Report: Microsoft Plans Security Chip for Next Windows

Microsoft Corp. wants to change the fundamental architecture of the PC,
adding security hardware prior to the release of the next generation of
its Windows operating system around 2004, according to a media report.

The Redmond, Washington, company wants future PCs to contain a security
technology called Palladium, and is in discussion with Intel Corp. and
Advanced Micro Devices Inc. to develop the chips, according to a report
in the July 1 issue of Newsweek magazine published Sunday on the MSNBC
Web site. Microsoft owns a stake in MSNBC.

Representatives of Intel and Microsoft contacted in Europe had not heard
of the technology.

Among possible applications of the technology are authentication of
communications and code, data encryption, privacy control and digital
rights management (DRM), according to the report.

While most talk of DRM revolves around music, Microsoft Chairman and
Chief Software Architect Bill Gates sees it as more useful for
controlling e-mail: Palladium could be used to limit forwarding of
messages, or to make them unreadable after a certain time interval has
elapsed, the report said.

Microsoft, for one, would benefit from being able to control e-mail in
such a way. It has repeatedly fought to keep damaging internal e-mail
out of court records in recent cases, including its battle with the nine
non-settling states over remedies in its antitrust fight with the DOJ.

The technology needs to be widespread in order to be useful: 100 million
devices will have to be shipped "before it really makes a difference,"
the report quotes Microsoft vice president Will Poole as saying.

Palladium grew out of a skunk-works project looking for ways to secure
information stored on machines running Windows and became an official
Microsoft project in October 2001, according to the report.

The first versions of Palladium "will be shipping with bugs," the report
quotes one of the project's cofounders, Paul England, as saying.

Microsoft's record on software security has been heavily criticized in
the past, and in January of this year the company announced a new
emphasis on trustworthy computing in an effort to clean up its image.
This news was soon followed by word that its software developers would
stop writing new code while they audited their existing code for
security flaws.

Microsoft has long maintained that keeping its source code under wraps
makes its software more secure than open-source software such as rival
operating system Linux, where anyone can inspect the source code and see
its flaws. A recent report from a Microsoft-funded think tank, the
Alexis de Tocqueville Institution, claimed that government use of
open-source software represents a threat to national security.

Proponents of open-source software say this openness makes it more
secure, as there is a greater chance that flaws will be fixed and that
users will be more aware of the necessity of upgrading to a fixed
version of the software.

Advocates of more open-software development may be winning the argument.
According to the Newsweek report, Microsoft will publish the source code
to its Palladium system in an effort to be more transparent.

Publishing source code openly is not the same as declaring it to be
"open source." According to the Open Software Initiative, open source
software must be freely distributable by third parties, including as
part of derivative works, without restriction or payment.

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