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The cable-television executives had a dream, and Bill Gates seemed ready to make it come true. It was a sunny afternoon in May 1997, and a group of cable chieftains had descended on Microsoft Corp.'s campus here to discuss the future with Chairman Gates. The executives - heavy-hitters such as Brian Roberts, then chief executive of Comcast Corp., and John Malone, then CEO of Tele-Communications Inc. - dearly wanted to build high-speed cable networks and pipe new types of entertainment and Internet services into consumers' TV sets. But they needed cash and technology to do it. Mr. Gates spun them an enticing vision. He said Microsoft would help build digital-TV set-top boxes and software to deliver potentially lucrative services such as Web shopping and interactive sports. In Mr. Gates, the executives saw a savvy partner who could provide the drive and the funds for such projects at a time when the cost of upgrading cable networks was seen as potentially prohibitive.

Microsoft a company known for its popular software and its very deep pockets -- but also glitches in some products -- is a liability lawyer's dream: the big game target that always gets away. For decades, software makers have been protected from lawsuits as U.S. courts have struggled with the task of defining something as abstract and fast-changing as computer code. But now a growing number of voices within the industry and government are arguing for software to be held to the same standards as other products, a potential reform that puts the world's largest software vendor squarely in its sights.

If and when it comes, Microsoft, no stranger to titanic legal battles, will be prepared, having weathered long-running antitrust litigation in both the United States and a parallel probe in Europe. But this time, the company has also taken pre-emptive steps against a backdrop of increasing complaints to improve the security of its software. In general, Microsoft says it is unfairly targeted because of the popularity of its software, which run everything from PCs and handheld devices to servers and game consoles. The products are even less buggy than others, in terms of per capita usage, Microsoft Chief Executive Steve Ballmer has said.

Steve Ballmer spoke this week with Computerworld editors about the impetus for the memo on core values he issued earlier this month to the software maker's 50,000 employees. Part 1 of the interview, which follows here, focuses on the memo. In Part 2, which will run on Monday, Ballmer shares his thoughts on a wide range of topics, including the merger of Hewlett-Packard Co. and Compaq Computer Corp. and his desire not to limit his company's potential for expansion into new business areas.

Q: By what metrics will you gauge the memo's effectiveness?
A: The sharing of good ideas and the competition amongst groups. It's the best metric, as opposed to "Here's a number." There'll be some numbers that are useful. I mean, we measure customer satisfaction in 66 different ways, and we measure this and that and the other thing. But the measurements are probably less interesting than the best practices which we will share.

There are a few things to consider about Sun J2EE based on Microsoft's .NET Framework before making a software development decision. Learn how to make the right choice by examining the companies and the markets.

Sun has never relinquished its control over the Java/EJB standards (even going as far as pulling them back from the ECMA standards committee). So you certainly have to be willing to place a significant amount of faith in a company that is trading at an eighth of its value from a year ago and has lost four of its key senior executives in the last six months. [Microsoft at the other hand] even with the significant distractions that the Department of Justice has caused Microsoft over the last three years, the corporation has continued to build both quality products and market share. Moreover, it has begun to listen to customers like never before. Witness Microsoft's recent withdrawal of its MyServices initiative and new security battles-both based on customer feedback about concerns over security with Microsoft products and technologies.

J2EE: sacrificing portability (and also limiting the number of available resources on that particular technology) or holding firm on using only portable J2EE features and sacrificing performance. And J2EE's slow adoption of SOAP and Web services has forced vendors to release their own proprietary extensions.
.NET: can make a relatively smooth transition from COM to .NET using the best toolset on the market (Visual Studio .NET) to develop Web services and other XML/SOAP-based applications today.

Microsoft envisions applications that link companies together via Web services to make it easier for different enterprises to do business, a Microsoft official said Tuesday during a presentation on the .Net tools strategy. XML-based Web services will enable the synchronization of processes across the Internet, said Microsoft's Tom Button, vice president of developer tools, at Microsoft offices here.

"We think the opportunity is going to be for building networks of companies," Button said. XML-based Web services protocols will enable dramatic improvements in integration without requiring the replacement of existing systems, Button stressed. "Microsoft is in the process of rebuilding its entire product line to be able to integrate using these protocols," Button said. The SQL Server database, for example, will be exposed to enable stored procedures to be deployed as Web services, he said.

When [AOL] originally did the [Netscape] acquisition, the big motivation around it was to be able to have a bargaining chip ... to get better terms. They could say, 'We own Netscape and we're willing to use Internet Explorer, but if you don't give us distribution through the Windows desktop we're going to use Netscape and we're going to double its market share overnight and cause you guys lots of problems.' There's no internal goal at AOL, or at least when I was there, to go get browser market share.

Internally at AOL, they don't think about browser market share. They think about getting AOL out to millions of people, so they'll do whatever is most expeditious in doing that. Now, if Microsoft cuts off Internet Explorer from them then, yeah, clearly they'll be able to switch to Netscape. They just don't have any internal motivation to get browser market share.

Database giant Oracle could have used a few oracles in its executive offices last year. Just over a year ago, on the last day of its 2001 fiscal year, the company inked a multimillion-dollar contract with the state of California. While the salespeople associated with the deal likely toasted their good fortune at the time, apparently no one at the company predicted the storm of negative publicity the deal would generate in subsequent months--or they would have kept the bubbly on ice.

The $95 million, no-bid contract has been panned by state auditors, has cost some state employees their jobs, and has drawn harsh criticism from a legislative audit committee. This week, the crisis erupted anew when newly released e-mail showed that an Oracle lobbyist encouraged the company to line the pockets of key state politicians to keep the contract intact.

With Longhorn set to enter beta testing next year, Microsoft has begun to make plans for supporting new hardware technologies in the upcoming version of Windows. At the top of the list is the inclusion of native DVD write capabilities, with floppy-like drag and drop writing support. But multiple non-interchangeable DVD formats may lead Microsoft to back a single technology and force manufacturers to reach a consensus on standards. Writable DVDs are beginning to catch on for backup purposes, transfer of multi-gigabyte files, storing video from a camcorder and other areas where CDs do not provide enough space. And as prices continue to drop, many computers are shipping with the new drives. However, disagreements between industry leaders have led companies to back different formats and thus fragment the growing consumer market.

The next version of Windows XP (which I assume means Longhorn and not XP SP1) will replace the current Compressed Folders feature with the compression technology used by Inner Media DynaZip. "This agreement further validates DynaZip's high-performance, reliability and compatibility with the standard PKWare ZIP file format," said Inner Media's president Neil Rosenberg. And, as any XP user could tell you, the Compressed Folders feature isn't exactly a great performer, so I'm sure DynaZip's technology will be faster. Good news, Windows fans.

A former Oracle lobbyist declined to testify on Thursday about a controversial $95 million state contract, one day after it was disclosed that he had recommended the database giant give campaign contributions to key legislators. Ravi Mehta, who appeared under subpoena before a legislative committee investigating the contract, refrained from offering testimony under a state statute based on the Fifth Amendment right against self-incrimination. Mehta's role in the six-year no-bid contract came under scrutiny after the committee released a Jan. 5 e-mail sent from Mehta to Robert Hoffman, Oracle's director of legislative affairs. The memo lists nine state politicians, explains why they are important to Oracle, and recommends how much money they should receive.