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ANNOUNCER: Please welcome general manager, Investor Relations, for Microsoft, Colleen Healy. (Applause.)

COLLEEN HEALY: Good morning. On behalf of the Investor Relations team, and everyone here at Microsoft, we welcome you to the 2006 Financial Analyst Meeting. Thanks so much for taking the time to be with us today, and in many cases the travel to do so.

We also welcome our attendees via the live webcast. We are streaming today's meeting on the Microsoft Investor Relations Web site.

Throughout the day, we'll take a look back at our performance in fiscal year '06. We'll also look ahead to fiscal year '07 and beyond. As such, we will make forward-looking statements today. You should refer to our SEC filings for risk factors relating to our business. We undertake no duty to update any forward-looking statements.

Fiscal year '06 kicked off our multi-year product cycle. The newly launched products of Xbox 360, SQL Server, Visual Studio and Microsoft Dynamics CRM offerings were very well received by the market.

During the fiscal year, revenue grew by $4.5 billion, and we generated double-digit bookings growth.

Since our last financial analysts meeting, we completed our $30 billion buy-back program, and we announced more to come. We expect continued double-digit revenue growth in fiscal year '07, and delivery on the second major installment of our product cycle, with Windows, Office and Exchange. We're also making key investments in critical areas of growth for the company that you will hear more about today.

Also today you're going to hear about exciting offerings: Windows Vista, Office 2007, Unified Communications, our Windows Live services, Microsoft adCenter, our entertainment offerings and more. We're innovating for the long term. Today's presentation will provide you with insights on our approach to do so.

So, what's today's lineup? You should have an agenda in front of you. You're going to hear from Steve Ballmer a couple times today -- in the morning and in the afternoon. He will share with you our map for Microsoft's innovation agenda. You'll also hear from business leaders who will talk to you about innovations, investments and drivers of growth in their businesses. Ray Ozzie will talk to you about technology trends and how our strategy for software and software services are poised to leverage those trends.

After lunch, you will hear from Kevin Turner, who is going to provide you with an overview of how the company is driving for business excellence in the way we operate and execute.

Craig Mundie will give you a view of our longer-term approach to innovation and our investment philosophy to optimize innovation cycles. Chris Liddell is then going to put for you what you've heard in the context of our plans for driving shareholder value.

Steve will then close the day's prepared remarks.

You may have noticed on your agendas that we have added an extra Q&A session this year to provide you with more of an opportunity to ask questions. The first session will be right before lunch with our three presidents and Ray Ozzie. The second session will be at the end of the day with Steve Ballmer, Chris Liddell, Craig Mundie and Kevin Turner.

As in past years, our executives are looking forward to mingling and chatting with you during breaks, at lunches, and at the reception at the end of today.

Some housekeeping matters. For those of you who are onsite, we do have the communications network Internet site again, or CommNet. If you are having trouble accessing that site, just raise your yellow surrender flag, and someone from the tech team will come and help you out.

The PowerPoint slides and transcripts from today's meeting will be on the Microsoft Investor Relations Web site for your convenience when you get back to the office, if you want to refer to any of them.

For any non-GAAP financial measures that we provide today, reconciliations between the GAAP and non-GAAP measures can be found on that same Microsoft Investor Relations Web site at www.microsoft.com/msft.

As in past years, we do have the product fair set up across the hall in the Rainier Room. We encourage you during breaks to please check out the products that are being displayed and demoed there.

You may have already noticed that throughout the conference center we have some large-screen TVs in various locations. They're showing market activity of various tech stocks so that you can keep up with the market while you're here with us today.

We also have Internet kiosks set up for your convenience. You can log in, check your e-mail during breaks, the latest news and market quotes. And then, in terms of parking, for those of you who drove this morning, you do need to register your car -- we don't want you to be towed -- and the registration desk can help you.

Lunch, I am happy to report, will be served today, and will be in the McKinley Room. It will be a buffet style, and our executives are looking forward to grabbing a bite and chatting with you over lunch. The tables in the McKinley Room will have cards on them so that you can identify which groups you're most interested in hearing more about over lunch.

And then, at the end of the day, we will have a cocktail reception in the McKinley Room as well. Shuttle buses leave for the airport and hotels at 7:15 p.m., and the business desk can help you arrange taxis, if you need them.

Please complete the evaluation section on the CommNet site. It really gives us a great feedback mechanism to hear about the effectiveness of our speakers and to improve this event in coming years. As an incentive to do so, for every speaker that you fill out an eval for, you will automatically be entered into a drawing for some prizes. The prizes today include an Xbox 360 console with some games, Microsoft Streets Trips with GPS Locator, Motorola Q running Windows Mobile, and a subscription to Xbox Live for 12 months along with some games.

Also, I do want to remind you that, as in past years, you can submit questions for our executives via the CommNet. During the Q&A sessions we'll take questions from the CommNet, as well as field questions live from the audience today.

Today we have our business group CFOs, our divisional CFOs, our executives and the investor relations team here to meet with you. The investor relations team is happy to provide any help to you today to best leverage your time spent with us. I'd also like to thank them for all the hard work that they've put in: Joe Binz, Charly Tracy, Kevin Green, Dennie Muscarella, Michelle Sutter, Leona Locke, and a special thanks to Tracy Zettner, who organizes this event for us every year.

So, with that, it gives me great pleasure to introduce to you our first speaker, Microsoft's chief executive officer, Steve Ballmer. (Applause.)

END

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