Back to agenda

WILL POOLE: Thank you. Good morning. So I'm pleased to make a somewhat uncharacteristic announcement for Microsoft: We are ahead of schedule today, which is great. But even more exciting to me is that we are ahead of our announced schedule for the delivery of our product yesterday, formerly code-named "Longhorn," and now known as Windows Vista. My goal as the leader of the client business will be to keep us ahead of schedule on both those topics.

You know, overall, we've had a very good year, and I've got three big topics to talk to you about over the next 45 minutes. First will be to recap how we've done in FY 05. Second will be to tell you, but probably more importantly show you with a fairly intensive set of demonstrations, what's happening with Windows Vista. And the third will be to give you an idea of what our priorities and expectations are for FY06.

Looking back over the year, we've taken a very large, substantial business, the Windows client business, and we've been able to consistently and predictably grow it. I'm very proud of how we've done that, and of our accomplishments over the past few years with the Windows client business.

In FY05, we delivered quite strong revenue results, growing about 6 percent, or $700 million, to a record $12.2 billion in sales.

In FY05, the PC market grew about 12 percent, and we saw solid growth in all markets with the exception of Japan, and with especially strong growth in emerging markets, particularly China and Latin America. As you know, our OEM business is what drives the majority of the Windows client revenue, about 80 percent, and our OEM revenue grew by 10 percent last year—again, strong results.

We've had very nice progress on our global efforts around anti-piracy as well, and those range from our enforcement efforts to the piloting and now introduction of a substantial program called Windows Genuine Advantage, or WGA. In the 10-month pilot that we had going in the marketplace over FY05, we had over 40 million Windows customers validate the authenticity or validate that the software they are running is genuine, in order to confirm that they can get access to future updates and services from Microsoft.

We've also seen that the revenue from our commercial and retail licensing business certainly had some challenges. We saw a 9 percent decline for the year in FY05. Our substantial challenge has been signing our multiyear enterprise agreements. And we believe that predominantly has been driven by the uncertainty among our customers around the timing and feature set and availability of our new operating system offerings.

From the retail perspective, we had a decline, which we always expect given how long the operating system has been in market, so this is pretty much characteristic. And both those points, the availability of our new operating system and driving retail sales up again, are things that we'll be addressing with the introduction of Windows Vista over the course of the next year.

Another area that we continued to focus on in FY05 is driving our premium mix. And that's a key area where we've been able to achieve higher financial performance in our business over time. That means both the professional SKU as well as our Windows XP Media Center Edition and Tablet PC products. Within the OEM channel we had about a 50 percent premium mix that remained flat in FY05. However, our unit growth for Media Center Edition itself was tremendous—about a 300 percent unit growth in FY05 compared to FY04. We also are seeing continued growth and momentum with the Tablet PC. A great example of that is the IBM Lenovo ThinkPad Tablet. It's absolutely a great product, and there are many other very excellent tablet designs that have been coming to market over the course of the last 12 months, and we see even more coming out over the next 12.

Finally, one of our biggest accomplishments over the course of FY05 was the introduction of Windows XP Service Pack 2. And we have been exceptionally focused on addressing the security issues that our customers have been facing. Shipping SP2 was an exceptionally high priority for us. We brought it to market. We actually distribute it online. And we were able to achieve over 218 million downloads of SP2 since its introduction last August. And then if you look broadly in the marketplace at consumer PCs, which are the easiest to measure for us, we see over two-thirds of consumer PCs are now actually running SP2. So we feel really very good about how well we've been able to help address security problems for consumers as well as enterprises, and get that software broadly adopted in the marketplace.

You will see that we will continue to emphasize the work in security in Windows Vista—and you heard Bill talk about that a bit this morning, and you'll see more of that in my demonstrations today.

We closed FY05 in April through the end of the year with the introduction of our Start Something global advertising campaign. This is the largest marketing initiative in the history of Windows. It's a 15 month–long campaign, and one that really highlights the countless ways in which people—everyday users, be they business users or consumers—can really bring their passions and realize their dreams and aspirations as a result of using the hundreds of thousands of software products and devices, and all the value that comes to them through the PC ecosystem built around Windows. Our goal with the Start Something campaign is to improve the brand value perceptions and increase preference for Windows over time—and clearly Windows is one of Microsoft's most valuable assets, so we feel very strongly about the importance of making this investment starting this year and continuing it through up to the Windows Vista launch next year, where it will fold very nicely into our objectives there.

I mentioned last year about our efforts in emerging markets. This is an area that for us initially started a bit on the defensive side a couple years ago. We are now feeling very good about how we've been able to engage from a product as well as a marketing, sales, and government relations perspective.

The first thing we've been doing is to really grow our portfolio products with which we can engage. That's been evidenced most clearly by the Windows XP Starter Edition, which has been released in 22 countries and in six languages. Some of the locales where you're seeing it now are Thailand, Malaysia, Indonesia, India, and Latin America. We've really looked to address the needs of first-time users through a combination of affordability, local language availability, and ease-of-use features. And I'm pleased to announce today that we, as of last week, reached a milestone of 100,000 units of Windows XP Starter Edition sold in the markets I mentioned. We feel very good about how this has gotten going, and we have I think a lot of good opportunities ahead of us as we work closely with local governments and others who want to bring PC technology to first-time PC users.

The second area in our emerging markets efforts has been around recapturing revenue, really looking at the issues around piracy that Steve mentioned this morning, and trying to address the global phenomenon. If you look at the numbers BSA points to, about a 35 percent software piracy on a worldwide basis, that's a $31 billion loss for the industry overall. We are a big player, and we see a lot of issues around counterfeiting and piracy that we believe can create a huge amount of opportunity for us if we continue to execute well.

In addition to doing enforcement work, shutting down counterfeit factories, looking at resellers who are basically loading software and then charging the customer for it, we also have been working very hard to differentiate the software value that you get when you have a legitimate or genuine product versus a counterfeit product. And that's really what the Windows Genuine Advantage Program is all about.

In addition to the goal of differentiating so people can tell if they're genuine or not, we also are providing additional value to customers such that they see a benefit from actually going out and validating their software. They can download additional updates and so on; that really helps them see that there's a reason to buy Genuine.

We've also been looking at some efforts around support-based differentiation, which have gone very well, helping our system builders and other partners who sell legitimate software offer better support services to their customers.

The third area around emerging markets has been specifically in expanding our markets. And that's looking at the problem of how to get to those 400 million households that we see out in the marketplace by 2008 who are first-time PC users, who have an opportunity to buy a PC but maybe have not been presented with an offer that works for them.

So we're looking at trials, for example, with large telecommunications companies, who are offering a Windows PC bundled with broadband subscription, for example, to give a very low monthly cost between $13 to $15 to get a combination of connectivity plus a PC, and go out there and start to capture some of that customer base that's available. So you'll see us expecting, over the next couple of years, to substantially increase our engagement with telcos and other entities who are active in the market to go after these customers.

We certainly have a number of challenges as we think about how to grow the Windows Client business. And the biggest challenge, by far, is looking at our past success. We have a "it's good enough" problem, and it's one that we're going to continue to work to overcome, simply recognizing that customers are frequently judging the value of Microsoft software by code in Windows that was written between five and 10 years ago, and they're finding that the software that they have right now works for them. They need to be convinced of why they should buy more. With Windows Vista, we're working to show people that past is not, in fact, good enough.

A second area is looking at open source. There have certainly been perceptions within the enterprise that open source is a less expensive solution for desktop computing. Through our Get the Facts and other campaigns, we're showing that that is largely not the case. And we've fitted emerging markets, the phenomenon of what we call 24-hour Linux, where a customer buys a Linux-based PC, a small business or a consumer, takes it home and then walks down the street and puts a pirated copy of Windows on that PC.

And the third challenge we look at is in the consumer space. We certainly recognize Apple's success with the iPod. We see that there's a bit of a halo effect that comes with the success of the iPod, and it's enabling them to more effectively go after PC users and sell them future Apple products. So all three of those areas are ones that you will see us addressing over the next couple of years in different ways.

One of the ways that we try to figure out how to specifically go after growth, as well as deal with market challenges, is to understand really what it is that drives people to purchase a new operating system. So we do a lot of research, as you'd expect, to understand customer perceptions, to understand what are the driving factors, what they value most. And here you can see listed, in approximate order of importance to these customers, how it is that we see people making decisions around buying a new operating system.

They really care a lot about compatibility; they care that their applications work and the devices work. So we invest a huge amount in each new release of the operating system to address and maintain and deliver increasing compatibility. They care about features that are important. They care about features particularly that solve problems they have, that address productivity or enable new scenarios. Security and quality, we actually feel like that has been an inhibitor in the past, but in the future will actually become a reason why people will be buying operating systems, because it will deliver them substantially more security and quality. Moving down the list, cost, availability, and brand preference are all very important as well.

Let's look at Windows Vista and these OS purchasing drivers from the perspective of the enterprise. The Number One thing that people want is to get more done. In a world of more, more, more, how can my computer, sitting on my desktop, make it more effective, more efficient, for me to do my job every day? We believe that we can deliver that. We can deliver increased productivity and really help people deal with the information overload and the workplace challenges that they face.

We also see our IT customers are very concerned about lowering cost. You've seen us continue to work on driving cost down through our various desktop deployment initiatives and other efforts with our current products, but you also will see that happen even more in Windows Vista. We think that we have an opportunity to knock as much as 25 percent of the annual cost of desktop management away from a Windows Vista-based PC in the coming years.

And third is looking at a theme of connectivity. In a world where wireless connectivity continues to pervade the workplace as well as everything from Starbucks to people's homes, we need to have people be able to move seamlessly between all of these different points of connectivity, to be secure, and to have the information that they want available to them when they want it. All of these things are very important in the purchasing decision for a small business as well as enterprise customers, and you're going to see substantial value there in Windows Vista.

From the consumer perspective, they tell us don't deliver new value until you give me peace of mind, until I can feel confident that my PC's going to just work. What are the features that we can deliver that are going to increase security so that it's not day-to-day problem. It's going to make them feel comfortable having their kids put a PC into their bedroom, that they're not going to be stalked by people online, that they're going to have the right level of child safety that they expect.

Once we've addressed that issue, we then need to make sure that we can give the consumers the ability to get more from their life, put this technology to work for them, for entertainment, for education, for communication, whatever it might be. And then to do all of this in the increasingly busy world of more, more, more. We need to put this into context so that the consumer can focus on what they want to do; they can organize their digital life in a way that makes them feel more at home with the technology, more able to adopt current and new technologies as they come along.

So with that, I'd now like to ask Shanen Boettcher to come out and show you, because I think showing is always so much better than telling, quite a few demos about Windows Vista. So, Shanen, take it away.

SHANEN BOETTCHER: Thank you, Will. Good morning. I'm really excited here today to share Windows Vista with you, make it real for you. With the release of Beta 1 yesterday, we've been out on the road talking with analysts and reviewers and customers in our field. And the response has really been overwhelmingly positive. They're seeing the business value, they're seeing the excitement in the features, and the things that Will talked about.

We're going to talk a little bit about business value, talk about how Windows Vista is driving cost out of the IT equation, around deployment, management, and security. I want to also talk about how Windows Vista is really supercharging information, or for productivity, giving them clarity, allowing them to focus on the things that matter most to them. I also want to talk a little bit about the platform, and some of the next-generation applications that are going to be possible on the WinFX platform and the Windows Vista platform.

And with that, let's talk about business value, beginning with deployment. You know, industrywide, it's very commonplace to use imaging technologies to deploy and manage Windows desktop. But in the past, Windows hasn't had a very deep understanding of images, and as a result there's been a proliferation of these images in the organization. That's because images are required for specific languages, for specific types of hardware, for specific types of application sets, and each image costs about $100,000 to manage within an organization.

Windows Vista includes a single worldwide binary, so there's a single worldwide core for Windows that's going to reduce those images per language. There's also a single hardware list, or HAL, that's supported with Windows Vista, allowing the same image to be deployed across laptops, Tablet PCs, and desktops. And the third thing is this Windows Imaging format, a file format that's going to allow us to do what we call "single instancing," putting images together, and it's going to allow us to more easily manage these images. So altogether we think we can, at minimum, reduce the number of images inside a company by 50 percent. And that's important because medium-sized companies have anywhere from 20 to 50 images; large companies can have hundreds of them.

Let's look at an example. Here I've got two images: a base desktop and a sales desktop, and they differ in that the sales desktop has a set of applications that's specific to the sales force, such as CRM applications. In the past, this has meant two separate images across different hardware types and languages.

Here's the WIM file and it's putting the two together. It's taking the deltas of those two and compressing them into a very small deployable image file. So each of these images is about 8 to 9 gigabytes, and you can see that it's compressed it down to about 2 GB in the WIM file format that I can then roll out across my organization.

What's nice also about the WIM file format is that it can be edited offline. In the past when you've worked with images you'd have to start a computer, apply an update, a new driver, a new Help file, for example, then snap a new image and add that to your library of images to manage. Here we can simply copy and paste if I want to update that image with a new Help file. I just updated that image. I'm ready to roll. When I show this to IT managers, they see the cost savings immediately that's available to them.

Let's talk about management of PCs. One of the investments here, just one, is event management. These are things that the PCs report are going on within them, and IT professionals want to take a look at all the events that are coming in. Today, each PC is really an island of events. With Windows Vista, though, we have the ability to forward events to a central console, and so here you can see a global log of events reporting in from across the whole organization.

What's more, we've also schematized the events in XML. So, they have a very known structure, which makes this much easier to program against and automate. So, I can actually go ahead and attach a specific task. If I see a warning or an error that I want to take action on, I can automate it by creating an event or a task to execute at that moment. When I see that event, I can automatically restart a service, apply an update, and so forth. That's automation. That's taking costs out of the management of PCs in the organization. That's business value.

Let's talk about security. One of the things that we're doing, an important one, is really looking at the infrastructure around the user accounts, and the privilege around which they run. As far back as Windows NT we introduced the idea of standard user accounts and administrator accounts. The idea is that a standard user account runs in more of a safe sandbox type of an area in the system. What has happened, though, is that with previous versions of the OS it's been a little bit of a tradeoff when you're running as one of these standard users, in terms of the things that you can do, like changing settings on the PC or installing applications. Even application vendors have come to assume people are running as administrator. And today, about 85 percent of corporate users do run as administrator, which is great for convenience, but it also means that everything that they do has administrator privilege, so there's super-user privilege on the machine. If they get malware or spyware on the machine, it too can run as administrator, so it's very important that we keep people more in a protected mode, or provide user account protection, as we're calling it.

What I want to do here is compare the experience on Windows XP running as a standard user and then move to Windows Vista, and show you the difference. I want to change the time zone that I'm in. As a standard user on Windows XP, I'm not allowed to do that operation. Or maybe I want to adjust the power settings for my PC. Again, I'm not able to do these. And these are the simple things that people want to be able to do but cannot without running as an administrator. With Windows Vista, we're getting more granular in terms of the things that people can do as a standard user. So, for example, as I showed you with the clock, what we are able to do here are things like change the time zone, and then there still are administrator actions that are needed. Changing the time itself of the system is, indeed, an administrative privilege, because it is based on authentication; Kerberos authentication uses the system time, logging uses the system time. What we do is allow for you to step up to a protected administrator mode just for a particular action. I can enter a password and just change the time, and then drop back down into that protected mode for standard users.

The same is true with power options. And then, if I need to install an application, which would require administrative privilege, again, I can just step up or escalate just for that particular operation, and then resume back down. This is important; you're going to see this used as an infrastructure throughout the product with applications.

We're also focused on compatibility. We're actually virtualizing system file areas, as well as the registry, so that legacy applications have compatibility but people can still run in a protected mode. You're going to see us use this, as well, in areas like parental control and safe browsing.

Let's talk about information worker productivity. One exciting thing is new form factors that are available. You've got a PC, a new laptop, it's got a screen on the top of the lid, and the laptop is actually off right now. This display gives me quick access to information. So it's a platform for being able to access things quickly such as a calendar of events. How many times have you been on your way to a meeting and you want to quickly check to see what meeting room you're in, or you want to take a quick glance at e-mail?

This is a platform; you can see that Office is working on this now, and it talks to Outlook on the PC to make this information readily available even when the PC is off. I can do things like control Windows Media Player, for example, listening to music and the like. We expect this platform to be used by a number of ISVs to expose this kind of quick access to information on the lid of the PC. Of course, this new PC form factor is riding on the momentum of mobile computing, of convenient computing. We're going to see, I think, a lot of PCs come out with this type of a feature to drive new PC sales.

So what happens when we actually open up the laptop for information workers? How do things get better in that environment? Windows Vista is really about clarity and giving people focus. You're going to see that throughout the operating system, in terms of its design aesthetic, its use, and you're going to see thumbnails and previews of everything that's going on. So here's an example of me looking in a folder. You can see each of the individual icons is displaying the front page of the document, and even the folders are showing you live previews of the information that's stored inside. This kind of live preview focus that we give people, such direct access to information is going to be a theme throughout the system.

Let's talk about Search capabilities. There's really advanced Search built into Windows Vista. And here you can see I've got 1,600 items within the scope of my document, of my information. Let me show you a quick example. Let's say I want to search for things about Australia. You can see how quickly I get down to information just partially typing that word, down to 50 items. This is searching across all types of information—e-mail, documents, photos, spreadsheets—all with those live preview capabilities, even the file folders.

We even go beyond just simple Search. We can always have the ability to drill down further in Windows Vista. In this Quick Search box I can build a complex query, or a compound query to further reduce my scope. So here it's Australia, and I'm also applying an additional parameter, budget, to find just the information that I'm looking for. And this Quick Search box is going to be everywhere in the system. It's going to allow you to use it even in places like the Start menu.

Finding an application can often be like looking for a document. If I want to find Remote Desktop, for example, I start typing Remote Desktop, and I can launch that application. Even in areas like the Control Panel, you're going to see the Quick Search box appear. And what if I want to change wireless settings? Wouldn't it be nice if I could just start typing in wireless and be taken immediately to those items; or firewall, taken immediately to that item? You can see this Quick Search box implemented throughout the operating system and in applications that run on it, so there's always the ability to further focus your information.

There's also advancement in terms of automatically organizing information. One of the things we're introducing with Windows Vista is the ability to look at information in a logical way versus a physical way. Today people who are really efficient at using PCs have arcane file folder structures or naming conventions that they use to keep things organized. Well, in Windows Vista we'll have that capability for people who do that, but we'll also introduce this idea of virtual views, or logical views, of information.

Here is a virtual view of all documents, my full scope of documents on the system. Of course, I have my ability to do Quick Searching up in the top and scoping information down. But, I also have the ability to pivot on information and create dynamic views of it. You're going to see us use the idea of metadata throughout the system. As an example, as I click on the author field up here you can see a familiar drop-down interface where I can select a specific author, and that view is dynamically updating; it's changing just to show me the documents that are written by Terry Adams, that person.

I can also use additional metadata to do things like group and produce these dynamic views of information. In the past if I wanted to have a view by keyword, or by author, I'm probably creating a set of file folders and copying documents around. That's proliferating information, and it leads to things getting out of date. Here I have a single truth, a single document that I'm looking for that's going to be able to be represented in a multiple ways in multiple views.

People ask how metadata gets onto that. Well, applications can populate that and do today, but people using a system can do it very easily as well. Sometimes you want to see a document in multiple contexts. Well, if I wanted to take the scheduling document and make it visible both as an administration document category as well as in the accounts category, I simply drag it and drop it onto that left navigation pane, it paints on that metadata for me. I can edit the metadata here; even on a File, Save I can go ahead and populate that metadata.

So this is going to be a very powerful way for people to stay on top of their information, to organize it, and you can see how combined with Search this gets very powerful in terms of being able to focus on the information that you're looking for. Each one of these things I find saves, you know, 40 seconds here, 50 seconds here. Pretty soon that adds up into a lot of savings in terms of productivity.

Let's look at an example of an application in the line-of-business space. I think there's been a little bit of confusion about what's going to be available in Windows on the platform. I want to show you some examples.

The important things to remember are that these applications are going to be very easy to develop and deploy. We're introducing an XML-based markup language that's going to allow Web-style developers to develop very rich applications. They're also going to deploy very much like Web applications in terms of living on the server, then coming down to a local client. But when they get there, they're going to run in a very rich environment. If you're familiar with rich Windows applications, that's the type of experience you're going to see with the benefit of the development and deployment of Web-style applications, so really the best of both worlds.

Let me show you an example of that. Here's an example of a patient monitoring system. This will be for doctors to review charts. And as they travel between treatment facilities, they want to have access to this type of information. They could do that by going to a Web portal or even clicking a link in e-mail. And this is the type of rich application that is possible on the WinFX platform. You can see the rich navigation capabilities here. We've got a great metaphor for the patient records, the charting metaphor for those doctors. This is also integrated with rich Web services capability, so there is notification and connectivity to other systems and applications. You can see the live monitoring happening here. We can also take notifications. And here's a doctor passing on a patient record to me securely. I'll accept that patient record. And we can see I have rich information about this patient that I can work with. I've got the ability to look at the real-time monitoring, the different charting information from the diagnostic equipment. I can use the rich visualization capabilities in the system to look at each one of these, even layer them, to get a clear view of the diagnostics, and even use some of the 3-D capabilities in the system to get a better view.

These are the kinds of rich applications that are running locally but are very easy to develop and to deploy. That's what WinFX, that's what Windows Vista is about, from a platform perspective. And this is the type of application we expect to see in the future built on Windows Vista.

Let's talk about consumers and what we're doing to make consumers safer as well as enable new capabilities with their PC. I want to talk about what we're doing in browsing, in the areas of parental control, and just take a look at an example application again on the WinFX platform. I'll compare the Windows XP experience with the Windows Vista experience. What do we have here? You can see it's an evil control.

This is a control on a page that is going to create a file in my startup directory. And you can see it's going to do a bad thing. It's going to format my C: drive the next time that I restart. This is showing you how running as an administrator gives such abilities to such controls. I just got infected and a bad thing is going to happen.

By leveraging that ability to separate user accounts and keep them in a protected mode allows us to defeat attacks like this. Let's shift to Windows Vista in the protected mode in Internet Explorer. As I try to create that file, the site fails. So in many demos around security, when security is working, something else is not working. And this is an example of that. This is a safer browser experience.

Let talk about phishing. Phishing is all about tricking people, right? It's about making them enter information into a site that they think is legitimate and then stealing it.

What we've done in Windows Vista in the browsing experience is really elevate the notification of a secure site. So here you see this lock that was formerly down low in the right corner. It's elevated into the address bar. We get a very clear notification that this is a known, good site, the Fidelity site. It has a certificate. You can continue safely.

Well, there are also sites that are not quite as nice as this. Let's take a look at what a suspicious site looks like. Here we're going through a site, and what's happening is Internet Explorer is detecting that this looks a little suspicious to us. It has heuristics built into it that say, "Hey, there's an IP address in the URL that's being displayed." There are controls on the page that look a little funny to me. There might be windows on top of windows blocking things out.

And so what we do here is we immediately flag in the address bar—you can see this yellow, as well as we have a notification that this is a suspicious Web site, warning them that this doesn't look quite right to us. And giving end users an opportunity to report this site as potentially a phishing site. Microsoft reviews these notifications hourly to determine whether or not this is a phishing site and whether we should add it to the known bad phishing sites list. And then, when and if that site is added to the list, this is the experience of a known phishing site.

So immediately the site itself is blocked completely. The address bar is turned red and we get, again, a notification up here that "This is a known phishing site. Do not proceed." We give the opportunity here to click through, but we give a lot of warnings about "This is a known bad site. We really don't think you should be giving your information there." So this is a safer experience around browsing as well in the area of phishing.

A couple of other things that we're doing… The Quick Search box, as you can see is implemented here' let's go ahead and do a search. Search today involves a lot of click, click, click, back, back, back when you're looking for information. One of the things that we've implemented is the ability to easily add tabs. As I click on the different articles, you can see the tabs building across the top of the browser. This gives me very quick access to each of those pages of information on the site. I can even save those as Favorites so that I can come back to them later; so a very convenient browser experience in the area of tabs.

Next I want to talk about RSS. And RSS is really redefining the Internet experience. It's a lot like how digital video recorders are redefining television. It's bringing information that is most relevant to you directly to you. We've implemented it in our platform—and Internet Explorer is one of the consumers of that platform—and we've made it much easier to view and consume these reports.

One thing is doing a much better job of discovering the feed. You can see here alphabetically all the feeds are laid out for me. I can view one of those feeds. We're also doing a much better job of laying out the RSS. And so you can see the beautiful way that this is laid out, easy to read, and add that to Favorites. I can add it also to my local RSS store, which then is a platform for applications to take advantage of in the system.

RSS isn't just about big major newspapers. They're about people and their blogs. Here's a blog of a friend of mine, a photo blog. You can see pictures of the family, even some videos incorporated into them. We can take a look at the RSS feed as well. It's going to do a nice job of laying that out. I can add this to my local store of RSS feeds so I'm subscribing to this site. And then there's the ability for applications to use these types of feeds.

One example might be creating a slide show or a screen saver based on this blog. I'm going to kick off that experience here. So what it's doing is it's pulling the photos from that blog and the videos from that blog and giving a very beautiful, a very nice experience. This is an example of an application using the RSS platform features within Windows Vista. What a great way for families to stay together and stay connected.

We've taken a look at business value and deployment and management and security, information worker productivity, and some examples of consumer excitement, both keeping them safe as well as generating excitement in this platform. Thank you very much for your attention. I'll turn it back over to Will.

WILL POOLE: Thanks very much.

SHANEN BOETTCHER: Thank you. You bet.

WILL POOLE: The good news is that there's a lot in Windows Vista, and we can demonstrate it for another hour. But we're not going to do that. To give you context on where we are in the timeline, yesterday we shipped Windows Vista Beta 1. And frankly, the majority of the features that end users see are not in Beta 1. They will come in Beta 2, which is when we really will engage broadly with end users.

In between now and then, we're going to have another milestone, which is our Professional Developers Conference, when we'll really be engaging deeply with both the corporate as well as commercial software development community, and getting them going with all the platform elements that Shanen showed you with Windows Vista.

Our plan that we've been public with for quite some time, that we are quite committed to, is to ship in time for H2 availability in 2006. We are moving fast with Windows Vista, and we're very, very excited to have the beta out.

Looking forward to FY06, we have again a strong outlook for our client business. We expect to deliver revenue growth in the range of 5 to 6 percent. That means roughly about $12.85 to $12.97 billion in revenue, if you look at the 5 to 6 percent year over year, so we feel very good about how we'll be driving the revenue. We expect the OEM channel to continue to drive our growth, with the PC market forecast to grow about 7 to 8 percent next year. This is slightly lighter than the market forecast for FY05, but again a healthy market.

We also are looking forward to the scaled implementation of the Windows Genuine Advantage and other anti-piracy programs, which we are confident will help us begin to really address the unlicensed PC phenomenon, and start to return some good revenue from those customers.

We believe in the annuity licensing area that clarity around the availability of Windows Vista and the timeframe in which it will be in corporations' hands and also, of course, around the value proposition of what features are there, are going to help them drive purchasing decisions and rapid adoption. Those will all accrue to the benefit of our ability to sign our multiyear licensing agreements. We do not expect to see the combination of our EA agreements plus retail decline in FY06 like it did in FY05.

In FY06 we also expect to continue to drive the growth of our premium sales around Windows Media Center, Windows Tablet PC and Windows XP Professional, and you should expect that in Windows Vista we're going to continue to drive segmentation in the marketplace, and to deliver unique value and compelling products that specifically meet the needs of customers that will help us increase revenue for those specific customer segments.

Finally, I think you can see from the demonstrations we've just shown, that as we prepare our own field, our partners, the marketplace, our customers for Windows Vista over the course of FY06, that we're going to have an exciting year. The excitement has already started. We're getting very, very good feedback from analysts, from early customer reviews, from people who have had a chance to touch and play with the software, and we are very much looking forward to the broad availability in the second half of calendar year '06.

I'm excited about the Windows client business. Thank you for coming today and listening to our story. (Applause.)

END

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