Q&A: Gates' role as innovator, deal-maker, philanthropist

Microsoft co-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 the IDG News Service about his legacy as an innovator, the background behind some of the deals announced at CES this week and directions for Microsoft.

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?

In terms of what we're proud of, I think it's the personal computer. 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 the 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.

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?

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.

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

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.

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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?

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.

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?

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.

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 US$200 laptop isn't going to do a kid much good if he doesn't live to age 5. With this in mind, what do you think technology companies -- that need to make profits -- can do to spur development in emerging markets?

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 be 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.