SEATTLE - Microsoft on Friday said it plans to launch a new operating system for smart cards next month, moving the software giant into yet another market where it believes it can sell its software. Smart cards, essentially credit-card-sized devices with computer chips embedded in them, have been a dormant market in the United States, while they have blossomed overseas. Microsoft believes its entry into the market, along with the 4.5 million software developers who write programs for Windows, will spur activity in this country.

"Standards can make a huge difference in opening up markets, and we see that happening with smart cards," Microsoft Chairman Bill Gates said Friday to a group of 200 smart-card developers. Microsoft, which announced plans to develop the Windows for Smart Cards operating system a year ago, is expected to launch it at the Comdex computer trade show in Las Vegas in November. The company will make a smart card "toolkit," which software developers use to write applications, available in the first quarter of next year.

The operating system actually is the fourth version of Windows - along with the industrial-strength Windows NT, the consumer Windows 98 and the small-device Windows CE. A smart-card chip has the power of the original personal computers. It will be used to store data that identifies the user to a variety of computer systems, from workplace badge readers and mobile telephones to automated-teller machines.

Health insurers, for example, could include information about a member's medical condition, so that doctors could determine whether a patient is, say, a diabetic.. Employers could connect card readers to computers so that a card swipe would give the computer enough information to display a worker's files from any machine within the organization.

Microsoft plans to weave its smart-card software with its other products. Windows 2000, the next version of NT - which could also launch at Comdex -will have some smart-card features built into it. That way, a credit-card company considering using Windows for Smart Card might also be persuaded to buy Windows 2000.

Similarly, Microsoft is planning to integrate features from Windows for Smart Card into its Office word-processing and spreadsheet applications and its Internet Explorer browser. "Our efforts go way beyond what we actually stick on the card," Gates said. Mike Dusche, Microsoft's director of smart-card marketing, expects the cards will cost the credit-card companies, employers and health insurers that buy them between $2 and $5 each. A few pennies from each card would go to Microsoft to pay for the operating system, Dusche said.

The company has deals with Schlumberger and Gemplus to make the cards. And companies such as British Telecom and Merrill Lynch have committed to buying the devices. Gates said Microsoft will issue smart cards to "a significant number" of employees within a year. "We are going to make ourselves a guinea pig for this," he said.

In the end, Microsoft's goal is to turn smart cards into another computing platform that its software can power, said Karen Hoffman, an analyst with the GartnerGroup. "For Microsoft, the personal computer is just the first of a continuing chain of computing devices they want to dominate," Hoffman said. Microsoft rival Sun Microsystems is the current smart-card-market leader. Despite that advantage, Sun's Java Card will have its hands full with Microsoft, Hoffman said. "How many people know what a smart card is?" Hoffman said. "They still have a lot of time to make up ground."

Even Sun believes Microsoft's entry into the market lends legitimacy to the market. "There is a good aspect to this because it gives some credibility to smart cards in the U.S.," said Patrice Peyret, director of Sun's consumer and embedded group. "The U.S. market is getting more mature in terms of cards."

Peyret questions the logic of integrating the Windows card so closely with Windows 2000, Office and Internet Explorer, because the current market for smart cards is largely mobile phones and automated teller machines. Those devices don't generally run on Microsoft software. "The importance of tying Windows to the card is really not clear to me," Peyret said.