Tuesday, March 20, 2001 - Page updated at 12:00 AM

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Microsoft plan is to unleash a HailStorm

Seattle Times technology reporter

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Microsoft yesterday explained how it will make money off .NET, its bet-the-company strategy to reshape the Internet, by firmly making itself chief gatekeeper.

The audacious vision left some software developers agape and prompted a rival to suggest Microsoft continues to wield monopolistic power, but Microsoft executives said they're only trying to give people more power over their computers and fulfill the Internet's promise of easily managed information.

"It really is about the dream and vision people have had all along about how computers ought to operate," said Chairman Bill Gates at a briefing for about 100 journalists and analysts in Redmond.

Under the vision, users would store personal and other information on the Internet in a way that could be shared and transferred automatically among computers, phones and other devices.

Plans call for the system to launch in 2002 as a free service, but customers may pay a monthly subscription fee for premium services, such as file storage, elaborate messaging systems and automatic calendar management. It would be similar to how broadcast TV is free, but cable has tiered fees for different levels of service.

Other top companies, including IBM, Hewlett Packard and Sun Microsystems, have their own visions of Internet business models that may prove formidable competitors. But Microsoft has an advantage because its software runs more than 90 percent of the world's personal computers.

Gates has discussed his vision of next-generation Internet software for more than a year. But until yesterday, he had made few details public about his plan to position the company as a facilitator of the commerce taking place on that software foundation.

The system won't generate revenue for perhaps two years, but analysts at yesterday's briefing said the stock price could be affected, as investors better understand the strategy and how it will make money.

After the system begins operating in 2002, people who sign up will be able to use any computer or Internet-ready device to log in, retrieve files and messages, update appointment calendars and share information.

The basic system, code-named "HailStorm," will be free, but Microsoft will charge a monthly fee for more sophisticated features, such as the ability to automatically notify people on your appointment calendar if your airplane flight is running late.

"This is a revolution where the user's creativity and the power of all these different devices can be fully engaged," Gates said.

The foundation of the system is XML, a universal software language that enables different computers and devices to share information even if they run on different platforms.

Microsoft is still selling that vision to software developers and leading Internet companies. Last week, it announced online auction leader eBay had signed on.

The system also is being designed so that it can interact with non-Windows platforms, including Macintosh, Java and Linux.

Building blocks on the XML foundation include Microsoft's Passport registration system and MSN Messenger instant-messaging system.

Passport, designed to authenticate users on the Internet, is being expanded to provide a single, secure login and password for use at different Internet sites.

Gates said there are 160 million Passport accounts, with 10 million new accounts added each month. "It's our goal to have virtually everybody who uses the Internet have one of these Passport connections," he said.

Instant messaging, which would handle much of the communications of HailStorm, was popularized by America Online, but recent reports suggest Microsoft is catching up. The potential market is huge, according to IDC, a market-research company.

Analyst Robert Mahowald estimates the daily volume of messages will increase from 926 million last year to 6.8 billion in 2004, with most of the growth in corporate settings.

"Messaging is really the killer app in terms of users," said Goldman Sachs analyst Rick Sherlund, who estimated subscription fees for the service may start at about $3 per month.

An AOL Time Warner representative said the company would not comment, but noted the way Microsoft is "trying to position themselves as the bottleneck for all Internet activity" could raise the ire of antitrust regulators.

"What they're talking about is from the moment the customer brings his computer home and turns it on, from the first moment, they've suddenly gotten into a Microsoft web that they are enmeshed in forever more," said the official, who asked not to be identified.

Asked whether the company could face antitrust problems with HailStorm, .NET evangelist Sanjay Parthasarathy said, "This is about putting the user in control. You tell me if that's a problem."

Microsoft does produce the dominant operating system, Windows, and new versions will be equipped to run HailStorm. But Bob Muglia, Microsoft group vice president for .NET services, said Windows users may opt out of HailStorm and run the operating system without Passport.

Muglia said the system will address concerns about privacy and security on the Internet by allowing users to decide how much personal information they want to release via Passport.

Microsoft is making a commitment that personal data belongs to the user and "we won't use it in ways they don't want," he said.

Muglia said the company would address concerns about security and reliability, in part by building a redundant series of secure data centers around the world.

Dave Winer, president and chief executive of Userland, a Silicon Valley software developer, said Microsoft's system may have enough appeal to help people get over their squeamishness about the company serving as a repository of personal information.

"It's fear-inducing in a way," he said. "But, on the other hand, the functionality is compelling."

Brier Dudley can be reached at 206-515-5687 or


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