A review of 2001 gives guidance for the high-tech market in 2002

It's now clear that 2001 was one of the roughest years ever, with a financial downturn affecting nearly every sector of our industry—not to mention the effect that September's terrorist attacks have had. Companies that rode the dot-com boom to fame and fortune saw their values plummet. The financial problems weren't limited to start-ups: High-tech companies big and small posted huge losses and smaller-than-expected gains, and for the first time, year-over-year PC sales growth slowed. I think a look back on this important period can help guide us as we move into the second year of the new millennium.

For Microsoft, 2001 was a time of extreme highs and extreme lows. The company released its eagerly awaited Windows XP and the much less exciting Office XP. Windows XP is the first Microsoft product to ship in a true 64-bit version, and the coming year will see other products—such as Windows .NET Server (formerly code-named Whistler) and SQL Server 2000—ported to Intel's 64-bit Itanium platform, providing more headroom for high-end servers and scientific/engineering scenarios. On the opposite end of the spectrum, Microsoft finally made headway with its Windows CE—based Pocket PC products. By the time a major upgrade was released in October, more than 1 million Pocket PC products had been sold, and one of them, Compaq's iPAQ, was so successful that Compaq couldn't make enough of them to meet demand. Watch for the enterprise-oriented Pocket PC to further erode Palm's lead in the handheld market next year.

Pocket PC's success wasn't the only hint that corporate users are beginning to leave their desktops behind. Wireless networking based on the long dormant 802.11b (Wi-Fi) standard finally took off in 2001, and its successor, the 50Mbps 802.11a, looks to be a hot commodity. Microsoft will release a Windows XP and Wi-Fi—enabled Tablet PC in the first half of 2002 that will further blur the line between desktop horsepower and portable convenience.

Microsoft had its share of problems in 2001, of course, and how these difficulties affect the company and its products going forward will be interesting to see. The company finally admitted that Linux was a big concern through a bizarre series of attacks on the open-source community. Clearly, the open-source OS has something to offer—especially for low-cost Web servers—and I expect cash-constrained companies to continue pursuing this option in 2002.

But Microsoft's biggest concerns were legal ones. The good news for Microsoft and its customers is that a breakup is now impossible, but as I write this column, what sort of remedy will result is still unclear. However, the outcome of the US and European antitrust cases will affect us all, so they continue to be worth following. Also on the legal front, Microsoft buried the hatchet with Sun Microsystems over its Java suit, then proceeded to bury the hatchet in Java by removing it from Windows XP. So if you want Java in XP, you'll have to download it manually. The result of this action, I think, is that Java will continue to decrease in importance next year.

We're also facing industrywide consolidation. Just as the automotive industry closed ranks and culled the weaker members from the herd, so too shall the tech industry find itself with fewer but (I hope) stronger participants. Consolidation, of course, brings with it the promise of standardization, and Microsoft would like to see the industry standardize on its biggest bet ever: .NET. Competitors differ over the details, but they agree that Web services are a platform on which the future can be built. And .NET is the most fully formed approach to this future.

We at Windows 2000 Magazine are thinking about the magazine's future. Effective next month, our name will change to Windows & .NET Magazine. We hope this name will give us room to grow for a while without another change. And we hope that you'll continue to turn to the magazine for the most comprehensive and accurate information about Microsoft's platforms.