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Just Trust Us, Microsoft Says

Redmond flinches during its analyst day when consumer groups demand privacy hearings.

REDMOND, Wash. --

Bill Gates

can keep your secrets.

Microsoft

(MSFT) - Get Microsoft Corporation (MSFT) Report

promises.

With renewed scrutiny bearing down on the firm from privacy advocates, Microsoft executives -- during a meeting with financial analysts Thursday -- repeatedly emphasized that consumers, and not the software firm, will control the data stored in its controversial Passport personal information service.

At a time when control over personal information is emerging as a key social issue, Microsoft has found itself wedged between trying to fulfill its key mission -- to make technology easier to use -- and the mistrust that consumers and other businesses feel toward it and its upcoming products.

While giving a product demonstration during a keynote speech by Chairman Gates, the company's Robert Hess showed how a consumer might log on to a financial services site to apply for a mortgage.

When the Web site presented a complex template asking for information that varied from the balance in his checking and savings accounts to his monthly income, Hess clicked on an option to allow Microsoft Passport to fill in the form for him. Before providing the information, though, Passport gave him several options to limit the amount of information he wanted to submit to the fictitious financial services firm. It also allowed him to grant one-time access only.

"So, this shows how I have control over the information, and that I can also control at what ... level they have access to," Hess said as Gates watched silently on stage.

On Thursday, the Electronic Privacy Information Center and 12 other consumer groups filed a complaint with the

Federal Trade Commission

over Microsoft's control over consumer information. The company clearly felt the sting of that complaint, coming on the same day that a few hundred financial analysts and reporters descended on the firm's headquarters for its annual analysts day.

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Later on, Hess pointed out how the firm's software, integrated with Passport, also would allow the financial services firm to offer the mortgage applicant a deal on home insurance -- but only at the customer's choosing.

Passport, as a part of Microsoft's new Hailstorm strategy to link together different Web sites inside of its Windows XP operating system, will be deeply embedded in a variety of the firm's software products. Throughout the day in Redmond, demonstrations showed how Passport could be used not only to save consumers time in filling out forms, but also to provide businesses a way to control who has access to their Web sites -- with profound specificity.

In one demonstration, a user enabled Passport to lock out certain Internet users from viewing a single file on a Web page, while granting access to others. In another, it identified a merchant's orders to a supplier, and allowed the merchant to adjust the order to meet increased demand.

Yet while Microsoft was busy touting the abilities and usefulness of Passport, it also took pains to assure the audience here that it wasn't a 21st century Big Brother reigning over individuals' and firms' information.

"That's not Passport keeping the information, that's the company keeping the information," said Eric Rudder, vice president of technical strategy for the company, during one presentation. He was referring to a fictitious company using Passport to allow it to identify its customers.

Then, at the end of the day, CEO Steve Ballmer himself addressed the issue himself, saying he was "shocked and dismayed" about the criticism that the company has received over XP and its various components.

"In the Hailstorm area, people say Ooooooooh, is there some big plot here?' We have the top interest to continue to earn the trust of our customers. The customer gets to choose how their information is used," Ballmer said. "The customer has to opt in to letting us use their information. They don't opt out, they have to opt in to every thing we do."

He assured the audience that the company would be a good steward of the responsibility the company has toward the public, and the trust the public would put in it.

"One of the most critical things, if you want to be accountable to partners and customers, is they've got to trust you. What we've gone through in the last several years has caused some people to question Can we trust Microsoft?'" Ballmer said. He later answered that question by saying "We will be accountable to our partners and customers to continue to earn their trust."

After a federal appeals court in June upheld a lower court's ruling that Microsoft had illegally maintained its Windows operating system monopoly, Sen. Chuck Schumer (D, N.Y.), whose constituents include Microsoft competitors AOL Time Warner and Kodak, has now called for new hearings on Microsoft and its next-generation XP operating system in September. XP is scheduled to be released on Oct. 25.

While the company has said XP is on track for that launch date, analysts at its meeting Thursday openly wondered whether the concerns could potentially delay its release, or force the company to re-engineer it into a less intrusive version.

Ballmer said the company is doing its job to make sure the Windows XP will be on track, deflecting a question from

TheStreet.com

about whether he was concerned about a possible delay.

"Worried is an interesting way to ask the question," Ballmer said. "The fact is, we're doing our job, we're getting ready for manufacturing, we're preparing for shipment and staying focused on getting the product out. There's nothing else for us to do but that. We've got our heads down and we'll respond to any request to show up and discuss matters, but our job is to finish a great product."