Welcome and Introduction
2003 Financial Analyst Meeting
July 24, 2003

ANNOUNCER: Ladies and gentlemen, please welcome Senior Director, Investor Relations, Curt Anderson.

CURT ANDERSON: Good morning. On behalf of the Investor Relations team, I'd like to welcome you to the financial analysts meeting. It's a beautiful day in Redmond, and I apologize that we're going to lock you indoors all day. We don't usually get great weather like this in Seattle, so enjoy what little of it you're going to get to today, and please do enjoy the day. We've got a very busy agenda and we're getting off to a little bit of a late start.

I want to extend a warm welcome to the folks that are joining us online today. Today's event is being broadcast live via webcast on the Microsoft Investor Relations Web site. The event will also be available for you folks after the event on replay and will include the PowerPoint® slides, as well as transcripts. So please do access that as well.

Well, I've had a chance to meet many of you before, and since I'm new to the role, I'm looking forward to meeting more of you today and getting to know you and getting a better understanding of your needs and concerns with regards to Microsoft and Investor Relations.

Since I'm new to the role, I'd like to extend an invitation to all of you to drop a line to me, either that or over the phone, and let me know how we're doing as an IR team, and let me know what we can do to better help serve your needs.

Before we get started, I'd like to take just a minute and acknowledge a few people that have been very instrumental in making this day a success. I really couldn't have done it without them. So I'd like you to join me in thanking Tracy Zettner, Michael Noesen, and the entire crew here at the conference. Without them, this event couldn't have gone off as well as it could have.

(Applause.)

I'd also like to thank our speakers and their handlers. It's a very busy time around Microsoft this time of year, and they've pulled great feats to try to make today a success. So I'd like to thank the speakers and their handlers as well.

And then finally I'd like to thank all of you for making the long journey to Redmond. I realize that it's kind of tough to get here from the East Coast, so thanks for dedicating two full days to come out here and join us, and hopefully we'll make it worth your while.

Well, as you learned last week, despite a challenging environment, we had a great FY03—close to double-digit growth rates in all of our core businesses, and really across all our seven businesses, and managed to make some pretty key investments that'll cement our success for the future. FY04 looks to be equally as challenging, but we've got a great plan in place and I'm confident that it'll be a success.

Today you're going to hear from leaders from each of our seven businesses. They'll offer their own perspectives on the progress we've made to date and some of the directions and opportunities that lie ahead.

In addition to hearing from the seven business group leaders, I'm pleased to let you know that we're going to get a few minutes of Orlando Ayala's time, who just recently began leading the charge in our small and medium business space. As you know, Orlando has been an instrumental individual in our sales force for many years and has agreed to take on this new role, leading the charge in our small and midmarket partner space. So we're looking forward to getting just a few minutes of his time today.

As usual, you'll hear from Bill Gates, Steve Ballmer, and John Connors, and they'll provide their unique perspectives on the year that we just closed out, as well as the future that lies ahead for us. And one of my very favorite parts of FAM is the demo lineup, and this year is no great exception. We've got a fantastic lineup of demos from across all the businesses; I think 13 or 14 of them. So this might actually be more aptly named Demofest 2003 rather than FAM. So hopefully you'll get a chance to see some of that.

We'll have some examples of some new form factors in the client space, probably a sneak preview right here; some exciting information from the information workers space on team and individual productivity and collaboration. You'll see some great examples of some demos from the mobile and embedded space, as well as some examples of how we're doing a great job of integrating the products from all of our business units.

So I hope you come away from today's session excited about our future and excited about the investments we're making and having a little bit better understanding of the direction we're going to take the company going forward.

Let me just take a quick second and introduce today's speakers and their topics.

Bill Gates will lead off here shortly with a quick presentation of his perspective on how deeply focused we are in delivering more value to our customers and how we're delivering value through integrated innovation.

Following that, Jim Allchin will give us a review of the client business, provide some thoughts on sustaining Windows XP momentum, and spend some time discussing the opportunities and drivers for growth in that business.

Pieter Knook will follow with some notes on the progress we've made in the mobile and embedded space to date and some thoughts on our future there.

Jeff Raikes will be on to talk about information workers and focus again on collaboration and productivity and where we're taking those products.

As I mentioned already, Orlando Ayala is going to join us for about 15 minutes. We'd like to add more to his time, but unfortunately, with the business schedule, we couldn't quite fit it all in. Orlando is going to give you some insight on how we plan to go after that small and midmarket business space. And this is a tremendous opportunity for us, so I think you'll get a lot out of what Orlando has to say.

Doug Burgum will follow with some perspective on the future of Microsoft Business Solutions and some of the great things we're doing there to deliver business value for our small and medium-size business customers.

Eric Rudder will join us then and talk a little bit about the great progress we've made in the server space. All of you have seen the fantastic numbers that division has been putting up, and we're looking for great performance from them in the future. Eric will spend some time focusing on how we're delivering innovation and integration across the various products there.

After lunch we'll kick it off with Robbie Bach. He'll cover the Home and Entertainment Division and give us some insight on our broad consumer strategies, which will include Xbox®, TV, PC games and hardware. So you'll get a chance to see what's going on there.

And then the last business we'll cover today is MSN® with Yusuf Mehdi, and Yusuf will come and join us and share some of his thoughts on the progress we're making in the MSN division.

Then we'll lead off with John Connors, who will spend some time recapping how we finished off '03, talk a little bit about where we're headed in '04, and then hopefully give you some insight on some of the key investments we're making for our future and some of the key drivers for FY04, as he always does.

And then finally we'll close the day out with Steve Ballmer, who will offer his perspectives on the year and talk to you a little bit more in detail about what we're doing to secure our long-term success as a company. And then following Steve we'll have Q&A with Bill, Steve, and John, as we normally do.

We hope you'll join us for the reception and dinner immediately following Q&A. The reception will be out in the patio just outside the McKinley Room, which is at the opposite end of the building where you walked in this morning. So as you can see, we've got a very full agenda today. I'm sure you'll get a lot out of the day. Please stop us at any time if you need anything and we can help out.

I did want to take a second and talk a little bit about a couple of logistics here. As most of you have probably already discovered, we are trying to go with paperless delivery of the presentations this year, so we will no longer be handing out hard copy. That's sort of our attempt at saving a few trees.

It looks like most of you have probably successfully gotten online and accessed that. If you are having trouble, please just throw up that white flag near your desk and support personnel will be down to help you out and get you online there.

From the site, you'll be able to do a couple of things. One, you'll be able to access our agenda for the day. You'll be able to download the PowerPoint presentations to your laptop to take home with you. You can also take notes as you wish on your own laptop. And then, importantly, you can also access the evaluation tool, which I think the gentleman this morning showed you. We'd really appreciate it if you could take some time to complete that.

Across the hall, demo booths; you guys probably had breakfast there this morning so you saw most of the things we're offering there; showcasing some great technologies from the Mobile Device Division, Tablet PC, MSN, Office 2003, OneNote™, CRM and MapPoint®, and then, of course, you can test out some of the latest Xbox games as well. So take a look at the demo booth when you have a few minutes on break and see what you think over there.

We have MS Investor terminals throughout the building here to give you a chance to access the latest news, check up on the market. You can also take a look at that during the breaks as well. Communications service is across in the St. Helen's Room, basically Internet connections, telephone, printer and fax. Go ahead and avail yourself to those services as you need them.

If you did drive here today, make sure you did register your car. Security will tow your car, if it hasn't been registered, without notice.

I also wanted to mention that lunch and dinner will be served in the McKinley Room, as I mentioned earlier. That, again, is at the opposite end of the building.

Baggage check—if you've got bags or things you want to check, it's in the last room. I think it's in the first hallway as you came in. Please check in there to drop off any bags that you don't want to tote around for the day.

Finally, as I mentioned earlier, we'd really appreciate it if you could take time to fill out an evaluation form this afternoon. We'd like your feedback on the event today, what you think of that and how we can improve; evaluations for the speakers.

And then I'd like also for you to give us some feedback from an IR perspective and let us know how we're doing and how we can better serve your needs. That, again, is on the eval tab on your online event management tool. Please take some time to fill that out. As an incentive, we're going to raffle off a couple of gifts at the end of the day for those of you who have completed the evaluation. So take a few minutes to do that, if you would.

The gift—I think you all picked this up. I'm sure you all—a few of you stopped me and asked that you would have rather had a small, one-time dividend than the individual gift here, but you can enjoy this and maybe take an opportunity to download some pictures or music or even your PowerPoint slides for the day there.

Last but not least, I'd like to just briefly introduce the IR team. I won't make them come down here, but they're in the back: Amy Hood, Brett Iversen, Cathay Corley, Kristy Kearney, Dennie Muscarella, Tracy Zettner, and Michelle Sutter. That's my fantastic team. And thank you guys for all your hard work this week. Please do stop them when you see them today and ask them any questions you'd like and get to know them, because we're your window into the company. And, again, please let us know if there's anything else we can do to help you out today.

With that, I'd like to welcome Bill Gates, the Chairman and Chief Software Architect. Thanks, Bill.

END

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