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The head of the software giant told the BBC that its ambition is to be bigger than Google in search.

He said that competition had ultimately been good for web users because it had pushed search technology. This meant search would be "far better" in a year.

The next decade looks even better, he said, with a lot more advances in software technology ahead.

"The beauty of software is that we are always making breakthroughs. We will have more in the next 10 years than we have had on the last 30," he said in an exclusive BBC interview.

Mr Gates said he saw Microsoft's strengths lying in search, but also in its software that provides the glue to make different devices talk to each other so that people can have more power over their content.

Our success is overwhelmingly greater than theirs [Apple's] is - they are learning from us every step of the way and we are learning from them Bill Gates, Microsoft

"We are in the best position we have ever been in," he said.

But he stressed that Google was not the only threat it faced in the long term.

It had competition in every arena, from the likes of Nokia, Sony and Apple, but that was something with which Microsoft had become accustomed.

More to do

He admitted Apple had had the biggest bite out of the digital music business with its iPod and iTunes success, and wished that Microsoft and its device partners had a bigger share.

But he stressed that, in most part, Microsoft was not about making devices.

"Our success is overwhelmingly greater than theirs [Apple's] is - they are learning from us every step of the way and we are learning from them," he said.

Microsoft is still about making PC technology work for people, with software being at the centre of it to "help people out."

Although software has been his life's work, Mr Gates said that the PC of today is still not the PC he dreamed about 30 years ago however, and that was a challenge he would continue to pursue.

TV will be redefined so that the shows can be when you want them. They can be personalised; when you see the news it will on the topics you care about Bill Gates, Microsoft

"It is not as simple, not as cheap, not as powerful as I thought we could achieve so now I get to come in and work with smart people to make that happen. It's the most fun I can imagine," he said.

Although there were a billion PCs, that was still very different to having six billion in the world and that they was still more to be done to make them much smarter.

"They can do lots of things, but still you can't talk to them, and that is one of the things we will get this decade," he predicted.

"So being part of really getting that ultimate tool that empowers you, lets you achieve your potential, lets you pursue your curiosity - there is nothing more fun than making that 100% true."

Playing in the home

What was becoming ever more important to the company was providing the glue that makes it easy to get one device to talk to another, particularly in the home.

With more broadband penetration, Mr Gates said he still saw the PC as the device through which people could organise and share their digital content, such as photos and music.

He sees Microsoft's role as critical in helping to change people's lifestyle in the home, for example, making "digital memories" easily accessible.

Microsoft offers more than just software

Entertainment is also becoming an extremely important area for Microsoft and every other big name technology firm.

"TV will be redefined so that the shows can be when you want them. They can be personalised; when you see the news it will on the topics you care about," he said.

But it is also an evolving arena which is embracing gaming and other types of content much more, as well as video, music and TV.

The Xbox 360, released in November in the US and December in Europe and Japan, joins the media centre as part of Microsoft's effort to provide people a hub through which they can organise and share their content.

"The whole family home can be connected together so it is easy to see your photos on different screens in the house, and easier to get the music wherever you go."

Longer term

Looking ahead, the strategy Microsoft is taking to remain a dominant player relies on work being done in its global research laboratories.

"It's based on the long-term approach we've taken in investing in things like speech recognition so you can talk to your phone, or visual recognition so that if a phone takes a picture of a sign in a foreign language we can translate for you," Mr Gates said.

"We are stronger than ever because we have a research lab in Cambridge, we have one now in China, one in India and that is where the top problems in computer science are going to be solved."