The Microsoft chairman began showing the new operating system, code-named Longhorn, to outside software developers so they can begin writing new programs that will work with it.
Longhorn is billed as the biggest operating system upgrade since Windows 95 by Microsoft, whose software runs more than 90 percent of the world's desktop computers.
The company plans to release an initial "beta" version in the second half of 2004, but analysts predict the final version likely won't emerge until 2006.
"We're at the beginning of this process," Gates told more than 7,000 programmers and application designers Monday at Microsoft's Professional Developers Conference here. "We need your involvement to get this right."
Many of the improvements in Longhorn will occur behind the scenes.
A unified file storage system will let users search for information regardless of whether it resides in e-mail, spreadsheets, or word-processing documents. A user could search, for example, by author or project.
Another new feature in the works is a vertical panel on the side of the screen that could include essential information at a glance, such as the time and date, instant-messenger buddy lists, links to favored Web sites or updated stock prices.
Longhorn's graphics would be more sophisticated, with windows that can turn transparent when pushed aside and better means for previewing documents — even those with video incorporated.
Microsoft plans to add peer-to-peer networking technologies to let co-workers, for example, send documents to each other that they can jointly view and annotate.
Gates said Microsoft is banking on dramatic improvements in computer processing power by 2006 for many of Longhorn's features. For one thing, new chips would help boost security by allowing computers to handle confidential documents in an isolated part of the computer.
"A personal computer in less than three years will be a pretty phenomenal device," Gates said.
Security is a major concern for Microsoft. Software flaws in its products have been widely exploited by hackers and viruses, costing customers dearly in lost productivity and remediation.
Greg DeMichillie, an analyst with Kirkland, Wash.-based Directions on Microsoft, an independent research firm, cautioned that the conference is geared to show mainly what's possible with the technology under development.
"There's some interesting stuff in there, but it's more just an idea," DeMichillie said. "What will actually happen could be very different from what we see."
By Helen Jung