Speaking Friday at the Computer History Museum here, Gates said the industry is "halfway to solving spam," with good filtering available but the message authentication piece remaining to be solved.
More serious, according to Gates, are the problems of identity theft and phishing. He said a solution would be an "info card" users could view to confirm the identity and authenticity of Web sites, thus making it more difficult for criminals to make their sites appear legitimate.
Individual computers need to be "isolated by default," Gates said, in order to prevent the spread of viruses and malware. He said technology should make it impossible for criminals to scan and probe networked computers for vulnerabilities.
Asked if hed ever personally been hit by a computer virus, Gates responded, "I havent had a virus on my machine … basically ever." But the Microsoft chairman added that machines at his home had been infected with "malware or adware" requiring him to run scanning software on them.
The malware/adware threat is great enough, Gates said, that Microsoft is investing "hundreds of millions" of its $5 billion annual R&D budget toward solving it.
"I think most of these security problems are solvable," Gates said, adding that passwords are becoming "the weak link" in security. He predicted that smart cards and biometrics would be in widespread use within the next "five or six years" as a solution to easily crackable passwords.
Microsoft has been touting Windows XP Service Pack 2 as its first step in alleviating the malware crisis. But during an online Web chat in early September with Microsoft security business and technology chief Mike Nash, it became clearer than ever that Windows users want more spyware protection. And they want it sooner rather than later.
"Some of this [spyware protection] will come through extra protection in the platform [like we did in XP SP2]," Nash said during the online chat. "But its also clear that there are some good third-party solutions available today as well. As our plans develop, we will update you with our progress."
Microsoft has said it is working on anti-virus software that will be based on technology it obtained from its recent GeCAD and Pelican Software acquisitions. Nash and other company officials have declined to offer a ship date for a Microsoft anti-virus offering and have hedged on how much, if any, of Microsofts anti-virus technology would be built into Windows versus delivered as a subscription service.
When Gates was asked at the Computer History Museum which technologies havent lived up to his hopes, he cited ink and voice recognition. Both, he said, have taken much more development time than he initially expected but are beginning to bear fruit.
He cited a recent demonstration in Beijing where speech recognition was a faster method of entering text than a keyboard. Keyboards in China and other Asian nations are much less effective than in those with less complex character sets, such as the English-speaking nations. Gates predicted that Asian markets would be the first to widely adopt speech recognition for general computing tasks.
On the Linux front, Gates disputed claims that Windows is losing market share to Linux, although he predicted that the movement from various flavors of Unix to Linux would continue. He said Microsoft isnt losing share to Linux overseas because pirated copies of Windows are widely available.
One of Microsofts goals, Gates said, is to become more than "just another flavor of free software in China." As economies expand, as they have in places such as South Korea and Hong Kong, Gates predicted that China and other countries would begin respecting intellectual property and paying for the software they use.
Gates admitted that Linux is a "clear competitor" to Microsoft operating systems, but in a nod to the site of his remarks, added, "We have had clear competition in the past. Its a good thing we have museums to document that."
Editors Note: Mary Jo Foley of Microsoft Watch provided additional reporting for this story.