This is a partial transcript from Your World with Neil Cavuto, October 25, 2001.

NEIL CAVUTO, HOST: Well, certainly talk about tough timing. As Molly pointed out, a hot new product, a lousy economy, a hurting city. Microsoft saying the heck with all of that and going ahead full throttle to launch Windows XP right in the heart of New York City, a decision Bill Gates says didn't come easy at first.

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BILL GATES, CHAIRMAN, MICROSOFT: We weren't sure whether it was appropriate to come, and so a few weeks ago I called up the mayor and got his input, and he very enthusiastically said, please, do come, New York's open for business, and he was part of kicking off the launch this morning. So it was fantastic support from him and the entire city.

CAVUTO: Now, I noticed when you were here you had a chance to visit ground zero. What did you think?

GATES: I was there yesterday, and it was a very somber experience. The devastation's incredible. I think actually being there you get more of a sense of how horrific it was, a lot of relatives there visiting the site. So I was very touched by it.

CAVUTO: The reason why I ask, as you know, Mr. Gates, that one event has changed obviously the economic landscape, to say the least, and people might not be in a mood to buy computers. They may not be in a mood to upgrade the ones that they do have. Are you worried about that?

GATES: Well, I think September 11th can't be overstated in terms of its emotional impact and the way it's brought the American people together to think about terrorism. On the other hand, in terms of business, I do think that business will resume, that the idea of using the PC as a great tool, using it in new ways, having it be more reliable, I think that is something that will push the tech industry, in particular, and the economy in general back into the strong position it was in over the next year.

CAVUTO: Are you worried, though, that this is not getting at least the immediate response that Windows 95 did, that this evolution or revolution, whatever you want to call it, isn't kicking off like that one did?

GATES: Actually, the kickoff is way beyond Windows 95. The preorders were more than doublet, Windows 95. The way the industry's come together with the manufacturers doing marketing and new machines. We've got 5 million machines in the retail channels right now with Windows XP.

CAVUTO: Let's be fair, we have a lot more computer users than we did in 1995, right?

GATES: But Windows XP is about upgrades and new machines. And so whereas Windows 95 sold about 40 million copies in the first year that it was out, it's clear that with Windows XP we'll be able to do more than double that amount. So the new applications, the new reliability, this is an even bigger deal than Windows 95 was.

CAVUTO: You know, I have used Windows XP, Mr. Gates, and one of the things that strikes me is it doesn't crash. That's great. But the other is it seems at least a bit intrusive. Your Passport service really, you know, to go ahead and get on the Internet and all of that asked me a lot of personal questions, a lot of credit card data. I feel like saying, "None of your business."

GATES: Well, actually, Passport doesn't collect any of that information unless you want to provide it. What Passport's about is a very simple thing. It's too hard to remember all your different user names and passwords out on many different Web sides. And unless we can get something that all Web sites can share, then you'll only go to a few big Web sites. And for the Internet to achieve its potential, small companies should be able to offer subscriptions and not have you have to have a special name there and retype things in.

So Passport's purely an enabling factor. You give no information you don't want to give, you share it with no sites unless you explicitly authorize it. No system has been move vetted in terms of these issues than this new infrastructure called Passport.

CAVUTO: On another level, I can't put the one that I loaded on my desktop onto my laptop. I have to buy another Windows upgrade, right?

GATES: Well, you have to pay a license fee if you want to use it on more than one computer.

That's always been true of Windows. There's nothing new about that. If you didn't pay before, I've got news for you...

CAVUTO: Uh-oh, uh-oh. All right. Forget I even asked you. Forget I even asked the question.

GATES: All right.

CAVUTO: Let me get your take on some other things that regulators are probably concerned with in this latest offering, Mr. Gates: the fact that there are a lot of bells and whistles sort of built into the program.

Wasn't this the same issue that drove you to court, in the first place? Are you just kind of being gutsy here or foolhardy?

GATES: Well, making Windows better, that's what we do when we spend our billions and billions of dollars on R&D. Historically, Windows didn't have graphics interface. People just used DOS. We didn't have Internet connections. People want an ability in Windows to do things like real-time communication and plug in their cameras.

At the same time, one of the things that we do that's amazing is we preserve compatibility with third-party products and we give information to all those third parties, including our competitors, about building on top of "XP." So we demonstrated today how the AOL client, the Netscape browser, anything you want runs even better on XP than the previous version, and they have opportunities to go beyond the clients that they've already written.

CAVUTO: But still, some of the states are separately suing you, Mr. Gates. They've hired a top trial attorney who will no doubt seize on this and say, we've got to go get them. Are you worried now that you not only have the Justice Department worried about you, but you now have these attorneys that will go their own way and use as evidence what you're doing with Windows XP?

GATES: Well, the fact that the states have been in this many, many, many year lawsuit, that is absolutely nothing new. The fact is that improving Windows...

CAVUTO: Well, hiring this lawyer is.

GATES: Yeah, they've been hiring lawyers at various stages. I wouldn't make a big deal about that.

Definitely, in the case we've said that we'd like to settle the case. It looks like there's a good opportunity for that. The new judge, seeing that most of the case was thrown out by the appeals court, asked the parties to sit down once again, and we're putting our energy into that and we're hopeful of a settlement. Meanwhile...

CAVUTO: By when? By November 2nd?

GATES: Oh, I won't speculate on a date or anything like that, but we're doing our best there.

CAVUTO: All right. Just one last question, this Madonna "Ray of Light" song, was that your pick?

GATES: Actually, I'm not in charge of the creative work on the advertising. I knew that pick was being made. They showed it to me. It looked good to me, and I'm excited about the advertising, because we've got a great product to back it up.

(END VIDEOTAPE)

CAVUTO: All right, Bill Gates.

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