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Gates: Microsoft Will Invest $6.8 Billion In FY '04 On Longhorn, Collaboration

Microsoft will increase its investment in research and development by 8 percent to $6.8 billion in its 2004 fiscal year as it works on its Longhorn version of Windows, collaboration services and .Net services across all product lines, said company Chairman Bill Gates.

At the company's annual financial analyst conference here, Gates said the next version of Windows, code-named Longhorn, will incorporate a new Windows File System and managed set of APIs that will enable Windows developers to get to key Windows services more deeply and efficiently.

The first technical beta of Longhorn will be delivered at the Professional Developer's Conference in October, and a broad beta test version will be available next year, other Microsoft executives said Thursday.

"Part of the next generation of Windows involves a Windows file system that [recognizes] schemas--meetings, appointments, contacts and customers that will be shared across all the work we do. We redefining new way of writing software with managed APIs and part of .Net runtime," Gates said. "We're very excited about prototypes we built, and we've got major advances in user interface, APIs, new storage capabilities and Web services as built-in pieces of the platform and are very oriented around scenarios so it's easy to manage workflows, manage contacts and unify those in single storage."

Of the company's $6.8 billion R&D investment, Gates said, "It's a serious number. The goal is to take R&D activities to be synergistic, to take XML Web services, management [and] UI advances, and drive those across all the different [Microsoft] products. Longhorn is not just release of Windows client. We're in the same time frame [for] Office and server products, where everything is synchronized to build on this platform and take advantage of that," Gates added.

Microsoft plans to add another 5,000 employees in the U.S. in its 2004 fiscal year, which began July 1, 2003

Gates also affirmed that Microsoft will release several interim releases of the Windows client before Longhorn ships.

"There will be intermediate releases between now and [the full release of] Longhorn, but we don't know the exact time frame for this," Gates told the more than 200 financial analysts gathered at the conference.

Windows XP Service Pack 2, which will incorporate mostly bug fixes and security patches, as well as Microsoft's peer-to-peer networking update, for instance, is expected later this year, Microsoft Platforms Vice President Jim Allchin said Thursday morning.

He said unlocking business information by pushing out XML Web services and enabling dynamic systems management will allow complex business processes to be done in an automated way.

Gates also identified six big initiatives designed to "empower" knowledge workers between 2003 and 2009. These include better desktop management, integrated storage, a Windows file system that draws on file system and database expertise, business intelligence, model-based programming, speech/language and software updating, Gates said.

He also pointed to innovations in collaboration, wireless and workflow technologies that will deliver high ROI and reduce cost of ownership over the next few years.

Microsoft, like Lotus, is working on better workflow to enable seamless flow of business processes between humans and applications, Gates said.

He noted, for example, that Microsoft will create synergies between its front-end Office and Windows technologies with new communications technologies.

"We're excited about having Office connect to Placeware," Gates said. Microsoft renamed the technology Microsoft Office Live Meeting 2003.

Some of the scenarios include enabling knowledge workers to launch a collaborate workspace and Web site from within an e-mail message, integrating corporate and personal e-mail views to simplify information management, advances in ink technology in its Tablet PC and forthcoming Office 2003 and OneNote products that will speed up communication and make communication more natural.

He said, for example, that Outlook 2003 client and outlook Connector will allow users to view and manage their corporate and home e-mail accounts from the same view. It will be available from MSN later this year.

Gates criticized one Harvard Business Review article that asserted that IT spending is a waste of money. He claimed that Microsoft will create better synergies and integration between various platforms, communications and collaboration technologies to enable next-generation computing applications.

"We disagree with all of this. We fully acknowledge the harsh realities... [but] there are solutions to every one of those things. People talk about total cost of ownership, and we decided we had to design our products to address those challenges," Gates said.

He added that the 8 percent growth on research and development this year is also designed to enable better security for its platforms products.

"We're just at the beginning of what we can do with software," he said. "The IT audience, developer, knowledge worker, the way business processes are done, the way people deal with info at home. With all those pieces, we've just started to surface what software can enable. We talk about that as software empowerment."

On the same day that yet another Windows security flaw was identified, Gates alluded to Trustworthy Computing as "a piece we gotta get right or all the other advances won't matter."

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