Mr Bob Herbold, executive vice-president and chief operating officer of Microsoft Corporation, flies into Dublin once a month to oversee Microsoft's Irish operation, which serves the European, Middle Eastern and African region. As chief operations officer of one of the largest global corporations, Mr Herbold's time in the Republic is limited. But he may be visiting more often, following Microsoft's decision to choose Dublin as its regional hub for its new Microsoft.Net strategy.

The decision means Microsoft will supply all its software to the European, Middle Eastern and Africa regions via the Internet from Irish servers and has underlined the Republic's growing prestige as an e-commerce hub.

"Today about 80 per cent of our contracts are done through a licensing agreement and 20 per cent are physical, while in three or four years it could be that 50 to 60 per cent of our business is done through contracts agreements off servers," he says.

The strategy is offering software as a service rather than a product and could turn out to be as significant for Ireland as Microsoft's initial investment in the Republic in 1985, according to Mr Herbold.

"The actual investment figure is irrelevant but the important thing is that future investment from Microsoft and its partner firms will now come to the Republic," he says.

Microsoft's initial investment in the Republic in 1985 has now grown to represent more than 1,600 jobs and 5.5 per cent of the total Irish exports of goods and services.

But the Republic could have lost the investment, according to Mr Herbold. It took some two years of negotiations with the Government and billions of pounds of infrastructural investment before Microsoft was prepared to accept that the Republic's Internet connectivity was adequate.

He cites the privatisation of Telecom Eireann and the Government's deal with Global Crossing to provide the Republic with bandwidth as the crucial elements in Microsoft's decision to locate here.

"What we are signing up for is to head towards this being the centre of our business for the next 15 years as far as Europe is concerned," he says.

And the Microsoft.Net strategy is not simple e-procurement.

"This is totally new - this ability to view the Internet not as just a static bunch of pages that you get information off, but in fact a set of programming modules, that is very significant.

"The overall strategy is related to taking full advantage of the Internet in a way that people haven't been able to do so far. Microsoft.Net makes a commitment to create software to enable the growing range of computing devices to work together extremely well."

Irish software engineers at Microsoft's European Product Development Centre in Dublin will work on the development of these types of software and contribute to the overall strategy, he says.

The importance of the Microsoft.Net operation cannot be underestimated for the company, which is beginning to show signs of vulnerability.

The antitrust law suit filed by the US Justice Department against Microsoft, the emergence of small fast-moving technology companies and the threat posed by the Internet have called into question Microsoft's ability to maintain global dominance for a further 25 years.

In addition, the company has lost some high-profile staff to start-up companies. "You will see occasionally a person leave and it is an event oftentimes noticed in the media. But we have an extremely strong bench," says Mr Herbold.

"The industry attrition rate for IT professionals in the US was 19 per cent in the fiscal year 2000," he says. "During that period ours was 9.6 per cent so we basically operated at about one-half the level of the industry."

The company has also reviewed its salary levels in the past year and this will ensure Microsoft is competitive on an ongoing basis, says Mr Herbold.

But staffing is the least of Microsoft's worries at present. Most of the focus has centred on the Microsoft legal team which has spent much of the summer locked in a survival battle with the US Department of Justice.

In June, US District Judge Thomas Penfield Jackson ordered that Microsoft be broken into separate operating systems and software applications companies. This followed an earlier ruling that the company had violated US antitrust law by using monopoly power to hurt its competitors.

The implications of the decision are huge and promise that the legal battles between US government and Microsoft, which have been ongoing for almost a decade, are unlikely to be resolved for years to come. But the legal disputes have done little to hurt the brand image, according to Mr Herbold.

"We studied that very carefully as did many other independent organisations," he says. "Approval levels in terms of favourability for Microsoft is as high as it has ever been and there good reason for that."

But the legal uncertainties have undoubtedly sapped the confidence of investors. Microsoft stock has almost halved to just $60 this year following its battle with the authorities and the correction in technology stocks.

"We don't speculate on the share price, we let you do that. Over the long haul it's important we look at the share price from a long-term perspective. We intend to please shareholders."

The suggestion that the poor share price reflects negative sentiment towards the new Microsoft.Net strategy is dismissed by Mr Herbold.

"I can assure you we had a good reception when we launched the dot.net strategy in late June and from developers when we showed it to them in July," he says.

And after a long trying year for the corporation there are signs Microsoft may be turning the corner in its legal battles with the US Justice Department.

This week the Supreme Court decided to send the antitrust case back to a lower appeals court against the wishes of the Justice Department. This is likely to delay a final ruling and could favour the company, which won a previous legal battle in the same court.

Mr Herbold is keen to stress the type of court that hears the case is not important compared to the case.

"What's important from our standpoint is we think we have a very strong legal case that either the Supreme Court or the court of appeals would look at and give us a clean bill of health.

"Look at what happened in the first court case. The court of appeals said the test was easy: are consumers winning or not in the context of putting Internet capabilities into an operating system? And it said: you bet."

The US presidential election could also present an opportunity to Microsoft. Mr Herbold is a strong supporter of Governor George W. Bush and most experts believe a Republican administration would be more disposed towards the company compared to a Democrat administration that has spent two terms in office chasing Microsoft through the courts.

"Speaking as an individual and not as a representative of Microsoft, I hope George W. Bush gets elected. I think he would be great for the USA," says Mr Herbold. "But this has nothing to do with Microsoft's view. We believe we have a sound case relative to what we do for the consumer."

And it's this consumer focus which Mr Herbold believes should sustain Microsoft for another 25 years.