The Microsoft future according to Bill Gates (page 1 of 4)

Microsoft chairman Bill Gates is proud of his latest acquisitions. A plain, steel-case watch and an extremely ordinary-looking mobile phone. The watch is not a designer model costing a million dollars and the telephone isn't studded with diamonds. So why is the world's richest man, worth over $50 billion, so excited about these products?

For a very simple reason. These products, along with several others that are on the way, will play a crucial role in defining the future of Microsoft, the world's largest software company. The watch, called a SPOT (Smart Personal Objects Technology), is fitted with Microsoft's latest software innovations and can do quite a few very smart things.

Gates's SPOT watch has a miniature central processing unit and a small but powerful FM radio antenna. These features, combined with Microsoft software, allow the wearer to access information, such as local news, weather, sports updates, personal messages and appointment reminders.

Microsoft has already tied up with various companies, including Japan's Citizen, to produce and market these watches, which will flood the US and Canadian markets in the coming months.

The Microsoft-powered mobile phone is already out in the market. The telephone, called Smartphone, has all the trappings of the latest models: a high-resolution color screen that allows you to play games, check e-mail and images and also browse the Web. But those are now run-of-the-mill features. So what's special about Microsoft's newest gadget?

Smartphone comes loaded with Microsoft's Windows software, something that almost every potential mobile phone user is familiar with. Microsoft is betting that since people use Windows in their offices and homes, having the same software loaded on their mobile will attract buyers to go for Smartphones rather than the current 3G-capable phones that come with software that may not be compatible with Windows. The Smartphone has all the usual Microsoft products: Outlook Express, Internet Explorer, MSN Messenger and Windows Media Player.

Microsoft has already tied up with a number of handset manufacturers, including Samsung and Motorola, to roll out the Smartphone. However, Microsoft has run into opposition from market leader Nokia, which has chosen to use the C++ based Symbian Operating System for its own mobiles.

Several players - including Sony Ericsson, Samsung, Panasonic and Motorola - have also agreed to sell phones with Symbian software. As Nokia has over a third of the global mobile telephone market, it can definitely offer a serious challenge to Microsoft in the dominance of the mobile phone software market. DoCoMo, the main trend setter, has also shut out Microsoft in favour of Symbian OS and Linux.

Meanwhile, Microsoft is fighting Sony and Sega in the video game console market, which it entered nearly four years ago with its Xbox console. These battles are clear signs that Microsoft is increasingly diversifying into consumer goods.

As technologies converge and an increasing amount of domestic and office equipment becomes interconnected and wired to the Internet, Microsoft sees new opportunities in new areas. The company has increased its research and development budget and will spend nearly $7 billion on R&D this year, far more than any other IT company.

How do you spend $7 billion on research and development? If you're Microsoft, you literally build the future. At the company's headquarters in Redmond, Washington, Microsoft has constructed a "concept" home that reveals how we may live just a few years from now.