e talked about everything from a more-affordable Microsoft's Windows CE to an ambitious plan for data-center automation that could take five years to realize.

Acknowledging that the replacement cycle for many types of computer systems is longer than it has ever been, Bill Gates used Microsoft's Windows Hardware Engineering Conference in New Orleans to demonstrate advances he says could get businesses spending on IT again. In a keynote presentation noteworthy for the range of technologies covered, Microsoft's chairman and chief software architect talked about everything from a more-affordable version of Microsoft's Windows CE operating system (which now can be licensed for less than $3 per copy in volume) to an ambitious plan for data-center automation that could take up to five years to realize. Throughout his pitch, Gates tried to show that the technological advances could lead to productivity or efficiency gains, but admitted "there's still work to be done" in helping companies justify the expense of system upgrades.

Microsoft demonstrated a prototype computer, developed with Hewlett-Packard, that Gates said was a manifestation of Microsoft's thoughts about the "future PC for the knowledge worker." The model, called Athens, combines a slim computer unit with a large high-density display screen, simplified cabling, a cordless telephone handset, and a wireless keyboard and mouse. In tests, Microsoft says, users experienced a 17% improvement in reading speed and 30% gain in time spent on all tasks as a result of the bigger screen. A power-management feature in the machine can cut power consumption by 78%, representing $95 in annual savings for each unit, according to Microsoft.

Athens also boasts advanced phone features such as voice dialing, a unified in-box for voice mail and E-mail, and access to contact information from Microsoft Outlook via Caller ID. The prototype PC is just one example of how Microsoft is increasingly working with hardware partners to break new technology projects into smaller pieces, collaborate with them on software-hardware interplay, then recombine the results, Tom Phillips, general manager of Microsoft's hardware design team, said in an interview.

At the high end, Microsoft touted its progress in data-center automation. Having launched its Dynamic Systems Initiative in March with Dell Computer and HP as early proponents, Microsoft says the list of hardware vendors working with its architecture has expanded to include Fujitsu Ltd., Fujitsu Siemens Computers, IBM, NEC, and Newisys. The initiative involves delivery by Microsoft later this quarter of software called Automated Deployment Services that, when used with Windows Server 2003, promises to make it faster and easier for IT administrators to deploy and manage software "stacks" across many servers and to apply systems resources where they're most needed.

"The ultimate benefit is a dynamic system of storage, computing and network resources that grow and shrink based on IT policy and workload needs, in an automated fashion," says Bob O'Brien, group product manager with Microsoft's Windows Server Division. It could be three to five years before all of the pieces of Microsoft's Dynamic Systems Initiative are in place, including computer, storage, and networking systems from hardware partners.

At WinHEC, Microsoft demonstrated the concept using a combination of Hewlett-Packard servers, storage systems, and networking gear, the result of more than a year of collaborative design work between HP and Microsoft. HP's contribution included development of an "authenticated identity" to secure its ProLiant servers during the startup process and software "providers" that help in the distribution and management of software to HP servers, switches, and disk arrays. "This innovation means that the quality of applications running in the data center will be much higher, and yet the operational costs of managing that will be a lot less than it's been in the past," Gates said.

Gates also unveiled a usability tool called XEEL that's intended to make it easier for people to intuitively use devices ranging from Tablet PCs to PDAs and phones, highlighted new security technology called Next Generation Secure Computing Base (formerly Palladium), and said Microsoft's next version of Windows, referred to as Longhorn, will come with a completely new presentation system and a "leap forward" in graphics. In addition, Microsoft will attempt to further seed the industry with Windows CE via a licensing change that makes a stripped-down version of the operating system available to device manufacturers for $3 per copy, compared with $15 for a full-blown professional edition.