The News From Redmond

NOTHING BUT DOT-NET Where do you want to go? If you're Microsoft, to the Internet--and fast. That's the message an invitation-only group of reporters and Wall Street analysts heard last week at the software giant's Redmond, Wash., campus. Gates & Co. unveiled .NET ("dot-net"), a clunkily named companywide initiative that aims to at long last yank the company--whose main products still come shrink-wrapped--into the Internet age. Gates and his troops hauled out gadgets that were truly cool (a new Net-friendly tablet PC you write on with a pen), and videos that tried too hard to be (a promo for a new Net protocol with a hipster saying, "I told you it's the bomb").

Microsoft has caught flak for being late to the Internet party. And it's not clear .NET--much of it still years from market--will sway the naysayers. President Steve Ballmer called the new direction "bet-the-company," and the cost of failure does look high. One major risk: Microsoft says .NET will be "open code"--accessible to non-Windows platforms--meaning the company may not be able to leverage its monopoly as intensely as it has in the past. Another risk: Microsoft is moving from its lucrative pay-for-software model to a far dicier subscription model.

Hanging over it all was a certain legal proceeding. Days earlier, Microsoft got rare good news: Judge Thomas Penfield Jackson stayed his order dividing up the company pending appeal. Microsoft lawyers were busily drafting briefs urging the Supreme Court to hold back and let a presumably more pro-Microsoft appeals court get a crack at it first. But in Building No. 33, Gates was dodging the topic. Pressed by a reporter, he insisted nothing in .NET had been influenced by the case. Some observers, however, saw it as at least partly an effort to fend off a break-up. Jackson wants Windows to be its own company. The new plan--which further integrates it into Microsoft's operations--may just be an attempt to pull Windows even more tightly into Microsoft's NET.