Q&A - Gates: Innovator, deal-maker and philanthropist

Microsoft founder and Chairman Bill Gates has been giving keynote speeches
at Las Vegas conventions, including the Consumer Electronics Show and the now-defunct
Comdex, for decades. Before his last CES keynote speech as a full-time company
employee, he talked with IDG News Service Executive News Editor Marc Ferranti
about his legacy as an innovator, the background behind some of the deals announced
at CES this week and directions for Microsoft.

The following is an edited version of the interview:

IDGNS: We've been tracking your career for some 30 years. One bone of
contention has been when people have said that Bill Gates is a business mastermind,
but not really an innovator. Can you point out a couple of innovative things
you're particularly proud of?

Gates: In terms of what we're proud of, I think it's the personal computer
that we're proud of. It was a crazy idea at the time, that we could take the
microprocessor and create a software industry around it. There was no software
industry. Computing was about big businesses, and what we did in 1975, with
me dropping out of school, was to say that we could build an industry that was
about empowering people. We could seek out partners to build the hardware. We'd
let anyone write software for the work we did, and everything we've done, over
these 30 years, has been about that vision of personal computing. We were first
ones with that vision.

And now we're tackling the new frontiers. We're bringing TV, we're bringing
new educational experiences, health experiences, onto this device that empowers
people in a new rich way. And so it's pretty broad, the PC industry and our
innovations in it -- I don't think there's anything in the last 30 years that
has had as much impact.

IDGNS: In the consumer space, since we're at CES, can you point out
some recent innovations Microsoft can leverage in the next couple of years.

Gates: Well the dollars spent on games and Xbox in the U.S. is greater
than Sony PS3 and Nintendo Wii combined. Really, that's because of the innovation
in Xbox Live -- connecting people up, letting players find each other, matching
them, getting video online. It's a real breakthrough way of thinking about even
the future of TV.

We've got a million people using our Mediaroom, which is TV delivered over
the Internet. Companies like AT&T and 19 other phone companies around the
world bet their future on this being the new video platform. And what that means
is when you think about news, and you go and use Mediaroom news, you see the
things that you care about, the ads are targeted at you.

Look at what we've done with Surface, directly touching and manipulating things
-- that's gonna be a centerpiece.

I can go on and on, there's so much that has to do with making it natural,
bringing these things together and integrating them. We're the company that's
doing the walk -- a lot of business focus but enough consumer focus that, from
the biggest game phenomenon in the world to the biggest instant messaging thing,
we have a lot of success that represents the innovation we're put into it.

IDGNS: With increasing competition from abroad, innovation is of increasing
importance to American companies. What's your thinking around the link between
innovation and intellectual property?

Gates: Well, we're a company that's based in the United States, but
obviously we're drawing on engineering talent from all over the world. We've
got an unbelievable research group in China, we've got an unbelievable research
group in India, and we're delivering to consumers all over the world as well.
And we file for intellectual property in all of these countries. They're all
in different stages in terms of copyright, or patents, and it tends to be a
pretty complicated area.

Other countries look at what's going on in the United States and they say they'd
like their engineers to have those same opportunities, those same incentive
systems, and so there really is a sense of progress in that. It's just one of
the elements that make sure people are willing to take risks and keep the innovation
in this industry the fastest of any industry in the world.

IDGNS: You're going to be talking here about new partnerships for Microsoft's
MSN, Xbox Live and Mediaroom IPTV services that will provide more content to
drive Microsoft's consumer entertainment strategy. Can you talk about what you
needed to do -- on the technology side and on the business side -- to make these
deals happen?

Gates: XBox Live is attracting virtually all the content people because
of the volume we've got there, and they see this group of very engaged users
spending a lot of hours and finding new media in that environment, so that's
made it easy for us. Our announcement with NBC on the Olympics is about our
innovations in Silverlight, where you can view interactive content, multiple
video streams, so it's really a perfect match for the Olympics where you have
all this different content and yet different people care about different parts
of it.

IDGNS: As your consumer entertainment strategy comes to fruition, how
will your business model change from what it has been in the past? Can you quantify
goals for advertising-generated revenue?

Gates: We've seen good growth in our advertising revenue. That's an
area where Google's the leader and we need to be very innovative to drive the
scale. A huge partnership with Viacom is helping us with that. We'll be signing
up more partners around the world. Taking the advertising platform to scale
is very valuable for things like the search property we offer.

We participate in a lot of business models. We have consumer software like
games that you buy on a one-time basis. We have things that you can pay as a
monthly fee, that we run up in our servers, as more of a service type model.
We have some software we give away for free. And so, ads are coming in as a
big, strong component but I don't see it replacing the others. We need all modalities
to be strong.

IDGNS: In your philanthropic work, you've focused on fundamental health
issues for the developing world. In the tech sector, there have been efforts
such as the OLPC, and Microsoft's efforts to reduce prices in developing countries.
But there's been criticism about these efforts. People have been saying, well,
a $200 laptop isn't going to do a kid much good if he doesn't live to age five.
With this in mind what do you think technology companies -- that need to make
profits -- can do to spur development in emerging markets?

Gates: Companies make their contribution by both giving some cash to
broad areas but also by having their products in their area of expertise be
tailored and donated to people who are poor. So in the case of Microsoft, we
went and got involved in putting PCs in libraries. We went to Chile to put PCs
in the libraries there, so by having a really robust machine connected to the
Internet, going through the training, working with the government, getting all
the pieces right -- we learned how to do that in the United States -- those
projects were incredibly successful.

So while I admit for my Foundation the top priority is health, Microsoft is
about software. It's got a product, that's what the company knows. And that's
where, in its activities around the world, its helping educators, it's helping
kids who have curiosity, and I think that's fantastic for Microsoft to do that.

I'm taking the success that Microsoft had and putting tens of billions of that
into the basic needs where breakthroughs can be made -- and there, we'll be
using software. We'll be using mobile phones, we'll doing data gathering, so
we'll be using software as a tool to do it. I wish every company was doing as
much as Microsoft is to take their expertise and look into that developing world
and see what role they can play . We've had great impact, great success, and
it helps us attract better employees. It makes our employees feel good because
we were founded on the idea of empowerment. We're not just talking about it,
we're out in over a hundred countries delivering it in a significant way.