Is it possible to run an exe file which is saved on server machine using exec() function?
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Yes if this exe can be executed from command line and if the server platform is Windows, otherwise, if for example is Linux, you need to add Wine or VMWare to your server installation.

In a Windows platform, you can also use COM to deal with programs like Outlook, Word... http://www.php.net/manual/en/intro.com.php

I can run the exe from server side using PHP.But on client machine I can't run the exe.

What kind of application are you trying to use?

If for example it's a converter: you submit a file, PHP will run the exe tool and output the result to the client. You won't get an interface.

I want to open an e-book which is stored on server in exe format. Client want to open and view the e-book without downloading in the client machine.

You need to provide a viewer, just like Google Docs or Scribd does. And I think you will need to convert them to PDF format and from that to SWF, there is an open source project for PDF: flexpaper, just search it, bye.

Is it possible to open the e-book in client machine's flashplayer without downloading ?

do you find any solution???