Sustaining Windows Client Momentum
2003 Financial Analyst Meeting
July 24, 2003

JIM ALLCHIN: Good morning. When we talk about magic, I love to talk about Windows®, so that's what I'm going to talk about, the client momentum, and how we're going to continue to keep that moving ahead.

Even in a tough economy, the PC growth did come back a little bit. We went from negative territory last year into 3 percent this year. Our client business actually grew almost four times that, with 11 percent growth. So how are we actually sustaining that? Well, it's through Windows XP. And last year I talked about all the things that we were going to focus on, and we, in fact, focused on that, and with very good results. We've now shipped 130 million licenses of Windows XP. We pushed up, even from a very high number, our Pro mix, Windows Professional. In the fourth quarter we moved up to 70 percent, from our 60 percent, where we were last year. Probably the most exciting to me is the breakthrough scenarios and form factors. We now have about 40 different ODMs and OEMs making Tablet PCs, and about 45 ODMs and OEMS making Media Center PCs, which is pretty amazing. We're just getting started in this, so it's a very exciting area, in both the business as well as the consumer space.

Another area where I'm very excited is what's going on in terms of the media format, because that gives us a lot of integration with other devices that may be in the home or in the workplace. It also gives customers in the workplace technology that they can use in their business in more dramatic ways, if you're in a real estate office and the like.

I think one of the most interesting pushes we've made this year is in the content space. You may or may not have seen what we've done by moving into movies, with releases such as T2, with much higher format quality than what you have in a DVD, and it depends on how they do the encoding, but it can be up to three or four times DVD quality. Here's another one, Standing in the Shadows of Motown; again, it comes with Windows Media® format there.

In the coming months you'll see us come out with a lot more titles, and we're working with IMAX to basically have them use our technology for all of their films. We're also working with directors and writers, like James Cameron, for his work in the future. So we think that through the content effort that we're doing, simply because the quality is so good, and our digital rights management technology is so good, that those two together will help continue to foster the momentum in the Windows XP space.

Now, there's still plenty to do. There are probably still 350 million PCs with NT® 4 or Windows 9X on them. Just like I said last year, that's an opportunity, and we're continuing to move down the path to get those machines upgraded. We are continuing to move up the Pro mix—I've already mentioned that. And we are going to have a lot more breakthrough PC scenarios and form factors, even in this year before we get to "Longhorn."

Over here on this desk we have a whole variety of different form factors, many you may have seen but some you may not have. We have a series of tablets—in this case there are a couple of ruggedized tablets here. We have slates; this is one of the brand new slates. We have convertibles in a set of different varieties here, the HP one. We also have—these are all either slates or convertibles, where you have the keyboard and you spin it around, and you may have actually spent time in seeing these up close and personal. We have the original Media Center that was quite successful—it was in the Top 10 in retail revenue, in terms of SKUs available—very impressive. We have ViewSonic, another type of form factor. You'll notice this particular device here is an example of what the world is going to move to in terms of these form factors in the media center: this is an AV rack level system that doesn't look like the conventional PC. And you're going to see a lot more versions of things like this. These types of form factor changes give us the opportunity to move more into different uses in business, or different uses inside the home.

Of course, there are new technologies—in fact, I'll show you one in just a minute—that we think will increase our multi-PC household penetration as well. In emerging markets, it's going to, we think, grow maybe up to four times. Other markets, this next year we have efforts going on to make sure that we do a great job there in terms of winning real dollars from those markets.

Now, one problem that people say in this upgrading space is, "Should I really upgrade? What I have is sort of good enough." And we've faced that problem. This slide I showed to our sales force last week at our annual sales meeting, and what it is is, in this area it shows the top of the line, the premium that you could get from Dell in April 1998. And you can look at the specifications there; they look small today, but this was the top of the line at that point in time. It came with Windows 98 on it. On the other side is a machine from July 2003, which I just purchased, and it's from eMachines, and it has a 2.2 gigahertz Celeron, 128 megabytes of RAM, et cetera, et cetera. You can compare them.

Well, people I don't think realize—even if they don't change their experiences at all; I'll get to that in just a second—the amount of performance gain that they get just in terms of the raw hardware. So I just had the team do a few comparisons here about what kind of difference it really makes. And if you're in a knowledge worker situation and you're doing lots of different texts and replacements, and working, these kinds of incredible slowdowns in the old environment—or speedups if you're looking at the new—are pretty phenomenal. So you get something right away, and it's incredible. Now, I haven't even mentioned the fact of all the new experiences that you get. I mean, Windows 98, your applications might impact the operating system, you might be spending a lot more time rebooting, or restructuring, restoring the system versus Windows XP, which really doesn't have that kind of problem at all. We have all the media technology that's available, we have all the wireless technology that's available, and on, and on, and on. So from whether it's just raw performance, or whether it's the new experiences, it's night and day.

Now, what about price? It's absolutely amazing. This was the price from Dell, and this was the price including monitor; I actually bought the eMachine and it was less than $400. I can also tell you that I spent quite a bit of time on this particular machine, and it performs really well. It came with the Home Edition as a native part of it, shipped with it, and it was great. It was really, really a very nice system. The average today, just to be clear, and obviously if you want to do some very high-end things, you're going to want a much more powerful machine, but I did want to make the point that I don't think people have realized how much has really changed. And I could have set up a side-by-side demo, but just for time I just thought that the slide would get across the point.

And we also talk a little bit more about this, and whether or not there's a value proposition for moving to Windows XP and Office together. Now, what I have on this slide is basically an analysis that we did using the Gartner TCO assessment. We studied 13 organizations which had a range of a small number of desktops, 2,500 up to 120,000. There's an error there. And the net present value of the deployment of Office and Windows together went from $218,000 to $256 million. The average payback was 16 months. These were audited—these figures were audited by Gartner.

Well, that's the value. Well, how much pain is this to actually go through the deployment? Of course, the top is addressing that, but if you just look at deployments, I wanted to spend time, and last year we produced this report which KPMG audited. I guess this report was published in August or so time frame last year. I think it's available on our Web site. But this was a study that we did covering nine organizations, ranging from 250 to 70,000 desktops. And there's a dramatically smaller time to deploy Windows XP than prior systems, first.

Secondly, the app compatibility that people mainly worry about are custom apps. And this was the study that was done across these nine organizations of what the compatibility was. Now, this was last year. Windows XP has actually improved in compatibility since that time. For standard apps off the shelf, obviously the number of apps compatibility is much higher in a percentage.

And then, a very important number is just the amount of reduction in help desk full-time engineer employees that have to man the desk to be able to support a combined Windows XP/Office XP system. So, whether it's just doing what you're doing today, and you want to get to do it faster, or whether you want to take advantage of the new experiences, either way, there's a lot of momentum behind the upgrade.

Now, what's coming next? We are having Service Pack 2 for Windows XP coming out this fiscal year. Primarily not features, but there will be a few things that we're adding to that. We have a version of Media Center, an upgrade, coming out this year. And that will be announced in the next few months. Unfortunately I won't be showing it to you today because we haven't announced it. We have an update of the Plus! pack coming out, and I will be showing one feature of that which you may not have seen in just a few minutes. We have an update of the Tablet PC coming up this year.

There are a lot of great things in those updates. One of the things that I'm very happy about, though, is the synergy we're getting in some other products within Microsoft. A couple that I want to highlight is the Systems Management Server, which is the new release coming out, which really simplifies the deploying of Windows XP and Office. You can do one-button scripted deployment using Systems Management Server for Windows XP and Office. We think that will be a huge boon to the deployment for corporate accounts.

In terms of Office, there are a number of great synergies that exist. We have ClearType® in Windows XP, and the next version of Office has taken advantage of that in their reading pane, and I don't know if you've seen it, but it really makes reading on the screen a joy. And it makes it very, very simple to sit and read documents without eye strain. Another example of that synergy would be, we have great wireless support in Windows XP, and what Outlook® does in the next version of Office is take advantage of that with the way they're doing the caching in the e-mail client and calendaring systems. And it's night and day. If you have the new Outlook, and you're in a wireless situation, it is night and day how easy it is and you're not spending all your time synchronizing, it just happens behind the cover. And there are many other capabilities there that are coming around specific form factors, for example, the Tablet. The ones I just mentioned were just specifically related to Windows XP in general.

Then, another area that we're pushing on is synergy with other devices. I heard Bill mention the Mixer from Xbox®, that's an example how if you have Xbox in one room in the home, and you have Media Center in another room, they can end up sharing photos and music. And you'll see us do that for other content as well. And I have here a prototype, a reference design we're building which will be coming out soon. What this device is, it allows you to remote the Media Center user interface to TVs around your house. So, you plug your TV into this, and through the IR remote control that you have with Media Center, you can control the Media Center from another TV in your home.

Another area that we're working on is to bring up the awareness of all the great experiences that exist in Windows XP today. You may have heard about the Amazing Windows Experience campaign that we're working on. It's been going for some time, and we're continuing to touch a lot of people with it. We did a Dads and Grads Tour, we think we touched up to 11 million people. And this is not an advertising campaign. This is grass roots, to get out and touch people and show them what they can do. Media is a core part of what we're showing here, but it's everything from looking at what you can do with Messenger, that you can do video, and you can keep in touch with friends and family across the Internet. And we think that the more that we push on making people aware of what they can do with their native Windows XP systems, that will, again, help this momentum that's getting more people to say, "That old PC, that's just not what I should be using. I should have a new PC with Windows XP on it."

So, with that, I would like to bring out Roan Kang, who is going to give is an idea of some of that synergy that's happening between Office and the Tablet PC.

ROAN KANG: Thanks, Jim.

I'm really excited to show you guys how innovations in the new Microsoft Office system are going to take advantage of the power of the Windows XP Tablet PC Edition to really deliver greater value and improved productivity. The Microsoft Office team has been hard at work to integrate greater inking capacities into all the core Office applications. I'll show you how.

This is Word 2003. How many times have we all printed out documents and other people have sent us comments on them? You take a pen or pencil and you write annotations in the margin, and you have to send that hard copy back to the person so that they can incorporate those comments. Not anymore. If you have a Tablet PC and Word 2003, you can comment directly in the document just like this. So easy to update. Imagine the amount of time you're going to save.

Now, this is not just Word, but all the core Office applications. For example, Outlook® 2003, you can now e-mail in ink very easily. We find that about 60 percent of all e-mails are short e-mails like "Thanks" or "I'll see you at two." Well, now you can take care of those e-mails in the comfort of your office. You can work naturally, you can work on the plane or—my favorite—you can sit at home in front of the TV and take care of all those e-mails.

So now I want to show you a brand new application called OneNote™ 2003. This is a new digital note-taking program that creates a digital notebook on your PC laptop, desktop, or especially well on your tablet PC. Why would you need a digital note-taking program? Think about the deluge of information we all face today. Where do you take notes on that? If you're like me, before I had OneNote, some of those notes were on sticky notes, some of those are on my board, my bulletin board, some of them were on my paper notebook, some of them were on my PC, some of them were in my PDA. Wouldn't it be great to have one place to capture almost any type of information, and then organize and reuse it? Well, now you've got it. OneNote delivers these three top benefits: You take notes the way you want by capturing virtually any type of information in one place, and I'll show you how that's done; you can organize that information efficiently and easily, the way you prefer; and then you can reuse and share that easily like nothing before.

So what do I mean by "You can take notes the way you want?" Well, you'll notice here that I can capture virtually any type of information you can think of. You can type text here, right, you can type notes, you can handwrite your notes if you have a tablet PC and OneNote. You can capture photos and graphics, charts and PowerPoint® on the Web. You can even create audio, if you're at an important interview or meeting and you don't want to miss something, and I'll show you how to do that.

Now, if we go to this page, you'll notice that I have a mix of my handwriting and also typed text. I can only take notes to do this, right. Now if I want to take notes, you'll notice that just like paper I can write anywhere on the page. But even better than that, you have the ability to then move any of those notes as you see fit, simply by dragging and dropping them. You can also have all the rich authoring tools that you're familiar with, with Microsoft Office. For example, you can number or bullet your list. You can, of course, capture a diagram very handily, if somebody draws that on the board. And you can imagine how useful that is in brainstorming meetings, in conferences, in a lecture where you're learning something important.

Now, I promise you that you can capture virtually any type of information and OneNote delivers. Not only can you capture graphics and visual information, and handwriting and text, but you can actually record audio simply by clicking this one button here to record. Now, what happens is, not only is OneNote recording the audio that's happening right now, but it's better than a normal tape recorder, because it actually synchronizes that audio together with any notes that I choose to write on the page.

Now, what do I mean by this exactly? Well, if you'll notice, any note that I take now has a little audio icon next to it. And if I click that audio icon—so you can imagine how useful this is for journalists doing interviews, for salespeople at important client meetings, who don't want to miss anything, for a lawyer doing a deposition. The possibilities are almost endless.

Now, OneNote not only captures virtually any type of information in one convenient place on your PC, but it organizes that information as well. You'll notice that these tabs across the top are like sections of my notebook, kind of like a three-ring binder might have different sections. You can create as many sections as you want, and customize those sections to your needs. These tabs across the side represent the pages in my notebook. So you can customize the pages and those sections, kind of like an infinite notebook.

The other thing that happens all the time is, before I had OneNote I had trouble finding my notes. Who hasn't had that experience where you need that one phone number, a key piece of information, and you're flipping and flipping and flipping through your paper notebook, you're sunk, you'll never find it? Well, with OneNote all I have to do is go up into this box, type in any word I want to find; you'll notice that almost instantly it hits seven results of the word market. I can cycle through them by hitting Enter, or I can open up this results pane, and you'll notice that it links to not only my typed notes, but all of my handwritten notes, as well. So you can find the information you need within a matter of seconds now.

Finally, the last thing I want to show you about OneNote is that OneNote makes it so easy to share my notes. For some reason, I always end up being that poor sap at the brainstorming who has to copy down all the information from the whiteboard at the end of the meeting and then transcribe it. It used to take me hours. Now that job takes me seconds. All I have to do is e-mail my notes by clicking this single button that's integrated with Outlook 2003. You'll notice that in the body of the e-mail it's captured as HTML, and it's sent also as an attachment here. So what that means is, if I sent this whole room this e-mail you would all get the notes, and even if you didn't have OneNote 2003 yet, you'd still be able to read them, because they're HTML. If you did have OneNote, you'd be able to double-click that attachment and add those notes directly into your own notebook.

So that's OneNote 2003: It helps you capture virtually any information in one place, organize it the way you want, and reuse it easily. To conclude, I hope you've seen that the innovations in Microsoft Office systems, like Word and Outlook, as well as the new programs like OneNote, really take advantage of the power of the Windows XP Tablet PC Edition, to deliver greater value and more productivity to everybody.

Thank you.

JIM ALLCHIN: Thanks, Roan.

So, I'm going to switch gears over to the consumer side, and I mentioned I was going to show you a little piece of what's in the Plus! Digital Media Edition. And this is something that we had in the first version, but we've upgraded it in a significant way. This is called Photo Story.

And how many times have you wanted to take your photos and add some narration and the like, and share it with a family member? Well, it's very easy.

I bring up this wizard, I begin to build my Photo Story. I'm going to go ahead and grab all these pictures. I add them, and I can edit them right now—so, if there's one that, for example, I might not want to include—and just move ahead. At this point, I could narrate and walk through each of the slides. I'm not going to do that, for time. I'm just going to continue. I can add a title. And, I'm the author. And I need to go ahead and add a background. I'm going to add that first slide. And I'm going to add a little background music.

And this is asking me about the quality level; you may not be able to see it; that's how I want it to be displayed. It's asking me about the name. I'm just going to go ahead and say Photo Story 1 will be just fine. So, it's compiling it, putting it together. By the way, the size of the Photo Story when you're done is smaller than the pictures and audio individually. And here's a very important part that I wanted to highlight. This says, "Create a video CD of your story." So, a key improvement that we're making here is that you can select this, and then burn a CD, a video CD, that you can play in virtually any modern DVD player. So, even if you don't have a PC, you can be able to share it with friends and family or others that only have DVD players. In this particular case, I'm just going to go ahead and exit this.

And I'm going to approach things a little bit differently. I'm going to bring up the remote control for the Media Center, and I'm going to go down and I'm going to go search for that Photo Story, which is right here. And I'll start in just a second. Very simple to do. That was one point I was trying to make, it's simple in making video CDs. I also wanted to make the point that I just did this on a laptop, a new form factor. And when I mentioned multi-PC households, these types of form factors for a student or others in the house, we think are going to be very compelling. So, lots of different form factors, lots of new technology to show off those form factors. This will end in just a second.

So, now I'm going to switch back, if you will, to business, but I'm going to move ahead a little bit farther in the future than I've been showing here. The next thing that we want to show is work that we've been doing in the hardware innovation team, along with partners to build reference platforms for the new office worker. And Chad Magendanz is going to come out and give us a little demo of our work in that area.

Hey, Chad.

CHAD MAGENDANZ: Hey, Jim.

So, it's my pleasure to introduce you to our visions for the future business desktop, code-named "Athens." It's a collaborative effort between Hewlett-Packard and Microsoft. Now, our primary goal with Athens was to design and refine hardware and software as a system, to get the hardware and software in the usability labs, get the hardware and software on the developer's desk to really dramatically shorten the feedback loop, so that we have a tight loop between Microsoft and our industry partners, and we ensure that the end user is never the final integration point.

Now, the most obvious feature of Athens is the display. Everybody remarks on it. It has obvious user appeal. But we're seeing some dramatic productivity benefits of a display like this as well.

So, for example, your typical Office tasks take about 30 percent less time on a larger display like this. We're also seeing a 17 percent improvement in reading speed with high-density displays.

So there is some real enterprise value there but obviously the module for this LCD is fairly expensive right now. Even right now it's about a thousand dollars, but projections from a display search show that the average selling price of this same resolution display in a 20-inch form factor should be less than $400 by the end of '04, so it's really coming down in price.

What may be less obvious about this display is the work that's gone into consolidating a lot of the cables and components so that everything is within easy reach for the user.

So, for example, this one VESA standard cable between the CPU and the display that has high-speed USB and video drives the slim form factor drive bay, integrated USB speakers, two element array microphones, video camera and a Bluetooth transceiver that drives this wireless keyboard that recharges right here in the base, wireless mouse and a cordless handset.

Athens also represents some long-term investments we've been making in power and security. So, for example, when I return to the office I can see at a glance that I've got notifications. These were updated while the machine was in an idle state. Just powering down to a standby state while the machine is idle typically saves about 78 percent of the enterprise desktop power usage, and that ends up being a real cost savings.

Now, just because it's powered down saving power and it's up in less than two seconds, that's only half the battle. We really want to streamline the authentication process as well.

So you can obviously just walk up, hit a key, hit the power button or insert your smart card. We've been focusing on making security convenient as well. Now, I have here a device; it's a flash drive. You probably have one already but this one has an integrated smart card chip and a biometric sensor. So when I return from the office I just insert this into my PC and it works like the ignition key for my car. So not only was I carrying my documents around securely but now I use it just like a key to log into my device. So all I do is press my thumb to the device and I'm right back where I left off.

So you can see in my environment here I'm taking advantage of the additional screen real estate. I can do side-by-side documents. I was in the middle of an online training session and this is exactly where I left things off. But what if I have an incoming call? So if I'm sitting here watching my video and I get an incoming call I can answer it right here with the speakerphone button on the keyboard, or I could pick up the handset.

"Hey, Mike, can you hold on?"

So while I'm talking to Mike I also have information about Mike because it did a reverse lookup on the caller ID information. So it has my Outlook address information but it has my communication history, all the files I've exchanged with him, all the meetings I've had with him. It could even use services on the Internet to find out the weather in his town or you name it; the potential is there for a lot of integration that we've just touched on.

"Hey, Mike, I'm going to call you back later, okay?"

So you'll notice that when I also hang up it resumes my training session, so it does smart things like pause the training session so it wasn't a source of background noise. It also set my presence information so that it indicated that I was on the phone to others.

Now, our goal here is not to introduce a lot of complexity. You know, did it matter that that was a PBX call incoming or Voice over IP? Most users, they don't even know what that is. In fact, a lot of developers don't want to deal with the complexity of the telephony service that's on the back end.

So our broad goal is to work with the most devices, services, and media forms and integrate them into a nice, consistent user interface and application interface for all of our application developers. So voice, video, text, real-time or recorded, it's all the same interface.

To illustrate that I'm actually going to make a call here from my Smartphone over to this off-the-shelf Sony Ericsson phone here. And this has Bluetooth capability so when this rings it's actually going to pick up on the PC right here and I can do the same thing that I just did with the incoming PBX call.

"Can you hear me now?" (Laughter.)

It's that simple. It's the same experience. It did the same reverse lookup on the phone number and I have all the information I had available if it was a PBX call.

Now, we have a lot of information we're bombarding the user with, and we have a responsibility to make sure the user stays in control of that information. Now, what do you do in your office right now? Well, you close the office door, or if you're in a cubicle you put a little yellow sticky saying "Do not disturb" or "e-mail only."

Well, the equivalent of that in the Athens world is the Do Not Disturb button. So now I press that button; it's not only obvious on my keyboard but my CPU changes, so it's very obvious to others that now I don't want to be interrupted, I'm in productivity mode. Incoming calls can come in and they'll instantly be routed to voice mail, as you can see right here. If I want to bring up the voice mail I just hit the Voice Mail button on my keyboard and I go to my unified inbox here. I can screen the calls on my display but it doesn't interrupt my workflow: no pop-ups, no audible alerts.

Now, outgoing calls are a challenge as well a lot of times, like ad hoc conferencing can be difficult. Well, in here you can still initiate a call just by tapping on the handset, or you can pick it up, do voice calling. You can select a user from your buddy list. Here I'm going to initiate a call to Carl, and while that call is ongoing I'm going to actually bring in another caller. So in this case it's a Voice over IP call.

"Hey, Carl, can you hold on while I conference the meeting?"

CARL: Sure, no problem.

CHAD MAGENDANZ: And so all I'm going to do is drag Edie over here and that's going to add Edie to the conversation. I didn't have to set up a bridge, I didn't have to put anybody on hold, didn't have to risk dropping the call.

EDIE: Hey, Chad, what's up?

CHAD MAGENDANZ: "I'm just showing off the ad hoc conferencing capabilities."

I can exchange files, whiteboard spaces, presentations. This is really leveraging the rich user experience in the PC to do what was a complicated task on the telephone.

"Thanks, guys."

So what is Athens? Well, Athens represents the next-generation PC that really pulls together appliance-like simplicity, cable reduction and intuitive system controls, but we're really adding value to your call, surfacing information that's already on your PC or on the Internet in ways to help you communicate more effectively. It's really a dramatic first step to bridging the artificial boundaries we've created between our networks that communicate between machines and those to communicate between people.

Thank you very much.

JIM ALLCHIN: Thanks, Chad.

So as we move even farther to the future, the way we think about the technology evolution is somewhat similar to the way TVs have evolved. When I grew up I learned how to change, too. I learned about vertical hold. I actually learned about hitting the side of the TV. And then after a few years we moved to transistors, sort of the vertical hold problem went away, but then there was a new problem that was color tint that you had to get down and tweak, and it became good enough for the masses.

Where we are today is, the TVs have gotten to a very refined level. The reliability is quite high. The type of technology that's being integrated in sort of understands task-specific things, you know—I want to see sports and the like—so it's moved up.

Well, you can make that same analogy to where we are in the PCs and, frankly, with our software, and we're sort of in the evolving technology phase. Most people in this room probably don't remember what HIMEM.sys is. That, if you were an old DOS person or Windows 3.1 person, you knew what that was because you sort of had to know what it was, but you don't have to know that now. But there are still many things that you shouldn't have to know that you still know, so we're on the path to move up to this refined technology space, and we're doing that through this Longhorn initiative that Bill talked about.

Now, Bill mentioned some scenarios about what we're trying to accomplish there. I just wanted to add that there's a tremendous amount of underpinning that we're spending the R&D dollars on to move up in terms of that foundation to go with the great scenarios, for example, like what Chad was just showing.

So these are just some of the areas that we consider to be critical, that in my organization we have a significant number of people working on. Applications. Wouldn't it be great to just go out to the Internet, grab an app and not worry what it's going to do to your machine, because today some might have devious things in it? Well, we're working on technologies to give a better quality of experience on the wide plethora of apps that exist. The same with devices.

And I'm not going to go through the list, but every one of these are very important to us, and it's an investment that will make the scenarios above so much better if we nail these.

Now, the next step for Longhorn, we've had some design previews already. We've shared with partners as well as ISVs and IHVs what we're doing. We do have regular builds running of this. The next big event is PDC, which is our Professional Developer Conference, which is coming up at the end of October. We will be handing out CDs there to get the developers going, to let them see the great capability that we're putting into Windows, and then later next year we will be doing Beta 1, which will be a broad beta of the technology of Windows code-named Longhorn. As Bill said, there are other pieces coming in the Longhorn wave but I'm just talking about the client here.

So that's it. It's a great future. We will sustain the momentum in Windows and the future; we're deeply invested in it and it looks incredibly bright.

Thank you very much.

Pieter Knook is next. And one of the changes that we made organizationally is that Pieter did the mobile devices and in my organization before I had the embedded systems. What we did is, for a variety of great synergistic reasons we combined the embedded into Pieter's organization, and Pieter now works for me, and we will be spending more time looking at the great synergies that we can have from Smartphones and Pocket PCs with the regular PC.

With that, Pieter Knook.

END

Due to the varying sound quality and subject matter of tapes, the information in this transcript may contain inaccuracies.