updated 7/29/2004 7:30:33 PM ET 2004-07-29T23:30:33

Microsoft Corp. may be best known for its dominant Windows product, but Thursday, Bill Gates touted software that's far afield from your basic operating system.

How about software that can recognize a picture of a bar code taken with your cell phone, and provide you with product information? Or technology that can sort photos based on whether there's a face in the picture, or whether the picture was taken outdoors?

Speaking at the company's annual financial analysts conference, Gates and other Microsoft executives sought to convince investors that the company continues to have strong potential for growth, despite concerns that the markets for Windows and the Office business software are becoming saturated.

(MSNBC is a Microsoft - NBC joint venture.)

Potential money-makers
Gates, Microsoft's chief software architect, showed off products that could provide new revenue in the long term, such as software that adds even more features to cell phones. But he also hoped to show that Microsoft has found new ways to make money off old standbys, such as a digital entertainment-focused Windows Media Center that builds off the standard Windows system.

Analyst Drew Brosseau of SG Cowen said Microsoft is trying to convince investors that there is plenty of revenue potential for Windows even though the next version of the operating system, dubbed Longhorn, may be as far as two years away.

"They're trying to focus on growth opportunities before Longhorn (by) expanding the definition of what Windows is," Brosseau said.

Other Microsoft executives touted the new version of Office, perhaps responding to analysts' concerns that one of Microsoft's biggest competitors is older versions of its own software.

The conference comes a little more than a week after Microsoft announced plans to return much of its $60 billion cash hoard to shareholders, through dividend payouts and a stock buyback program.

Cutting costs
For several years, Microsoft's stock has remained relatively stagnant at around $25 per share. During those years, Microsoft has performed well, but hasn't beaten its competition as soundly as it once did.

That's left the company searching for ways to cut costs, to the tune of about $1 billion in the current fiscal year, and create new revenue streams, to try to boost profitability.

Microsoft has long bragged about the billions it spends to develop new and potentially lucrative technology. On Thursday, Gates stressed the approximately 3,000 new patents the company will apply for in this fiscal year.

Microsoft also is counting on new talent to help it grow. The company said last week that it would hire 6,000 to 7,000 employees worldwide during this fiscal year, including new positions and replacements for people who have left. Microsoft had about 57,000 employees as of June 30.

Gates said Microsoft will continue to get much of its revenue and profitability from products for businesses. But he noted that consumers are much more likely to adopt new technology faster than businesses, because it is simply easier for a consumer to try a new product. That's one reason the company also is investing heavily in consumer products, such as its MSN online division or Xbox game console.

However, Gates conceded that none of the company's efforts will be successful if Microsoft does not create products that people actually want.

"One thing about innovation is we've got to make sure it maps to what the customer sees as value," he said.

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