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Bill Gates addresses a packed audience Friday at the UW. (P-I Photo/Joshua Trujillo)

Here's an advance look at a story I wrote for Saturday's newspaper.

Microsoft Corp.'s unsolicited bid to acquire Yahoo Inc. is still up in the air, but maybe it's inevitable in the eyes of Bill Gates.

During an appearance Friday afternoon at the University of Washington, the Microsoft chairman at one point referred to his company as if it were second in Internet search. In reality, Microsoft is in third place in search market share -- although it would move into second place, still well behind Google, if it's able to bring Yahoo into its fold.

"Often if you're No. 2 -- and in this case, a distant No. 2 -- you can try harder, so to speak, and try out new things that are quite different," Gates said when discussing Microsoft's technological ambitions in Internet search.

Whether it was a slip or a sign of Microsoft's determination to finish the deal, the comment was the closest Gates came to even alluding to the acquisition drama. But he touched on many other topics during the event – which felt like a combination homecoming and farewell address, as the last stop on his final university tour before he leaves his full-time Microsoft role.

With his father and two sisters watching from the front row, Gates recounted for the overflow crowd the well-known story of roaming the University of Washington campus as a boy with Paul Allen, who would become the Microsoft co-founder, looking for research computers that they could use in off-hours.

They were "stealing computer time, and now I'm giving it back," Gates said, to laughter.

Gates discussed a wide range of topics during a speech and a question-and-answer period. Subjects spanned his interests in technology, health and education. The speech included many of the same themes he discussed at other universities, including his belief in the long-term importance of natural user interfaces, such as voice and touch input.

One example is Microsoft's Surface tabletop computer, which Gates pointed to as a sign of new ways of interacting with computers and other devices.

"We actually think it's time to amend our slogan of 'a computer on every desk,' " he said. "Because with this kind of technology, we'd want to put a computer in every desk. We want the desktop or tabletop, we want the white board, to be something that's completely intelligent."

One attendee asked Gates how he was thinking about the environmental impact of the technology proliferation that he envisions. Among other things, he talked about the reduction in the size and materials needed for computers and other devices.

"The key thing we need is energy sources that don't cause environmental side effects, and that are dramatically cheaper," he said, adding later, "You really need to take this slope where the price of energy has come down ... and consumption has gone up, and find a way to do that that has no negative side effect."

At one point, Gates was asked how Microsoft was applying "lessons learned" from Windows Vista, the latest version of its operating system, which has earned a reputation for compatibility problems and other glitches, particularly during its first year. Gates downplayed the significance of the issues.

"Every software project is a glass half-full in terms of things that went super-well and things that didn't go super-well," Gates said. "The great thing about software is, if any of your software is popular, you hear back from users. They tell you what they like, what they don't like. ... You hear about it, and it's great, because that creates that feedback loop."

At another point, an attendee challenged Gates over a past comment by Microsoft Chief Executive Steve Ballmer that Google has succeeded only in the Internet search market.

"What's another place that you think they'll be making money in soon?" Gates asked.

The attendee cited the free Google Earth and Gmail.

"No, anybody can give things away," Gates responded, to more laughter. "But they're a great company. They're doing lots of good work ... but fundamentally that search-advertising nexus is more than 100 percent of their current profit stream -- and a very nice profit stream, indeed."

One student asked Gates what made him believe so much in the idea for Microsoft that he was willing to drop out of Harvard University to pursue it.

Before Gates answered, Mark Emmert, the UW president, interjected by saying to the student, "But you're not going to take this as a recommendation to drop out of college."

"Well, if you have an idea like Microsoft," Gates responded, "I highly recommend it."