Microsoft watchers, and there are a lot of us, have been amazed by the recent behavior of Gates et al in view of the still unresolved anti-trust case. At a time when it ought logically to be chastened, Microsoft seems more aggressive than ever, turning the proposed settlement with the DoJ into a weapon against competitors even before that settlement is approved and finalized. Why would Gates behave in a way that would seem to threaten the very settlement the company has worked so long and hard to achieve? The reasons are simple. Microsoft behaves this way because it can and Microsoft behaves this way because it has a sense of urgency. It is more important to Gates for Microsoft to act than for Microsoft to look good.

For Bill Gates, the game exists in the present and in the future and nothing in the past even matters. This is where the lawyers on all sides just don't get it. They look back at poor Netscape getting clobbered and think of how to redress that, while Gates thinks instead of who next to clobber. There is nothing personal here, just the naked ambition that has made Microsoft such a financial success combined with paranoia about the future. It is this discipline of always thinking about the next step that fairly defines Microsoft. It is also a discipline that comes solely from Gates. Microsoft CEO Steve Ballmer, while a very smart guy, can only emulate Gates in this area. He doesn't have Bill's internal drive. Nobody does. In that sense, Gates is probably more responsible as an individual for the success and neurotic failings of Microsoft than is any other top business leader of the last century. Jack Welch, Warren Buffett, even Rupert Murdoch are simply not in the same league with Gates. Nobody is.

For this reason, the proper settlement with the Department of Justice ought to be none of what is currently on the table. The best settlement would be the total removal of Gates from Microsoft. While he is still there, nothing will really change. Remove him completely (force him to sell all his Microsoft stock) and over time, the problems will go away on their own.

Right now, Gates' holdings in Microsoft are worth on the order of $50 billion, which is a lot to finance, so I propose that Congress authorize the U.S. Government to buy the stock. Certainly, the U.S. Treasury can raise that kind of dough. It would immediately yield a $10 billion capital gains tax payment from Bill, which works well for the government. With Gates out of the picture and the settlement finished instantly, Microsoft shares would likely rise and the government could sell them back to the public over a year or two just at a time when the national is coming out of recession. Figure that buys another $10 billion for Uncle Sam.

And Gates, suddenly a pure investor with $40 billion in cash, enters a new and exciting period of his professional life. I like it.

But of course it won't happen.

Instead, all the parties will be still fighting a year from now trying to resolve this thing and all the while Microsoft will be remaking itself, under the guidance of Gates, into a completely new kind of bully. And that's what the rest of this column is all about — predicting what Gates will do and where he will aim the New Microsoft.

The basic fact underlying my analysis is that Gates views the past as done with and gives it almost no thought. That's what he has lawyers for. And on some level, Gates has to believe that Microsoft's old businesses — the very businesses he is in trouble for running so well — will go away over time. So his competitors are right now fighting like jackals over parts of Microsoft that Gates probably no longer even values. That has to bring him some ironic satisfaction.

The New Microsoft has to be successful even if the Old Microsoft is completely dismembered. This is the prime directive for Gates, and has been from the start. It is not so important to protect what Microsoft was or is, but to protect what Microsoft will be. This is why he is so willing to behave in ways that would appear to jeopardize the settlement, because he feels Microsoft's success is assured no matter what any judge decides. Knowing this ought to embolden the other side, but it won't. They simply aren't smart enough to get it.

So the New Microsoft has to go where the Old Microsoft didn't. This means new markets, which eliminates at least for awhile any anti-trust concerns. It also means new enemies, which appeals to Gates. It probably gets boring beating up the same kid every day after school.

The New Microsoft will operate in five areas — financial services, video games, television, GPS, and wireless. .NET is the beginning of Microsoft's thrust into financial services, using the old technique of "embrace and extend" to hopefully grab a piece of every transaction everywhere. This is Microsoft number one priority and Gates is determined to see it through before the Windows and Office franchises evaporate, as they ultimately will. With close to $40 billion in available cash, Microsoft will spend whatever it takes to make this happen.

The other market segments — video games, TV, GPS, and wireless — are close enough to what Gates perceives to be Microsoft's core competencies. They are markets where Microsoft has not played or has been a small player. They are markets that are big enough to be interesting or growing fast enough to qualify as successors for Windows and Office. And most importantly, they are segments where Bill feels current leadership is weak and unfocussed.

So look over the next two to three years for Microsoft to use the same "embrace and extend" strategy in each of these areas. We'll see xBox followed by more and different xBoxes at a rate of evolution that will be staggering. Expect the same thing with Ultimate TV. Look for a major thrust in Windows for mobile phones. And while I'm not exactly sure how GPS will be rolled into this package, I know it will be. In each case, Microsoft will be trying its darnedest to build itself into the future, trying to create new de facto standards, which is to say new cash cows. And they will succeed. Current leaders in all these segments should be wary. That or sell out now, because -their future — no matter what happens with the DoJ, any private lawsuits, and those nine errant states — their future is going to be ugly.