Microsoft Corporation <% if gsSubBrand = "aolsnapshot" then Response.Write("(NASDAQ: MSFT)") else Response.Write("(NASDAQ: MSFT)") end if %>
One Microsoft Way
Redmond, WA 98052-6399
http://www.microsoft.com

UNION CITY, Ca., September 18, 1996/FOOLWIRE/ --- Microsoft's Consumer Appliance Group held a conference call Monday morning to announce Windows CE, a new member of the Windows family and the first devices based on it, as well as the broad industry support.

The company indicated that they were happy to make the first real disclosure of their strategy for the extension of the Windows operating system family down into these new categories of devices. Windows CE has been developed from the ground up by an effort that has extended over a period of three years to develop an operating system that is scalable and the basis of a platform that can be used for a broad range of communication, entertainment, and mobile computing devices in the future.

One of the things that they think differentiates Windows CE from other efforts in this category is the focus on being able to create a platform that enables in each device category both a strong synergy between the traditional full personal computer capability on the desktop and these new classes of devices; and also allows many applications to be developed on top of this operating system, as is the case with the PC.

The first products that will be available that use the Windows CE operating system is a category of mobile companion devices they call hand-held personal computers or HPCs for short. They expect these products will begin shipping in volume before the end of the year. The formal launch of these devices from a variety of manufacturers is expected to occur at Comdex in November. Companies that have, today, indicated publicly that they will be bringing these products to market include Casio, Hewlett-Packard, LG Electronics, NEC, and Philips Electronics. In addition, today, more than 33 companies are also making announcements that they are developing either companion products or third-party application software which will also begin to be delivered in the same time frame, around Comdex.

Windows CE will find applications in these communicating appliances, like the hand-held personal computer and, over time they expect to offer variations of the product that will support embedded classes of applications, mobile applications, and ultimately multimedia applications. All of the devices that will be produced using the Windows CE environment will have a synergistic operating relationship to the Windows PC. In the case of the hand-held computer, they expect to provide completely automatic synchronization for many of the basic personal information systems like To Do lists, contact information, and schedules. And the device will also provide automatic migration of applications back and forth between the desktop and the hand-held devices.

The initial products that are being built by the 5 manufacturers mentioned are actually being built using two specific microprocessor architectures. In this case, the Hitachi SH3 architecture and two distinct implementations around the MIPS architecture, one by Philips Semiconductor and the other by NEC. The system is also capable of supporting the X86 architecture, but at this time none of the initial OEM manufacturers have chosen the X86 for their initial line of products.

The company was asked how much code this product shares with Windows 95. They responded that they tried to increase the code density and build a very small system. As a result, they had to write many of the APIs from scratch. While the interfaces are identical and a subset of the major interfaces in Windows, the implementation is distinct. The user interface is very similar to Windows 95. The intent is that people will go to the store, pick up this device, and will see something that resembles very much, sometimes identical in terms of the interface, the Windows experience. The APIs are a proper subset of the Win32 API. So, an application designed and written for the Windows CE environment would run directly in a Windows environment. But, they have added a very small number of APIs to address things like queries given the fact that they had to integrate some database facilities into the system. Other than that, all the APIs are proper subsets.

The company was asked what the required memory configuration for this operating system is. The company answered that they are not disclosing at this point the specific memory footprint of the operating system or the memory configurations that have been chosen by the various hardware manufacturers. Those will be disclosed when the devices are put into the channel and announced at Comdex. They said, however, that it is very very small compared to traditional personal computer requirements.

The company was asked how portable this OS is to other architectures. The company responded that the operating system is quite portable. As they indicated, they have it running on two architectures and, internally, have also done the development necessary to support the X86 architecture. It would be possible to support additional microprocessor architectures as well and they would be willing to consider that in the event that other hardware OEMs came to them and indicated a strong preference for another architecture.

The company was asked a follow up question relative to the network computers that have been announced. The company responded that the NCs, as they have been proposed, are something that post-date a lot of the design work and implementation of the Windows CE environment per se. In addition, the network computers use a variety of Internet standards as pretty much their exclusive basis of operation. The Windows CE environment and these initial hand-held PCs will contain, as part of the basic offering, a version of Internet Explorer and the ability to deal with, for example, mail and other Internet applications. So, in that regard they provide some similar capabilities but go significantly beyond that because it provides a fairly rich subset of the Win32 API, which is something specifically not expected to be supported in the network computers.

In general, Microsoft's view is that there are two product spaces. One of them is the traditional PC space where you have the entire range from laptops and small portables up through traditional Windows NT servers and workstation class machines. They think what we are seeing here now is the emergence of a new category of devices broadly defined as non-PC devices. These, they think, will range from devices as small as watches and pagers up to fairly sophisticated multimedia devices. What is notable about this, and perhaps different from some of the positioning of the network computer, is that these devices are not intrinsically dependent on the network for their operation. The NCs that people have talked about have all of the operational characteristics of the device coming from its connection to the network. They think, particularly as you move down into these personal electronics, multimedia capable, and CD connected devices in the future, people are going to want systems that operate, at times, independent of the network. So, Windows CE will be the basis of Microsoft's offering for this entire family over time.

The company was asked what these products look like. They responded that the first set of products that are expected to come in the Fall are what they call "pocketable" devices. They were described as devices that would probably be too big for a shirt pocket, but would fit in a coat pocket. In general, they have a small grayscale display on them and the US products all have a keyboard as their primary input mechanism. The screens are touch sensitive so there is the potential to use a stylus to both point and click as part of the user interface and they expect that third parties may provide applications that would capture ink or provide other application software that avail themselves of the touch sensitive screen. But the primary input for day-to-day operation with respect to calendar, To Do list, etc. they would expect to be the keyboard. The reason for that is that, over the last several years, they have determined that while in the Japanese market where keyboarding is very difficult and they have been able to there achieve levels of handwriting recognition that make it a preferred mechanism for input, they don't think that in general handwriting has matured to be error-free enough in the US market to have it be preferred over a relatively small by traditional QWERTY-type of keyboard. So, US products will be offered that way. They will expect Japanese products to be brought to market in 1997 and think that those would probably have a focus on handwriting input.

The company was asked how these devices differ from some of the pocket organizers available today. They responded that the ones people will see in the US do resemble some of the organizer family of products in that they all have a clamshell design where they fold open and one half is a display and the other half is a keyboard. The company was asked what the advantage of having Windows CE versus any of the other operating systems on these other devices. The company responded that they feel there are several advantages. First, because it is a proper subset of the Windows32 API, there are a vast number of application development people who understand how to program for that. In addition, it is a development tool that will actually run on a Windows PC and they think that further enhances the ability of people to develop new applications for this platform. Third, many of the other operating systems aren't really general purpose. They meet only the specific requirements of the organizer or the device that they have been applied to. Microsoft's goal was to create a very broad development platform for ISVs.

In addition, none of the other devices that have existed in either what people have called the organizer category or the PDA category were really an open platform. In other words, there were never mulitple manufacturers of software compatible devices in either of those categories. What they have done is develop an open reference specification that defined the category from the computer architecture point of view and then provided the operating system and tools. The three of those things taken together are the traditional definition of an open platform. With some very minor modifications related to some aspects of where the user interface has to be different to deal with the small devices, the APIs are the same in both environments.

The company was asked if there would be Java support or Active X support so they could download applets into it like a word processor. The company responded that the Internet Explorer is a proper subset of the capabilities of the full Internet Explorer and they do expect to be able to support scripting environments and over time they may see more of the Active X environment as well.

The company was asked what they view as the main obstacles causing consumers to resist adopting the existing products in mass numbers and how do they think this operating system and new devices are going to overcome that. The company responded that there are several different elements to that. One they touched on earlier is the input mechanism. They also said that most of these devices were really underpowered to some extent. As people would strive to put them together, microprocessors that could run in this environment and operate on a very low power consumption environment just hadn't gotten to a level of absolute performance to make the applications you could run very compelling. Third, people have never designed these things such that they were really synergistic either in terms of data portability or the user interface with what people have come to know and love as the GUI of the personal computer. All of these things were designed in a somewhat autonomous way, they didn't work with the PC or had very limited connectivity with it, that connectivity was not intrinsic in the device and at best might have been accomplished using a specific application written for it, etc.

They think that since there are hundreds of millions of people who understand the personal computer and tens of millions of people who are Windows 95 familiar, that represents a much larger base of people who can pick this up and with no sense that they require new training or need to understand new applications, would be able to use this device. They think this represents a fairly radical change from any of the products that have come out in the past. They have a sample screen of one of the devices on their Web site at http://www.microsoft.com/.

Microsoft said that they are not dictating how these devices are configured. In fact, they expect the manufacturers to provide families of implementations of these things to meet both general and special purpose requirements. They do believe and their research has indicated that a street price at or below $500 is critical for a full-featured product and one of the reasons that they have incorporated so many of what they consider to be the critical capabilities into the basic operating system and applications component that they provide is to insure that people do have a good experience even in a baseline offering. People could add more sophisticated options for wireless communications and other things and that would add to the cost, but the communications necessary to hook up to your personal computer and have the automatic synchronization and data exchange capabilities between these devices and your desktop will all be included in what they estimate to be the $500 street price. The applications that will be included with this product from Microsoft include a personal information manager, an email client, and some companion applications for some of the traditional office/personal productivity applications. It also will include a version of the Internet Explorer that allows connection to Web sites through telephone connections.

They were asked if this was a base platform for the set top boxes for interactive TV. They responded that yes, their goal is to use Windows CE with extensions to it that would be made, for example, to support the multimedia requirements of television as the basis for a set top offering in the future. They have done work for about 3 years on interactive television and at this point they are waiting for the networks to mature in the public market before they would bring those products to market, in general.

They were asked who their primary competitors are in this marketplace and who they expect to emerge as a competitor. The company responded that there are a variety of companies that have been making small embedded operating systems. Those all represent development environments that are quite disjointed from that which people know on the personal computer. While they may provide some capabilities in this area, none of them have the level of integration and automatic synchronization with the Windows desktop that is intrinsic in this platform. And they think that puts it in a class by itself. Relative to communications capabilities, they do provide some capabilities which they will add to in future versions of the operating system to continue to allow them to exchange applications, controls, and data as appropriate with the Windows PC environment. In every case they are designing these as purpose-filled systems to meet the critical price points that they think are necessary for mass-market adoption. In every case they have to make very careful trade-offs as to what they include in order to fit within the memory footprint, power consumption requirements and, ultimately, price points that they think are important.

Microsoft thinks that this market has been fairly fragmented historically. In their mind the market for hand-held computers has really never matured yet and become truly significant because the average PC user hasn't really been willing to adopt that. It is their belief that with this class of implementation that it wouldn't be unreasonable to see upwards of 1 million units per year being taken up now, which would be a significant step up from even the combination of all the units in the other categories.

* A Fool conference call synopsis represents an effort to highlight the salient points of a conference call and should not be taken as an authoritative accounting or transcription of the entire event.

Copyright 1996, The Motley Fool
All Rights Reserved. This material is for personal use only.
Republication and redissemination, including posting to news groups,
is expressly prohibited without the prior written consent of The Motley Fool.