SEATTLE — When Bill Gates can't show unmitigated glee over a Microsoft Corp. product, the world's largest software company has a problem.
Last week, after watching a demonstration of the most important version of Windows in a decade, not even the preternaturally enthusiastic Gates could hide his frustration with a project that's years behind schedule.
"It would be super," he said dryly, "to get that out in the hands of our customers."
Gates is the most important of thousands of technologists growing restless with the recent pace of innovation at the company he co-founded in 1975. Few endeavors highlight that feeling better than the company's latest iteration of its flagship Windows operating system, code-named Longhorn.
Microsoft built its sizable fortune and overwhelming market share by selling new versions of its computer operating systems -- first DOS, then Windows -- every couple of years. Computer users flocked to each new upgrade as they sought relief from the hang-ups, glitches and bugs that historically plagued the complicated software.
This time around, though, Microsoft finds itself the victim of its own success. Windows XP, released in 2001, resolved many of the biggest gripes about the operating system. Subsequent updates fixed even more, to the point that there's no groundswell for a new version of Windows.
As the company released a preview edition of Longhorn at a Seattle conference, many of the Microsoft loyalists in attendance found themselves shrugging their shoulders.
"It's got things in it that solve problems," said Adrian Ford, chief technology officer of Global Graphics Software Ltd., who was invited to show off Longhorn's printing system. "I don't think it's going to be a blockbuster."
Of course, with Longhorn's public release still more than a year away, Microsoft has not yet begun to fight. Specific features have yet to be finalized. And there has been no marketing, said Group Vice President Jim Allchin, who oversees Windows.
But the lack of enthusiasm inside and outside Microsoft over Longhorn is feeding a cycle that is lowering morale and encouraging departures to faster-growing tech companies, thereby slowing improvements to the firm's key products even more.
That's not a surprising problem for a mature company. Instead of just making great stuff, big companies have to worry about internal leadership and execution, said Lenn Pryor, who until last month was among a handful of Microsoft's full-time Windows proselytizers.
"Few can do it all well on this scale," Pryor said. "Those who do are a special few with unique leaders and a unique culture. Microsoft has work to do still to achieve both."
More immediately, the company has to be concerned with customer complacency with Windows and Microsoft's other dominant software, the Office productivity suite. Those two programs generated 84% of the company's profit in the most recent quarter, and thousands of other tech firms depend on their continual improvement to sell computers and software that works with the programs.
"Microsoft's problem right now is that 'good enough' feeling," Directions on Microsoft analyst Matt Rosoff said. "I know a lot of people with older versions who say they don't need to upgrade." With Office, Rosoff said, that's even more of an issue: Many people are comfortable with Office 2000 and Office 97.
Longhorn was aimed at interrupting that slide.
In 2003, Gates said the principal technical accomplishment would be an end to the traditional way of storing data in a complex hierarchy of folders, some of which get lost in the clutter. Instead, files would go into a database accessible in any number of ways.
The financial strategy, meanwhile, was to save a wide range of other innovations for Longhorn and then tie the next version of Office to it. Consumers would have to upgrade if they wanted many new applications.
Both of those plans have fallen apart.
The technology stumbling block was that the file system required a set of programming tools that still hasn't been finished, Allchin said in an interview.
Financially, the bundling plan disintegrated as time stretched out from the 2001 release of Windows XP and as computer makers and smaller software vendors pushed for something new to build on.
"Our partners are asking for all these other features they want to bring to market," said Allchin, who made the decision to change course last year. "There's no question that was a significant driving factor."
Several former Longhorn exclusives, including tools to build graphics and communication applications, will now be compatible with Windows XP and other old operating systems. The next version of Office will run better on Longhorn but also will be suitable for previous systems, Allchin said.