Steve Ballmer: Worldwide Partner Conference 2011
July 11, 2011
A transcript of remarks by Steve Ballmer, Chief Executive Officer, Los Angeles, Calif., July 11, 2011.

Remarks by Steve Ballmer, Chief Executive Officer
Los Angeles, Calif.
July 11, 2011

ANNOUNCER: Ladies and gentlemen, please welcome Microsoft Chief Executive Officer, Steve Ballmer. (Applause.)

STEVE BALLMER: Well, thanks. I am beyond excited to have a chance to be here today at WPC. I have to say, I know I said this before if you've been to previous WPCs, but I'm going to share it again today privately for you. About the most exciting thing I get to do in any 12-month period of time is come to this conference. Why this conference, you might say? Well, you know we love our partners at Microsoft, you know that. Is that the reason? (Applause.) Yes, that's part of it.

But I find that our partners have perhaps the most interesting and unique set of insights on our business of anybody on the planet. You're involved, you care, you spend time and energy studying and understanding what we're up to. You take the time to translate these technologies into the solutions that really change people's lives, and yet you are independent business people who are coming to work every day cheering for us, but also understanding that you need to consider alternatives. So, you're pushing us, pushing us, pushing us, pushing us to improve our performance.

Customers aren't really quite as all-in as you are, and our employees have a hard time really pushing us as objectively as our partners. As Jon said -- well, Jon said we have 95 percent of our business through partners, I can't find the last 5 percent myself. So, I'm just going to say we've got 100 percent of our business with partners and so I've got to say thanks for pushing us, and thank you very, very much for your phenomenal work. (Applause.)

Last year's WPC was, for me, scary. Scary. Why? If you go back over the last three or four Worldwide Partner Conferences, we've been talking about the cloud. I think if you go back five years ago, we mentioned the cloud. If you go back four years ago, we started talking about the transition that we were going to make and the industry was going to make to the cloud.

Three years ago, we talked about it in some detail. Two years ago — little more detail. Along the line, I'd say some of the feedback we got from partners was: We're not sure we like the cloud. We're not sure. The cloud is a disruptor. It's a disruptor for all of us, and disruption can be hard to process.

Well why was last year scary? Last year I basically said at this meeting, “We're all-in on the cloud, 100 percent, and we need partners who want to come with us.” Doesn't mean that the business has all transitioned in the last 12-month period of time, but we're all in. It is where things are going and we need you to decide whether you're coming with us. So, to see 15,000 people here at the STAPLES Center coming with us, pushing to the cloud, pushing Windows Azure, pushing Office 365, that to me is exciting after me being a little nervous last year that some of you might say, hey, we can't quite be all in the cloud.

In fact, we got 41,000 partners now who identify themselves primarily as cloud partners, people who've come into the Microsoft ecosystem, in some senses for the first time, because of the opportunities represented by the cloud. So, I want to thank you for all your support. I want to thank you for making this transition, this journey to the cloud with us because it is going to be one of the most beneficial transitions for all users of information technology around the planet. It's disruptive technologically, we're redoing things in our business model, you're going to have to continue to re-map and re-skill and re-train yourself for this new world, but I'm very appreciative of the fact that you're making the transition with us.

Last week, I had a chance to do probably the second most exciting thing I get to do every year, and that's to -- or at least this year -- I had a chance to go to New York and meet with a group of about 500 university students who are competing in a competition that we call the Imagine Cup. We've been running this -- we've got some Imagine Cup lovers down here. It's a competition we've been running for nine years, students in over 183 countries in university-level formed together into teams.

We had over 380,000 students start out in the competition. That's very good for all of us who need to employ talented young people with skills in these areas. And they came together to work on programming projects with a team from their school, and in general, focus in on the applications of technology to some of society's most important problems.

In a sense, you could say it sounds a lot like what our partners do. You form teams, you come together, and you attack some of the most important and interesting and valuable business and social problems in the world. You get a little bit of a different perspective when everybody participating is basically 18 to 22 years old, but you get enthusiasm and energy.

Certainly, as I had a chance to look at what they're doing and how these students have re-vectored their time and attention to the cloud, it was very eye-opening and inspiring. So, I want to show you just a brief video of some of them together about the work that they're doing, and the work that I'm sure they'll be doing working for some of the companies in this room over the course of the next several years.

Let's take a little bit of a look at what some of the young, soon-to-be Microsoft partners are up to. Roll the video.

(Video segment.)

STEVE BALLMER: (Applause.) Whether you're hearing from a partner in Japan about earthquake and tsunami relief, or we see the interesting and exciting work that students can conceptualize, it should remind all of us what the real motivator and excitement and fun is of being in this business, and that's to transform society, to make it a better place.

But we all have something else we have to get done still every day. We come to work and we're trying to build great businesses and employ more people and drive growth and help customers improve their businesses. And, certainly, I understand that as you come to this conference, one of the things that's most important, one of the things you're thinking about and evaluating and telling me your point of view on, is how's Microsoft doing? Are they driving hard? Are they pumping? Are they bringing out great new products? Are they innovating? Are they coming forward with the stuff that we as partners can continue to bet on and invest in for our future?

And so I thought I'd give you a little bit of kind of a -- let's call it a report card or a state of the state, so to speak, on how we're doing and how we're doing with you, in fact, in building great businesses.

If you look at Microsoft, and people like to say we've got a lot of products. In some sense, I think that's a fair characterization. But in some senses, we're relatively simple. We're involved in creating either the platforms or the hardware for three major devices: Small screens, big screens, and middle-sized screens. Sometimes called phones, PCs, and TVs, sometimes we'll talk about the PC and the slate as separate devices, but we're trying to drive forward the platform for intelligent devices.

At the same time, we're investing in core scenarios on the back end, on the server and service side that becomes applications and tools that you can use to complete the experience -- Bing, Office, our server and Azure platform, and of course Microsoft Dynamics.

Across the board, the last 12 months, I think, was really quite phenomenal for us. We certainly have had great business success. We'll announce our financial results here over the next several weeks, but consistently through the first three quarters, we have delivered absolutely outstanding, double-digit growth rates in our Office product line, in our server product line. And a lot of that is entirely a testament to the work that has been done by our partners across the globe in really driving the business.

The level of innovation and new products that we've seen across this lineup is quite remarkable — from Bing to Windows Phone to Kinect. We're talking about just a few things, in some cases, didn't even exist 12 months ago, and we're driving forward.

Microsoft's absolutely unique in both the breadth and the level of integration across the product line and both the breadth and the integration are important. We're the only company out there that's investing in both on-premises and in the cloud. The amount that you learn from working in both environments that helps you in the other is dramatic.

We brought our Kinect sensor product to market this year for the entertainment world. And yet, the amount of interest that we see from business customers and partners in using that sensor in commercial applications is really high.

Competitively, we've done very well this year, and I'll run through that, but Bing is up in market share. Windows Server, 76 percent market share, and Azure is really climbing at a very, very rapid rate.

Dynamics, we've switched out our competitors' customers and brought them into our fold. Office and Office 365, basically the other guys have yet to really show up.

Xbox, we've become the number-one console this year.

Windows, we're selling a lot of Windows, and we've got a lot of competition in the Windows business. But we're driving hard with just in the last year alone 350 million, 350 million new PCs sold. That might compare with numbers from other guys that are in the 20 million range. Now, 20 is too much, but 350, last time I checked, is a lot more than 20. (Applause.)

Phones, we've gone from very small to very small, but it's been a heck of a year. (Laughter.) And you're going to see a lot of progress in that market competitively as we move forward.

So, this is our portfolio. We think the breadth is helpful, we think the integration is helpful. As we look to the future of these devices and the work that we're doing, for example, in Bing on the next generation of user interfaces, user interfaces where you tell the computer what you want it to do and it just does it. It's a combination of innovation that will go on in Windows and Windows Phone and Xbox and in Bing.

So, we think it's absolutely an essential portfolio for your and our ongoing success, and we think it's been a year of incredibly great momentum and progress, certainly not without a lot of competition, but I think for all of us, this platform, these products, have been a foundation for incredible business growth.

If you'd said to me ten years ago that, when we were kind of cooking with Office in the early 2000s, that we would still be growing double digits in our Office business ten years later, I have to admit, I might have been dubious. And yet, through the incredible work of this community and our R&D teams, that's exactly where we are.

Let me just highlight a couple of things in each area, first on Bing. Bing is probably the Microsoft product or service that our partners spend the least amount of time with right now. I think that'll change over the next few years, we're thinking about the dynamics and kind of architecture that will allow us to open Bing up over time to be more of a platform. And yet, I think its fundamental importance to our strategy both for the cloud and for intelligent devices means we should spend just a couple minutes on it.

Our market share in the U.S. grew to 14.1 percent this year, up three points. It's actually a huge, huge increase, 30 percent growth-plus in the number of queries that we're serving with our Bing search engine.

At the same time, in the last 12 months, we've integrated in all of the Yahoo traffic. Collectively that means that we're serving about 30 percent of the search needs of users here in the United States, from 10 to 30 in one year. The opportunity to innovate in this business, in some senses, depends on traffic. So, this just wasn't a year of integration and business progress, it's actually a year of incredible progress from a product perspective.

With Bing, we've taken a simple point of view -- people don't want to search, they actually want to decide and take action. Decide and take action. And in everything we're doing with Bing, and we'll show you a little demo here in a minute, you can see how we're trying to help people decide and take action.

Sometimes I get asked, I mean, isn't this market all done? There is a search leader, there's not going to be any innovation in the area. I think that is exactly the wrong thinking. The Internet, the Web is changing more today than perhaps at any time in history. We're moving from an Internet that was based around HTML documents to an Internet and Web that's based around the social graph, geographic information and the geographical Web, an Internet in which you want to access information not just from a keyboard or from a fixed device, but from mobile devices and via voice and other input techniques.

We've tried to show all of that and work very creatively on those opportunities inside of our Bing service. In fact, one of the things I think is most interesting is the work we've done around social in partnership with Facebook where you can now start bringing together what your friends are interested in and what your friends think about with the things that you're searching for and are interested in deciding and taking action on on the Web.

So, to show you a little bit of what we've done and are doing with Bing, I'd like to invite Stefan Weitz to come up on stage and just show you a little bit of the Bing product. Stefan.

STEFAN WEITZ: Thanks, Steve. (Applause.) Hi, everybody. Thanks for coming. I'm going to show you a few things today that we're doing in Bing. The first I'm going to talk a bit about this social thing that Steve talked about and tell you why it's such a big deal. And then we're going to get into this notion of how you can actually do things in search, not just do more searches. And, last, I'll show you how we think about taking all that Web data Steve talked about and putting it in a format that you can actually use.

So, let's first talk about social. We launched Bing as a decision engine back a couple years ago. But, really, when you make decisions in your real life, big and small, you often do it with your friends — from things like should I wear a coat outside today all the way to should I go see a doctor for this pain in my side?

And so at Microsoft, we asked, how can we actually let you bring your friends online into your online decision-making process? And through our partnership with Facebook, as Steve mentioned, and their three-quarters of a billion accounts, we think we can do some pretty cool stuff in search, let's take a look.

First off, bringing my friends with me into search helps to make search results more personally relevant for me. So, let's take a look at something like “Mango.” Now, mango, to most people in the room is a fruit. I like it better than apple, personally. But also because Bing knows who I am and who my friends are, it also knows that, actually, in reality, I'm probably asking about Windows Phone 7's new version of our operating system called “Mango.” So, I can see results from Steve, from Punkage, who have used the Facebook like system to like these results from across the Web, that gets pulled right into my Bing experience without anything else that I have to do.

But it's not just about making results more personally relevant. It's also about helping me sort through the vast resources on the Web to help make decisions. So, my wife wants to go to Hawaii, we have a small six-year-old daughter, and she wants a good place to go stay.

So, you go to Bing, you type in Hawaii hotels for kids, it's a good query. But, frankly, there are 51.3 million results, and this is a very competitive query. So, people actually would kill to be the top result there inside of Bing.

So, as a user, how do I pick the right result that I'm looking for on this page? Well, look what's happening here. I can see Brian McDonald and Rangon (ph) both like a particular site here, best kid-friendly hotels in Hawaii, boom; I've gone now from 51 million results to one that I think is pretty good. And, frankly, now I can do one click and ping Brian on Facebook with Skype, or I can text Rangon to ask him. You get the idea. Literally, it helps me sift through the Web's vast resources to find the one that I want. It's not just about maps, it's about bringing your friends with you as you're searching.

Those are a couple of small examples. There's a lot more there. But you can really begin to see how the social graph data is really helping search become more relevant and more useful to you.

Let's switch gears. Steve also talked about the fact that people are really trying to do more with search on the Web, not just search more. And you can really begin to see how Bing thinks differently, how Microsoft thinks differently about this by looking at the comparisons.

So, let's go to -- I'm coming to Los Angeles, I want to have a nice meal. So, let's say I want to go check out Luna Park. So, I might go to Google, if I get confused one day, and I can do a query here. And I can see these are good results, I've got a lot of nice things, a lot of good information, a lot of data. Very helpful.

But, actually, at Bing and within Microsoft, what we say is what are people trying to do when they search for Luna Park? Well, they're trying to go make a reservation. They're trying to save some money. They're trying to see the menu, all these types of things. So, look what's happening here. We're working with partners across the world to integrate their services directly into search.

So, now I can say this looks good, good reviews, find me a table tonight. And just like that, boom, I can reserve that table through OpenTable. Now once I've got that reservation, I'm kind of cheap, I guess, and so I want to save some coin. I can click on deals, and boom, through our partners at Dealmap, I can actually see deals for that restaurant, again, all right there inside the search experience. (Applause.)

Pretty cool. One of the things, too, I'm a big Dodgers fan, I'm in LA, I don't get to LA very often. So, I might want to go and check out Dodgers tickets. So, again, I get confused. I go to Google, I search for Dodgers tickets, and again, a good result. Lots of great data here, lots of things I can click on and drill into. But again, think of what Microsoft's doing. What we're actually saying is what are you trying to do when you search for Dodgers tickets?

Well, actually, likely, you're looking to go ahead and buy some. So, I can drill into our events tab, I can see they're playing here the 22nd. With one click there, I can literally get into an experience, again, through our partners at FanSnap this time, where I get to see all the tickets from all the different ticket brokers across the U.S., almost 8,200 tickets. And I can say I don't want to pay any more than, say, $50 for that ticket, let's say. And I can literally re-sort that down where now I can see this seat here looks good, and I can even see the view from that seat. So, with one click, I can actually now go ahead, zoom into the map, buy that ticket, and go to the Dodgers game on the 22nd. A lot of fun. (Applause.)

So, that gives you a flavor. There's lots more, and I encourage you all to come check it out. But there are a lot of ways we're thinking about how we can actually help you do and not just search.

The last thing I want to talk about is this notion of how we can help you make sense of all this Web data that's exploding around us. And we do that in a fun way. We do it using maps. What? Maps? No. I mean, maps are an interesting thing because, of course, they can do things like get you from A to B. So, I can get from STAPLES Center over to Luna Park restaurant very easily. It can route us there, it can make sure if traffic is bad, it can re-route us, all the usual stuff.

But, really, we think of maps as something we call spatial search. It's literally a way for us to represent all this Web data in a way that you and I can make more sense of it, by putting it into the real world. Data like parking. So, tomorrow I'm coming back here. Today, I paid $26 for parking, Steve yelled at me about that. So, I said how can I save some money tomorrow? So now I can go to our map application here, parking finder. I can drill in, see there's STAPLES Center. And I can go ahead and say I'm going to be here tomorrow at 7:00 a.m., show me cheaper places to park, $25, too much, ah, $4, right there.

And, again, using partner data and integrating it into the map experience where data lives, I can actually make a decision to park there tomorrow instead of where I parked today for $25. (Applause.) Yes, you can clap, that's a good one, I like that one a lot.

Or it could be things like five million photos that people have taken across the world and that we have re-stitched together into 3-D panoramas that can let you get in all the way from the satellite view up in space all the way down into, say, I don't know, the American Landscapes exhibition inside the Metropolitan Museum of Art. So, now I can literally go here and go check out -- I can walk inside the Metro Museum of Art and literally go all the way from space over to a brush stroke in a painting, all the way in, look at this beautiful painting and there she is. (Applause.) So, literally, taking this data from all over the place and re-associating it in a very interesting way.

So, that's it, those are a few things I wanted to show you, but you can see that at Bing and at Microsoft, we're thinking about search differently. It's not just index and retrieval anymore. It's about connecting people to other people, it's about connecting information to places, it's about connecting people to action. It's really about getting you, and moving the metaphor away from simply searching and finding to be more of a searching and being done. Thanks a lot. (Applause.)

STEVE BALLMER: If search and Bing is the most emblematic first cloud application, it's certainly clear that for folks in this room, the most important — from a business perspective — cloud opportunities in the near term are really around the server-platform and the productivity and collaboration applications. And this has been a very big year forward for us with both our private cloud, or Windows Server and Hyper-V platforms, as well as our public cloud, or Azure platform.

Really, in the course of the last 12 months, I would say a couple of big things have happened. No. 1, Windows Server continues to build market share. Over 75 percent of all of the servers sold last year came with Windows Server. We see equivalent progress certainly with over 40 percent of the new databases that go in running on top of our SQL Server database.

No. 2 in the last 12 months, we have made major advances with Windows Azure functionality and capability. It was really just over a year and a half ago that we really came to market for the first time with Azure, and the capability and functionality and referenceable customers that you brought to that platform have really started exploding, and I'll talk about that in a minute.

The third thing that's happened in the last 12 months is we really stitched together now a much more coherent and complete public cloud and private cloud story with System Center, with Visual Studio, with Active Directory, a common platform and a common infrastructure that lets you move things. Start them in the private cloud, move them into the public cloud, extend an application that's running on-premises with new capabilities that are running on Azure, and do that with a simplicity that really makes sense.

In this world, things will move to the public cloud, but line-of-business applications will move at a much more measured pace to the cloud than most other aspects of the infrastructure. So, having the strategy that spans public and private is really a unique strength for Microsoft as we look at the competitors -- VMware, Oracle, Google, Amazon -- each of them has an offer that in some unique and very specific — but very limited in focus — way has merit. And yet, what we think you want to do and our customers want to do is have the flexibility to mix and match between the public and private environment.

We've driven hard with new capability in Hyper-V. We've had market progress in Hyper-V and certainly the cloud platform is really kind of a wide-open space, where as I said, we've made a lot of progress in the last year. So, it's pretty fundamental to us. I want to highlight for you just a couple of reference customers for Windows Azure, large businesses with big brand names that have have done phenomenal work on top of Windows Azure.

The first is Boeing. They've built an application to market the 737. The work was actually done by one of our partners, [wire] stone LLC, and [wire] stone used Azure, Windows 7 with its touch interface to Windows Phone, and they've put together thousands of images and pictures so that you can, on any device, really re-create what the 737 looks like. The folks at Boeing say it's the best thing that customers can see next to actually walking around and through the real aircraft.

Take a look at the demo you just saw in Bing where we're visualizing what's going on in the real world. That kind of similar application for marketing a 737, drawing on data that lives on-premises in Boeing, but exposing it in an application that lives through Windows Azure in the public cloud.

American Airlines, who's built an update application for Windows Phone. The partner involved there is Migration.mobi, and they've built a live tile on Windows Phone with real-time information on gates and baggage. No text messages, emails, phone calls -- it all just shows up. As we say in our Windows Phone ads, we help you get in and out and back to life.

Particularly, when you come into an airport tired at the end of a long day, that's exactly what you want. And the folks at American Airlines say the fastest delivery of flight information data on the planet.

So, we're moving forward to the cloud, public and private, in a very strong way with a very strong product set.

Dynamics. Microsoft Dynamics. This is the ten-year anniversary of us entering the business application space. Over that ten years, we've averaged 20 percent compound annual growth, 20 percent compound annual growth. And to the Dynamics partners, some of whom have been with us the whole ten years who are here in the audience today, I want to say thank you and salute you. (Applause.)

This ten-year thing really has been a little galvanizing in terms of our reflection on the opportunity that's available to us in business applications. Whether it's ERP or CRM, we see a unique point of view coming from Microsoft in terms of the flexibility of development and the ease of use of the program. We like the growth that we've had.

We've separated our Microsoft Business Solutions group from the rest of our Office group late last year. It's now a stand-alone division under the leadership of president of that division, Kirill Tatarinov, who you'll have a chance to hear from tomorrow. The division has done fantastic stuff. It's a very profitable part of Microsoft's business at this stage. And for those who have asked over time, are we all-in when it comes to business applications? We are definitely all-in.

We have some customers -- that's OK. I don't want to get asked that question today, and I don't want any confusion about it. When you're over a billion in revenue and you're multi-hundred-millions of profit, I believe you can understand we're all-in and we want partners who really push with us. Partners like xRM.com. xRM.com is a partner that's worked with us on a win for CRM with the LA public schools, 70,000 employees all moved to Microsoft CRM through the work of xRM.com.

Two out of three of the CRM design wins we've had this year have been in the cloud. And we've had some big switchers. Barclay's Bank switched off of Oracle Siebel and came to Microsoft Dynamics. Salesforce.com, we started making a point in the last year that you don't need to get "forced" to use Salesforce.

Marc Benioff became our best personal salesman when he spent the better part of his user conference, because he understands that the flexibility and the ease of use with the Outlook-style user interface really does give us a leg up.

In ERP, I want to highlight one customer from the last year who we're doing a lot with, and that's SpaceX, and that's the private company that's going to take over the space program, the commercial space program here in the United States. They're on AX 2012 when it deploys later this year, and we're real excited about their use for financial and project accounting of Microsoft Dynamics AX.

One of the questions I get a lot from partners is: When does ERP move to the cloud? And I'm excited to say that starting with Dynamics NAV early next year, we will put Microsoft ERP solutions in the cloud. (Applause.)

Office, Office, Office. Office 2010 shipped last year. We've already sold over 100 million licenses. It's unbelievable, thank you. (Applause.)

Two weeks ago, we formally announced and made available Office 365. Office 365 is really the broad service for anybody, businesses from very small to very large, that brings Office productivity and collaboration to the cloud.

We like to say Office 365 is where Office meets the cloud and brings collaboration to all. In just two weeks, we've had over 50,000 businesses around the world trial Office 365, that's about one business every 25 seconds. And they've been very small and very big. I had the opportunity at the launch to get to know the CIO of an organization in Glasgow, Scotland called the Wise Group. They do social services, job placement, retraining for people who are out of work in the United Kingdom. And he told me they'd done an Office 365 trial and the beta and they'd deployed it. And, you know, they're a few dozen workers and he was all excited about it and things had worked well.

And then he said, "But I didn't really realize what the power of Office 365 was until I was on a train." I guess it would probably have been about a month before I met him. He was on a train from Glasgow to London. The train, he had his 3G card in his laptop on the train, he's working on something. He got a call over his Lync connection. He participated in a video conference on the trip, on the way down. He had all of his notes, all of his papers -- all of his papers? -- see how old I am? I still refer to paper like it's important. But he had all of the information he needed on his laptop to participate real time, essentially, from anywhere on the planet using the capabilities in Office 365.

We've also seen some very large organizations move to Office 365. The American Red Cross with over 66,000 seats -- will have over 66,000 seats on Office 365 by the end of the year.

Sometimes our partners say, "Well, how are you doing versus competition?" The answer is, "Outstanding." Any place we engage, or a partner engages with Office 365, we win. The very few reference customers the other guys have, we didn't engage. So, to all of our partners, I ask for your continued best energy and best vigor, and best enthusiasm to go out there and really sign up Office 365 customers, because we have a phenomenal opportunity in front of us.

Skype -- subject to regulatory approval , Skype. I have to be careful here because we are in the middle of the regulatory process. But I'm very enthusiastic about acquiring Skype. Skype is very consistent with what Microsoft has made one of its core businesses, and that, for us, is helping people communicate and collaborate. I have asked and asked my partners, is this Skype acquisition somehow mean you're not as serious and enthusiastic about Lync? Quite to the contrary, one of the great motivations in acquiring Skype is to enable the enterprise to have all of the control it wants of communication and collaboration through Active Directory and through Lync, and yet be able to connect people within enterprises to consumers, businesses, and trading partners around the world. So, Lync, in some senses, with Skype is a strategy that I think will allow the consumerization of IT to really proceed with full vim and vigor, armed by Lync and the good work that our partners are doing. Seventy percent of the Fortune 500 is now on Lync. Certainly, if you look at the product from Microsoft that is growing most quickly, it is Lync in the enterprise.

Kevin Turner has taken to calling Lync the Kinect of the enterprise, meaning it's just eye candy when you demo it for corporate users. So, I encourage you all who have any involvement with Lync to really drive forward very, very hard. We have new scenarios coming, digital meetings, whiteboarding, et cetera. And with the combination, the power of Lync and Skype, under the same umbrella, we think we're going to be able to do even more fantastic things together. (Applause.)

Xbox. A big year for Xbox. We launched a new console roughly a year ago. We launched Kinect for Christmas. We had the fastest selling consumer electronics device in history, the fastest to 10 million ever with the Kinect product. And yet I feel like we're just scratching the surface. We had hackers come along and hack up Kinect, and say, we need it for business applications. We came with an SDK so you can use it now to build a variety of business applications for vision, and voice recognition.

We're still motivated in the Xbox team by entertainment, giving you any entertainment you want, or any entertainment you might be able to dream of, to have you be able to share it with the people you care about, to make it easy to do, and to have that on any screen, not just the big screen TV in your house.

We're driving forward on that proposition. You'll see more games coming this Christmas to Xbox for core gamers, Gears of War, new Halo. We have more things coming for families and young people, Star Wars, Disney, and Sesame Street, plus with Xbox this year more movies, music, ways to socialize, and live TV coming for the first time to Xbox this holiday season. (Applause.)

But, we've got to make things easier to use. I mean, look, at the end of the day a game controller is maybe a little too complicated for the average person. Heck, even a remote control is a little bit too complicated for the average family. And what we're trying to do is really work on making TV easier to use, by giving the TV a new voice. And that's your voice.

I want to show you the 2012 Xbox experience. This will be available this coming Christmas, and it's where you can use your voice to control entertainment through the magic of Kinect. Whether you want to play games, watch movies, listen to music, or share with friends the voice should be your own, no buttons, nothing in your hands.

I'd like to introduce Ellena, who comes from our Xbox team. And Ellena is going to show you how it works.

ELLENA STIFF: Xbox music.

STEVE BALLMER: Instant access to 11 million songs.

ELLENA STIFF: Xbox games.

STEVE BALLMER: All the games you love, and even more of the experiences that you're looking for.

ELLENA STIFF: Xbox video.

STEVE BALLMER: Simple and effortless voice and motion control. Everything that you care about, all the content types integrated. But, it's only a beginning. Our goal for this year is to increase the content in our entertainment catalogue from hundreds of thousands of entertainment experiences to many millions of entertainment experiences

Having all that content, though, will bring you another challenge. How do you discover what you're looking for? How do you find it? How will you find that entertainment you want this Christmas? Easier ways and guides, and menus, and remotes, I went looking just on the TV set over here in the Marriott Hotel for CNBC this morning, and I never found it. I don't know what that says about me, or how complicated the technology is, but in order to just simplify the whole thing, we're going to bring Bing to the Xbox. You say it and Xbox finds it.

ELLENA STIFF: Xbox Bing.

STEVE BALLMER: Bing on Xbox will search through Zune, Netflix, Hulu, Xbox LIVE, and even more content providers as they come to the Xbox system. With Kinect and Bing on Xbox, you can use your voice to find what you want instantly.

ELLENA STIFF: Xbox Bing Lego.

STEVE BALLMER: Let's say your kids love playing Lego Pirates of the Caribbean, thank you to the folks from Denmark for bringing Legos. And let's say you want to search for more Lego games. There they are, no menus to navigate, nothing like that, just your voice and this library of content instantly accessible to you. Let's say you saw the latest X-Men movie, and you want to enjoy more X-Men content.

ELLENA STIFF: Xbox Bing X-Men.

STEVE BALLMER: There we go, all the X-Men games, movies, shows, and even the animated series all in one place. With Bing on Xbox this Christmas we give you effortless discovery, effortless discovery, the great content coming to Xbox LIVE, the power of voice and the intelligence of Bing. If you wanted to put it simply you'd say: you say it, and Xbox will find it. Central to our vision of the next-generation experience is the TV and TV content that's most familiar to all of us.

ELLENA STIFF: Xbox live TV.

STEVE BALLMER: This year, live television will come to Xbox as we partner with leading TV providers. We've already done this in the U.K. with Sky TV, in France with Canal Plus, and in Australia with Foxtel. Watch live TV on the Xbox, news, sports, your favorite local channels. Watch in party mode, enjoy with your friends. TV is more amazing when you are the controller. And it's all just a voice search away. You say it, Xbox finds it.

That's our vision at home for the future of television, personal, approachable, and effortless. And just think of how you can apply the same kind of concepts eventually at work. Xbox and Bing this holiday season; I hope you'll all have a chance to enjoy. (Applause.)

A year ago, Microsoft had no Windows Phone. In the last year, we've sold millions of phones. When we survey our users, nine out of ten of the people who bought a Windows Phone absolutely would recommend it to a friend. It's certainly a very busy, active, competitive market. We've got a lot of work to do to break through. And yet, the people in the phone business believe us. We've already had over 20,000 applications built for Windows Phone in eight months. That's a faster ramp than either Android or iPhone had. Nokia, who had a choice this year to bet on themselves, to bet on Android, or to bet on Windows Phone said for their bet the company strategy, they're going with Windows Phone. They saw our roadmaps. They saw what we've done. They saw what we're planning on doing. They're pushing us. They're pushing us to go broader geographically with Windows Phone. They're pushing us to hit new price points with Windows Phone. But, they believe.

Others believe, too. Gartner and IDC both did predictions this year that said Windows Phone would be the No. 2 phone in the market by 2015. We've already shipped two major updates since we launched Windows Phone less than a year ago. The update that we just made available, “Mango,” which will be on phones this fall, has over 500, 500 new features. We know we've got a lot to do, but like the cloud, like NT many years back, we're all in when it comes to mobile devices. And whether it's phones or slates, or PCs, or console devices, we're certainly pushing extremely far, and extremely fast.

Windows, I talked about some of its success in the year, but probably the thing that's most on your minds today is Windows 8. We did a brief glimpse of that at the COMPUTEX and D conferences a month or two ago. We've made clear we're supporting the ARM processor architectures in addition to Intel. And Windows 8 really does represent a true reimagining, a true reimagining of Windows PCs, and the dawning of Windows slates. And to talk more about where we're going with Windows 7 and 8 PCs and slates, please welcome to the stage Tami Reller, who runs all of our marketing and business for the Windows Group.

Tami.

(Applause.)

END

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