Newsmaker: It's all about software, says Gates

newsmaker LAS VEGAS--For years, Bill Gates has been trumpeting software's ascent from the lowly PC to everything from cell phones to home entertainment.

No doubt, that move is already taking place. But it's unclear whether Microsoft's dominance in the computer industry will carry over to new consumer-oriented markets, or whether rivals such as Google and Apple will ultimately gain the upper hand.

In an interview just ahead of his farewell speech Sunday at this year's Consumer Electronics Show, Gates spoke to CNET News.com about competitors, the future of DVD, and why all of those seamless connections between digital devices exist only in keynote speeches.

Q: One of the themes, this year and every year, is about how consumers want access to their media wherever they are and on whatever device, seamlessly. It always seems that the seamless piece is what's really hard and where the experience tends to fall short of what we see in demos and keynotes.
Bill Gates: I'd say the most important step is that you use the cloud so that if you have licensed a piece of music, if you buy a new phone, it's there. If you buy a new PC, it's there.

Making the user move things between devices has been one of the downfalls. If we just allow them to be in the cloud, then any time you said who you are, you are connecting up to all of the content, no matter where it came from.

In five years, where will Microsoft need to be in order to have met the challenges from companies like Apple and Google?
Gates: Apple is a competitor and partner we've had for a long time. It was only three years after I started Microsoft that I went over to Apple and did Applesoft Basic for the Apple II and Office for the Mac as a product.

Video: Gates' keynote at CES
Microsoft's chairman discusses the outgoing and incoming digital decades.

But there were a couple of years in there where they were less of a competitor than they are today.
Gates: Well, they were almost dead for a couple of years in there. Yeah, it's a very competitive space. We've got to advance our platform. Windows really succeeded because we had a greater breadth of software available on Windows.

Now, when we think Windows, we think Windows Live, Windows on the phone. We have to keep it as the leading platform. We obviously have a lot of strengths with our development tools and our strengths in the business area. We're doing some breakthrough work in the cloud and with natural user interface.

I love the fact that it is so competitive. Google is ahead in advertising. Apple is ahead in music devices. There's room for us to be successful.

Are there specific things that need to change about the company's products or culture?
Gates: Remember, it's all about software. So why are we talking about those companies? There are very few companies that understand software. The phone is becoming about software, the TV experience is becoming about software. Our bet goes back to the founding of the company--that software is going to be at the center (of things). It really is coming true.

I think the core of who we are and what we do (is) believing in a platform. We're better positioned than anyone. Do we have to continue to work on our advertising scale and our search and some usability things in our music products? You bet. But that all comes off the core of being a company with the best research group, by far, of any software company, and a breadth of talent that everyone is envious of.

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