November 15, 1999 Web posted at: 2:04 p.m. EST (1904 GMT) by Clare Haney and Terho Uimonen

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LAS VEGAS (IDG) -- Microsoft Chairman and CEO Bill Gates again kicked off Fall Comdex with the opening keynote speech, this year trumpeting the reliability and scalability offered by the forthcoming Windows 2000 operating system, and emphasizing the role that XML (extensible markup language) will play on the Web and in electronic commerce.

But Gates began his speech with a reference to something no doubt on the mind of many in the audience: the recent ruling in the U.S. government's antitrust case that Microsoft is a monopolist.

"Anyone here hear any good lawyer jokes lately?" Gates quipped. All over the U.S., he said, entrepreneurs are working at innovation in their garages, while in their 20th floor offices lawyers are working equally hard. Both groups are working hard to do what they do best, he added, to laughter from an appreciative audience of approximately 6,000.

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One attendee, the film maker George Lucas, here to join Sony President and co-CEO Nobuyuki Idei at a keynote speech tomorrow, laughed and shrugged when asked what he thought about Gates' lawyer joke. "That's how business is done here in the United States," he said. "It's business as usual -- you sue someone, then you negotiate."

Stressing the principle of innovation -- Microsoft has argued that the antitrust lawsuit threatens its ability to innovate with its software -- Gates also said that he appreciated the letters and e-mail the company has received from people who say that Microsoft and the PC have benefited customers enormously. What's needed is more innovation, not less, he said to hearty applause from the audience.

Gates talked up the concept of the "personal Web," which enables people to personalize the Web with a universal inbox putting the user in control of which method third parties could contact them by.

"The personal Web is a tool that brings together all the good things we're used to in a new world of communications," Gates said. "It will make us think differently about the PC and the Internet."

Microsoft's next major emphasis is XML, according to Gates, who called XML "very central... it speaks to interoperability at the semantic level." The language, which adds tags to Web content that describe information, will help connect buyers and sellers over the Web, he said. The beauty of XML is that it will enable users to "pick and mix and match" information from different Web sites, Gates added. "People will never have to re-enter the same information again and again and they won't have to move their bookmarks and contacts. There will be personalization everywhere," he said.

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There will be new language extensions and new languages based on XML, Gates said, adding that Microsoft's initiative is called BizTalk.

Gates also took on the issue of "big boxes" versus PCs when it comes to reliability, maintaining that with Windows 2000, PCs will be as reliable as large systems.

"Most people think of hardware in terms of scalability" when it's really a software problem, he said, coining a new buzzword "software scale." He lauded the foresight of Tandem Computers for recognizing early on that scalability is indeed a software issue.

Microsoft's foundation for delivering scalability is Windows 2000 and Windows 2000 add-ons, he said, adding that the company has been working on the operating system for the past three years.

"Reliability is top of the list (of Windows 2000 features) ... People don't want to reboot their systems ever," Gates said. He also argued that PCs give users much more choice in terms of hardware, applications and languages than big boxes afford. Gates stressed that both Microsoft and the PC industry afford users a good deal of choice -- again, countering the government's argument in the antitrust trial that the software giant by its actions has severely limited consumers' options.

Other key Windows 2000 features are manageability of software and the ability to let users share documents in a secure way across the Internet, Gates said.

However, attendees gave the upcoming operating system a mixed reception.

"I won't go to Windows 2000 right away -- I don't want to be on the bleeding edge," said Andrew Grovo, vice president of information services for Homesteaders Life Insurance Company in Des Moines, Iowa. What's more, Grovo said, he wanted to see what alternatives to Windows 2000 here at Comdex. "I want to see what else is out there; I'm not sure, but I want to check out alternatives."

One obvious alternative to Windows 2000 for Web servers, and increasingly, intranets and in-house networks, is Linux, according to Bruce Wagner, CEO of IT Proactive, a networking consulting company based in Dublin, Ohio. "Windows 2000 is slow and it's a (memory) hog; I'm not recommending my clients to move to it, at least right away -- it's common wisdom that you always wait for Service Pack 2." Wagner, a Windows 2000 beta tester, recently received the release candidate of the software.

While Windows will continue to be a mainstay of many corporate networks, Wagner said, Linux use is on the rise. "Linux along with KDE (the Windowing interface for Linux)... is a real alternative to Windows. Linux has been popular on Web servers because it's reliable and the price is right -- but there's nothing wrong with reliability on a corporate network," he said. "Windows has market share and developer support -- but because of the Internet, Linux is getting more and more developer support around the world."

Gates touted the forthcoming launch of Windows 2000 in February as a "major milestone" for Microsoft, comparable to the launch of Windows 95.

A Microsoft staffer demonstrated the MSN-based Web Companion, a device that will be pre-configured to make accessing the Net simple. Gates also showed off a variety of Windows CE-based devices from hardware vendors as well as the first machines to be based on Windows 2000 -- a new Sony Vaio notebook and Compaq's i-Paq, the latter priced as low as $499, Gates said.

Gates used his keynote speech to show off the MSN-based Web Companion, a new category of dedicated desktop appliances designed to hook up consumers directly to the software giantâs online service.

Aimed at providing easy and affordable access to the Internet, the MSN-specific appliances will be available from multiple vendors, such as Taiwan's Acer Group, Philips Electronics NV of the Netherlands and Vestel USA Inc., Gates said.

Retailers will preconfigure the devices, and all users need to do when they bring them home is to plug in the telephone line and power cord, and the Web Companion will connect directly to MSN's Web portal site and other Microsoft services such as the vendor's Hotmail free e-mail service.

The Web Companion will be priced as low as in the $399 to $499 range, said market analyst Tim Bajarin, president of Creative Strategies Research Inc., giving media representatives a sneak preview of two such devices from Vestel prior to Gates' speech today.

Powered by National Semiconductor Corp.'s highly integrated, low-cost Geode processor and running Microsoft's Windows CE, the Vestel prototypes came in two different shapes. One featured a flat-panel display and the other one was an all-in-one with the device built into a 15-inch monitor.

Vestel officials said they expect to ship the vendor's Internet.Terminal family of devices in the second half of next year. The company is also readying a third model called Web Pad that will be wireless.

In addition to the initial purchasing price, users are also likely to have to sign up for a fee-based subscription program, but Gates did not disclose any details about the charges.

Microsoftâs decision to directly tie consumers to its Internet access service marks a dramatic shift in the companyâs strategy, Bajarin said.

"It is really Microsoftâs bridge to the 'Net economy," Bajarin said. "It gives them (Microsoft) lots of potential for revenue sharing across multiple business models."

James Niccolai and Marc Ferranti contributed to this article.