Microsoft founder Bill Gates has expressed confidence in the traditional personal computer (PC) market at the World Economic Forum in Davos.

With the US economy slowing down, many PC makers have issued profit warnings, their business also hurt by a sharp slowdown in PC sales.

There is not a decline in PC sales

Bill Gates

Mr Gates admitted that sales growth "has been down somewhat".

But he added: "There is not a decline in PC sales."

"It is very unusual in a market of that size to still have pretty healthy sales.

"The next big uptick... (will come with the) next generation of applications," he added.

Broadband cost warning

Mr Gates was holding a joint press conference with Compaq to promote a handheld product called Ipaq which has been distributed to delegates at the forum.

"The PC market is dramatically bigger than this wonderfully growing complementary market," Mr Gates said.

He had earlier warned that the main threat to the growth of the wireless internet was the cost of broadband connections.

Mr Gates was opening a debate on the future of the internet at the World Economic Forum in Davos, Switzerland.

If there's anything I am at all cautionary about... it's whether those broadband connections will become cheap enough

Bill Gates

He said that the wireless internet and the mobile phone would soon merge to become the form of communication of choice.

The strengths of the internet and the ability for it to create new products and build new communities of users was demonstrated by the success of the Napster music file sharing service, he added.

Cautionary words

Microsoft, alongside many other telecoms, computer and media firms, is positioning itself to grab a slice of the action when mass market internet access via handheld devices arrives.

"When I look at the next two or three years whether it's what that PDAs (personal digital assistants) will look like, it really will become a phone," said Mr Gates.

"The phone and the screen will come together.

"If there's anything I am at all cautionary about this picture on, it is not the hardware advances or the software things... it's whether those broadband connections will become cheap enough and popular enough to enable this for a really broad set of people," he said.

For media companies such as music giant Sony and German publishing company Bertelsmann, protecting their copyright is the key issue for the future.

Napster copyright worries

Bertelsmann's chief executive officer Thomas Middelhoff suggested that file swapping service Napster could charge a subscription fee, some of the proceeds of which could go to the media companies.

"The willingness to pay is there," he said.

Sony Corporation's chairman and chief executive Nobuyuki Idei agreed that the "fundamental" issue is copyright.

"It (Napster) is the danger of today's music industry, but it could be an opportunity," he conceded.

Later on Monday, Davos delegates will get the chance to discuss the issue of selling content on the web with Napster's boss Hank Barry in a forum called "The Internet as the World's Biggest Copying Machine".

Internet questions

Other key questions that will be discussed on Monday include policing of the internet, who will tax e-commerce and how mobile phones will change digital communication.

Gates has been debating the internet's future

Who should have responsibility for controlling web content is a key question on the agenda in Davos.

The recent legal ruling in France ordering internet service provider Yahoo to prevent access to sites auctioning neo-Nazi memorabilia has sent shock waves through the industry.

And as the internet becomes an increasingly important trading tool, industry leaders will be debating how, or whether, products sold on the net should be taxed and who should be entitled to levy the tax.

But hanging over all these discussions will be the shadow of the so-called digital divide.

Just one person in 10 living in the world has access to the internet.

With the demonstrations against globalisation fresh in their minds, industry leaders know they have to do more to spread the benefits of the new technology.

Annan warning

On Sunday, UN Secretary-General Kofi Annan called on business to work harder on environmental and social issues.

He warned delegates in Davos that unless business did so, the backlash against globalisation could gain momentum.

His call followed Saturday's anti-globalisation protests in Davos, which were quashed by riot police.

In Zurich there were serious clashes between police and anti-globalisation protesters late on Sunday.

More than 120 demonstrators were arrested.

The protesters were angry at being turned back after trying to reach the World Economic Forum.

Demonstrators hurled paving stones and bottles at police who replied with tear gas, water cannon and plastic bullets.