a framework called .Net. The .Net term has been used to describe everything from large servers running recent versions of Microsoft’s operating system to routine transactions over the Web.

“In some respects we haven’t made as much progress as we expected,” Gates told an annual gathering of industry and financial analysts. “Change has not been as dramatic.”

Gates gave the massive .Net effort a “C” grade for such basic services as the Passport tool used by consumers to move data about themselves to Web sites and automated alerts for plane schedule changes or new auction bids. On the positive side, Gates and other Microsoft executives gave dozens of examples of big companies using the .Net framework.

And they pointed to significant behind-the-scenes progress as technology companies, financial services firms and others come together to pick standards for security and other pieces of technical plumbing.

It will take two more years before most consumers see Web services capability built into their home computer operating systems, Gates said.

Among the added challenges is a reluctance by businesses to use the advanced programming structure because of worries that Microsoft will tilt the system to favor its other products. Some of the services touted by Microsoft work only with Microsoft’s server software. A coalition that includes Sun Microsystems Inc., credit card issuers and merchants is working on an open-source version of Passport.

“We’re going to see the world divide itself into two camps--Microsoft and everyone else,” said CS First Boston analyst George Gilbert.

Yet analysts and investors said they were impressed with the progress Microsoft has made and its increased willingness to collaborate with others in the industry on specifications. On the consumer front, Microsoft won praise by demonstrating a version of its Windows XP operating system for the living room, which it promised to ship this year.

Computers using the forthcoming Windows XP Media Center system will come with television tuners, remote controls and menus steering users to DVDs, digital photos and music files. Consumers will be able to flip through TV channels and select one for live viewing in a movable window while responding to e-mails and browsing the Web.

Gates and Chief Executive Steve Ballmer said the .Net initiative will add little to Microsoft sales for years. But they said it’s worth the effort because it will make Microsoft’s other products more valuable if they have increased ability to interact over the Web.

Gates said Microsoft has begun researching how to convert at least parts of such flagship products as Windows and Office into services themselves. One day the entire programs may be available only for rent.

“I believe in the long run things will be architected that way,” Gates said.