Fear and loathing in Las Vegas

The Comdex trade show should have been Microsoft's chance to regain lost momentum. But its rivals stole the spotlight.

Microsoft must be reeling after this year's massive Comdex show. With some 200,000 capitalists, geeks and marketeers converging on the fantasy-land in the desert that is Las Vegas, one thing was obvious. Even if Bill Gates is not paranoid, the world does seem to be out to get him.

"Anyone know any good lawyer jokes," quipped the Microsoft chairman as he strode on the stage to address the 8,000 people who had packed into a massive Las Vegas hall to hear him. They laughed appreciatively. In the US, Gates is still admired and they know the US government is on the verge of clipping Microsoft's wings - possibly by breaking the company up. They were very supportive.

In fact, Gates was on surprisingly good form, but he will need all the optimism that he can muster because one thing was clear at Comdex: Microsoft is under threat as never before.

Around Gates swirl trends set to knock him off his perch. The challenges came in three main arenas - from Linux came the inevitable onslaught on Microsoft's operating systems, then there are a variety of approaches nibbling into its "PC anywhere" approach and finally there are half a dozen factors picking at its hugely profitable applications market.

This should have been Microsoft's show. Its Windows 2000 operating system was supposed to be released months ago and, into this vacuum, trouble is pouring. Linux is moving forward with speed. The only major gripe users have with Linux is that it is a bit of a pig to install. Step forward venerable Canadian software giant Corel. It's release of Linux, christened "Linux for the Rest of Us", is apparently easier to install than Windows. Others are moving into this space too.

At Comdex, the Linux revolution was really in full spate. While Gates gave the main keynote for the umpteenth year running, Linus Torvalds, the creator of Linux, was also invited to give a keynote. While Gates' presentation was well received, Torvalds' was rapturous.

During Torvalds' presentation, John "Maddog" Hall told the audience that he thought of young Linus as his son. It says something that most found this touchingly honest and not pap. More than one hard-bitten hack was seen wiping a tear from their eye.

But the Linux revolution is not all about emotion, it is about an emerging new world - a world free of Microsoft. Corel was also showing off its Linux versions of WordPerfect Office 8, a fully functioned suite of programs that is every bit as good as the latest version of the Microsoft Office suite.

If that was not bad enough for Microsoft, the topic of downloadable applications reared it head. Sun Microsystems, whose CEO, Scot McNealy, launched a blistering attack on Microsoft once again at Comdex, is whipping up support for its StarOffice product. StarOffice is a free application suite that is stored on Sun's website and users only need to download the components they really want. So if you need to do some word processing but don't need graphics you just download the word processing part.

StarOffice runs on both Windows and Linux but to worry Microsoft even more, Sun announced at Comdex that it will launch a Web version of the product next year. This means that if you want to write a letter you would access the word processor on Sun's system and only download the document, not the application, to your system. This works less well in the UK where we pay to access the Internet, but it still offers some intriguing possibilities. And Sun should not be seen as a bit player. Two million people have downloaded StarOffice from its website in just two months. Finally, the challenge for Microsoft is to escape from the PC. For as many Comdex shows as this reporter can remember Microsoft has been showing its vision of how it will help deliver processing power on devices other than PCs. In recent years, it has focussed efforts on a cutdown version of the Windows operating system called Windows CE. This has significantly failed to take off.

Windows CE faces fights from the Palm operating system and also from Symbian, a grouping including Britain's Psion, along with Ericsson, Motorola and several others. Palm and Symbian signed an agreement last month which ensured that there would be compatibility between the two platforms for developers.

While the Symbian camp had a successful show, Palm had a massive announcement - a cross-licensing deal with Sony. Sony will use the Palm operating system on upcoming wireless personal assistant devices and possibly on video recorders and the like while Palm's owners, 3Com, will gain access to Sony's memory technology.

But Bill Gates will be fighting back. Comdex was rife with rumour that Microsoft will join the all important Bluetooth wireless consortium (a system for connecting all sorts of electronic devices together) and he is likely to use this technology in his new strategy - the Personal Web. This will see companies such as Philips manufacture "Web Companions" that will link directly into Microsoft's MSN site. There will be companions for your car, your kitchen, your pocket - everywhere. It's a very neat idea. What will the US Justice Department have to say; we must wait and see.