Breaking a silence that had left many bankers and card technology people wary and confused, Microsoft Corp. is about to insert itself into the middle of a raging debate about smart cards.

Adding its voice to those that have expressed impatience about the more advanced cards for payments, security, and other functions, Microsoft plans to put forward its Windows operating system as an answer to complexity and a leveler of technical obstacles.

The company has developed an extension of the operating system, called Windows-Based Smart Card, and has scheduled its formal unveiling today at the Cartes '98 conference in Paris.

Rumors have been flying about Microsoft's becoming a smart card issuer or payment-systems competitor, fueling reactions reminiscent of its alleged assault on the banking market a few years ago. Once again, the powerful but at times inscrutable software giant seems prepared to disappoint-or satisfy, depending on the point of view.

Interviewed in advance, product manager Michael Dusche characterized "Windows Card" as a "core technology" not necessarily threatening to banks or other industry end users. Microsoft simply wants to make smart cards more accessible to the 12 million Windows programmers whose energies have been directed elsewhere.

Citing support from card makers and even some financial institutions that may have questioned Microsoft's motives in the past, Mr. Dusche said the intention is to "bootstrap" the technology by unleashing creativity. "People will be showing up with applications we haven't yet begun to think of," he said.

Also true to Microsoft's form, it is not breaking any technological sound barriers. Whereas some vendors and potential customers have been awaiting cards embedded with personal-computer-worthy microprocessor chips- of the speedy 32-bit or 64-bit variety-Microsoft is focusing on available 8-bit technology that Mr. Dusche said can be delivered for no more than $3 or $5 a card.

"This is the most-enabling technology out there, it is low-cost, and it happens within the regular Windows programming model," said Mr. Dusche.

These messages and the messenger-Mr. Dusche, financial industry marketing manager before moving into the smart card role this month, is well respected among bankers-may or may not put to rest questions about the Redmond, Wash., company's ultimate or ulterior motives.

It is already attracting salvos from Sun Microsystems Inc., proprietor of the Java programming language and partisan of the Java Card application programming interface that has been embraced by Visa International, among others.

The shorthand "Windows Card" will only provoke comparisons with Java Card. Sun has also scheduled a major announcement for today that its officials say tops Microsoft's. They say they can deliver a complete "architecture" within the previously announced SunConnect framework, into which smart cards now can neatly fit.

"You need the card piece and an end-to-end system architecture that allows rapid deployment anywhere in the world, and no one else has that," said Arthur Coleman, market segment manager for cards and payment systems in Sun's computer systems group.

There may also be some haggling about time frames. Mr. Dusche said beta test versions of Windows Card are due in January with shipping of products in the first half of 1999. Mr. Coleman said the SunConnect extension is ready for pilot testing.

But there are signs that Microsoft, with the market power of Windows, may capture at least some of the middle ground it is trying to control.

"We have always been in favor of innovation, a larger pool of suppliers, and competition in the marketplace. These are good forces," said Visa International senior vice president Philip Yen. "Also positive is that Microsoft says its operating system can work with the Visa Open Platform," the card association's Java-based specification.

"This is not in conflict with Java-we are as supportive as ever of Java Card," Mr. Yen said. "Banks that want to use the Microsoft operating system can do it in the Visa Open Platform."

Patrice Peyret of Sun Microsystems' consumer and embedded technology group said he cannot predict Windows Card's market impact. He does not buy into the "Windows everywhere" philosophy. But he said a Microsoft entry "can legitimize a market," which could be a plus.

"Announcements like this bring more focus to smart cards and can drive the business, which is good for all of us," added Mark Greene, vice president of electronic commerce, International Business Machines Corp., a strong Java supporter.

MasterCard senior vice president Richard Phillimore agreed, adding that the banking industry can benefit from Microsoft's talking up of the security and authentication afforded by smart cards with readers on PCs.

Shoulder-to-shoulder with Microsoft in today's Windows Card announcement will be the smart card makers and Java Card backers Gemplus and Schlumberger. Microsoft has a close relationship with Gemplus, evidenced recently with the integration of GemSafe, a card with digital certificate technology, into the Windows NT 5.0 operating system.

Microsoft hired Java Card architect Scott Guthery away from Schlumberger to work in the Microsoft smart card group with director Philippe Goetschel, Mr. Dusche, and others.

Also of symbolic and political importance, Merrill Lynch & Co. and Huntington Bancshares of Columbus, Ohio, will be piloting Windows Card.

Huntington executive vice president William Randle has been an outspoken Microsoft critic. As an organizer two years ago of BITS, the Bankers Roundtable's Banking Industry Technology Secretariat, he advocated a watchful eye on Microsoft, which has since cooperated in setting standards for home banking and electronic bill presentment systems.

Huntington is also a co-owner of Cybermark, a smart card systems company. Mr. Randle, who has joined others in the call for interoperability among smart card operating systems, said the Windows-based strategy is "on the right track."

It has gotten a similarly favorable reaction from Catherine Allen, chief executive officer of BITS, who championed interoperability in her past job as president of the Smart Card Forum.

Microsoft sees Windows as an answer to the "lack of a classical operating system" for smart cards, said Mr. Dusche. Though Java advocates might see it as an imposition of rigidity, Mr. Dusche contended that extending Windows will bring "an immediate sense of relief." Windows programmers can use existing tools and can update or add to programs in ways they know. "Familiarity is the key," Mr. Dusche said.

"We have had a long interest in bootstrapping smart cards," he added. He cited Microsoft's support of the PC/SC Workgroup, which promotes smart card input devices on personal computers, and the fact that "our operating systems are smart-card-aware."

But smart cards "have been a little slow on the uptake," he said. "This is a full-force push to try to get them started."

The backing of Gemplus and Schlumberger indicates a desire even among competing vendors to smooth out the various competing and fragmentary operating systems. (Mr. Peyret said in another announcement at Cartes '98 this week that two Java Card licensees will adopt a single set of code, removing another layer of complexity to achieve interoperability.)

Microsoft defines its "Windows Card vision" as "to place a smart card in every pocket that lets a user access on-line resources." That leads to secure network access and authentication-a means of "bootstrapping" that has been suggested by Microsoft chairman Bill Gates-as well as the loading of debit and credit, electronic purse, customer loyalty, and wireless telephone applications on a card's multi-application chip.

But Mr. Dusche stressed that Microsoft is just laying a roadbed that developers will ride on. They will be able to program and deploy an application within an hour, he said, and they, not Microsoft, will push innovation.

David Karpenske, vice president of marketing, Schlumberger Test & Transactions, said, "Microsoft's entry into the smart card environment supports" his company's innovative thrust "by making available new tools and applications."

Industry observers have been looking for signs of how Microsoft itself might be a user, and Mr. Dusche said, "We would love to see smart cards as an authentication tool to prevent piracy. Protecting intellectual property is a goal of Microsoft, the music industry, and the movie industry.

"But we are taking baby steps. We are announcing a core technology."

"The question will be whether this turns the market on, and not just those of us who follow the industry closely," said Ben Miller, who runs the annual Cardtech/Securtech conferences. "I have learned to keep a lid on expectations. What was the latest rumor-that Microsoft was going to issue 100 million cards?"

"We are not building a plastic factory or a chip factory; we are just in the operating system," said Mr. Dusche.

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