Interview at Microsoft Research

A one-on-one interview with Bill Gates

(CNN) -With Windows XP and its new video gaming system, Xbox, Microsoft is continuing to turn out best-selling products. James Hattori caught up with Bill Gates recently at Microsoft's Tech Fest, where he talked about Microsoft's research and development future and the future of his company's anti-trust settlement.

NEXT @ CNN: Let's talk about something you just finished-up: Xbox. How'd that launch (in Japan) go?

BILL GATES: Xbox just launched in Japan. It went super well. That's maybe the toughest market because our key competitors, Sony and Nintendo are based there. But I think it's a market that responds very well to the breakthrough graphics - the kinda quality we have across the board with Xbox. We're very optimistic.

NEXT @ CNN: Let's talk now about what's going on here at Tech Fest. It's the second one - second year. This is a way, I'm guessing, for people within Microsoft to figure out what's going on in Microsoft - the up-and-coming things being worked on by researchers?

GATES: Research, I think, is the lifeblood of innovation in the economy. But big companies always have a problem taking their research and making sure it's focused on the problems that count. And even if you make a breakthrough, do you really get that research into the products that you ship? In our industry, companies like Xerox or AT&T are famous not just for doing fairly good research, but in many cases not ever being able to bring it to the marketplace. So when we started Microsoft Research, we said, let's make sure we're the best case ever, not only of great researchers, but getting that into products. And so events like this - where it's almost like a festival - you come and see all the neat research advances. That's one of the ways we make sure these groups are working like a team.

NEXT @ CNN: And I've been told that some integral technologies that are included in parts of, for example Windows XP, had their birth or genesis in some of your research programs (over) what, 11 years since you've had your research group?

GATES: That's right. It's grown over the 11-year period. Some of the earliest work was things like grammar checking, and that you see in Microsoft Word today. The transfers are all over the place. If you use Xbox and you look at the grass and trees, you know how incredibly realistic it is. That's a neat little technique that one of these people came up with. So many things that Microsoft wouldn't be anything like what it is today if it wasn't for our research group.

NEXT @ CNN: I know you're very hands-on and like to keep an eye on things across the company - which sounds like an impossible task to begin with - but when you walk through the aisles here (at Tech Fest) , what are you amazed by?

GATES: Well, there were about half of the things that I already knew pretty well and, you know, it's nice to see the people and encourage them. The other half are new things that people have come across recently. Things like the face recognition is a new piece of work. Some of the graphics (are new), like the way you can represent water and make that very realistic. The large (desktop) display - you know, we've always believed in that, but now they've built prototypes so we can start to figure out if your display is really large / bigger than, say, a newspaper. How would you use that extra space? How could it make you far more effective?

NEXT @ CNN: Do you have some sort of sounding board you use, for when you see something that strikes maybe you as a good idea, but you're not really sure if this is going to catch on, or is this really gonna be the big idea. Who do you ask?

GATES: Well, if I think something's going to catch on, I trust my own intuition.

NEXT @ CNN: And you're never wrong?

GATES: No, I'm often wrong, but my batting record is good enough that I keep swinging every time the ball is thrown. You know, if something looks good here, there's a lot of people who are in a position to latch onto it and make it a priority for their product group to do it. There's many of them down there where I'm pushing the product groups to understand exactly how they ought to get it incorporated into their products.

NEXT @ CNN: One other thing I'd be remiss if I didn't ask you about, and that's the pesky (to Microsoft) anti-trust lawsuit. A hearing is coming up in a few weeks. You and Steve Ballmer have decided not to appear, I understand, as part of that hearing?

GATES: The key part of the case is the settlement, where we have a settlement with most of the states and the federal government, and for that there will be no witnesses. The other piece may take longer and the whole procedure the judge is going to use is a little less clear, but Steve and I may end up being witnesses in that depending on how the judge wants to go.

NEXT @ CNN: Do you think these states that don't want to be part of the settlement have a chance of derailing the settlement?

GATES: Well, the settlement is in the best interest of consumers, in the best interest of avoiding the wasted expense of litigation, and even though it's a tough settlement, it's in the best interest of Microsoft so we can keep doing our products. And so at the end of the day, we think that settlement is what everyone should sign up to.

NEXT @ CNN: Do you envision any circumstance under which Microsoft might divulge part of its source code for Windows?

GATES: Well, actually, our customers have licenses to the Microsoft source code. The key point is that we're still paid when people use Windows, so we can hire smart people, create jobs, pay taxes and things like that. But lots of those people who need it actually do get access to that source code.