Bill Gates' Memo to Employees
July 21, 1998
Microsoft just completed another amazing fiscal year, with revenue of $14.5 billion, a 28% increase over 1997.

Redmond, Wash., July 21, 1998 — Microsoft just completed another amazing fiscal year, with revenue of $14.5 billion, a 28% increase over 1997. Our leadership in developing software that improves people's lives is more evident today than ever before. The computer industry is changing the world, and great software is at the center of this transformation. Yet in a business where technological change is constant, we cannot stand still. So today I want to talk about some of our exciting goals, and let you know how I am broadening Microsoft's management team to achieve them.

In its 23-year lifetime, Microsoft has had three distinct phases. The first, from 1975 to 1989, was characterized by bold thrusts into new businesses. Among our many successes were MS-DOS, Word, Excel, Macintosh software and Windows. We bet the company on Windows, and that paid off in Microsoft's second phase - from 1990, when Windows 3.0 was released, to 1994. Phase two was also marked by customer-driven change. Customers asked for an operating system that blended the best of Windows, UNIX and Netware, so we built Windows NT. Customers wanted our productivity tools to work better together, so we made Microsoft Office an integrated product. Recognizing the need to make fundamental advances in software, we created Microsoft Research. In 1995 we entered phase three, refocusing to take advantage of the tremendous opportunities offered by the Internet. Since then, Microsoft has reinvented itself so that, today, everything we do leverages the Internet's amazing power.

We are now entering a new phase - one that finds us with greater opportunities and challenges than ever before. Companies and employees everywhere are realizing the power of an information infrastructure that manages the flow of knowledge and data within a corporation - what we call a Digital Nervous System - and which allows it to leverage that knowledge more effectively than ever before. At the same time, people are starting to adopt a Web Lifestyle. No longer are they using the Web only as a source of occasional information; they are routinely using it to pay bills, buy cars, check movie schedules, book restaurants and plan vacations. The Web is becoming a central part of our lives. And at the heart of all this - at the center of communication and commerce - is software. Microsoft will work in partnership with other industry leaders to provide people with great software tools that will make a difference to how they work, learn and play.

The opportunities for all of us to contribute to this new phase are immense. We are just at the start of the digital age. The original vision of "a computer on every desk and in every home" will only be fulfilled by your work. We will look back on today's computers and software as unnatural and incredibly rudimentary. Ongoing improvements in hardware give us a chance to create software that is immeasurably better than today's. We must build on our existing strengths, and continue the low-cost, high-performance model that has made Windows, Office, BackOffice and our many other products so successful. We must apply those fundamentals to all our emerging businesses - to enterprise computing, Windows CE, WebTV and our Internet sites, and to all our future products and services.

To achieve this I am broadening Microsoft's management team, enabling me to focus more attention on our product strategy. I have asked Steve Ballmer to step up to become president of Microsoft. Steve will focus on boosting the business discipline and performance of all our businesses. He will also concentrate on our relationship with our customers. We aim to delight them, and Steve's role will be to ensure that we do. All this is a natural extension of what, as my long-term business partner, he's been doing for some time now. The majority of my time will be spent with our product groups, devising the technologies and products of the future.

There are some critical product goals that require breakthrough work. Foremost is the need to simplify the use of Windows so users don't have to learn as many utilities and commands. Also important is ensuring that our architecture unifies concepts inside Windows, so that we limit both code and complexity. We need to allow PC users to have a "Virtual PC" that is always managed by software and support over an Internet connection. Customers are asking for greater scalability and reliability so they can count on Windows for all their applications. Our research will position us to lead in integrating new input techniques such as speech, handwriting and vision into our products. Many future PCs will be tablet-sized devices that allow you to read and annotate information as easily as you do with paper. We must also lead in enabling "knowledge management" , so that information inside a company is easy to find online, and so paper forms and storage can be replaced. In the future more non-PCs than PCs will be connected to the Internet, so we need to extend our work to intelligent phones and TVs. The boundary between Web sites and software products will blur as people expect all their data, including files, mail and schedule, to be accessible from any Internet device. We need to use advanced technology to make our Internet sites the best. Every one of these goals requires work across several of our product teams. I will measure myself by how much I can facilitate ambitious goals that will help customers and put us further ahead if we move quickly.

In addition, I will work with Steve to bring renewed focus and energy to Microsoft's working environment, so that we are even more responsive to changing customer needs and new technologies. We must continue to attract and motivate the kind of remarkable people who have made Microsoft so successful, and ensure that working at Microsoft is as enjoyable as it is challenging. We must create a flexible corporation that will continue to leverage the many strengths of our people - Microsoft's number-one asset - far into the future.

We already have an incredibly strong management team. Today's changes will build on the work of Bob Herbold, executive vice president and chief operating officer, who has already done so much to streamline and improve Microsoft's day-to-day operations. Bob will continue in these roles as well as acting as a senior emissary for the company.

Microsoft is almost a quarter-century old, but we are just at the beginning. The future makes me very excited about my job and working with all of the Microsoft team to continue to surprise the world with our achievements. We can all be incredibly proud of what we've built so far. But the future opportunities will far surpass everything we've achieved to date. I'm more enthusiastic about and committed to Microsoft than I've ever been.

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