ANNOUNCER: Please welcome General Manager, Investor Relations for Microsoft, Colleen Healy.

COLLEEN HEALY: Good morning. Welcome to the 2007 Financial Analyst Meeting. It's great to see you all here. Thank you for making the trip, especially for those where it required travel. Welcome also to our attendees via the Web site. We are streaming live today on the Microsoft Investor Relations Web site.

Throughout the day, we will make forward-looking statements. As such, you should refer to our SEC filings for risk factors relating to our business. Also today we will be using some non-GAP numbers. You should also read our Investor Relations Web site for reconciliations between GAP and non-GAP measures. That's www.microsoft.com/msft.

Fiscal year '07 was a year of double-digit revenue, bookings, operating income and EPS growth for the company driven by the strength of our recently launched products. And, of course, during the year it marked the general availability of Office 2007 and Windows Vista.

During the year, we invested back into our business to drive future growth, while also returning $31 billion of cash to shareholders in the form of buybacks and dividends. This represented approximately 175 percent of operating cash flow returned to shareholders for the year.

Fiscal year '08 is also shaping up to be another year of double-digit growth, as well as a significant launch year for the company in its own right. During the year, we expect to launch Windows Server 2008, SQL Server 2008, CRM and Live CRM, Halo 3, new mobile devices based on Windows Mobile 6, many Office products targeted at business intelligence and unified communications, and innovation in online services.

Today, you're going to hear about our strategic plans and growth agenda in the areas of growth and expansion of the core, software plus services, and the connected entertainment opportunity in front of us.

We have a good lineup for you today. Bill Gates will kick off today. He'll chat with you about trends shaping the future and how software will continue to change the world. Then he'll hand the baton over to Steve Ballmer who will talk to you about our innovation agenda to drive shareholder value. The president of our business divisions and Kevin Turner will provide you more detail into each of their businesses to talk about the opportunities that we're going after and how we plan to position ourselves to do so successfully.

Ray Ozzie will then chat with you about the company's transformation toward software plus services with Craig Mundie taking a longer-term view on the innovation cycle and trends in computing, and our approach to lead the industry in those cycles. Lastly, Chris Liddell will put the plans that you've heard about in the context of driving shareholder value.

You'll notice today, based on past feedback, that we are providing more opportunity for you to ask questions of executives this year. The Q&A sessions will either immediately follow that speaker's session or be later in the day. We're going to have five Q&A sessions throughout the day. And, as in past years, our executives look forward to chatting with you during breaks, lunch and the evening reception.

A little bit of housekeeping. For those of you who are on-site, Garth mentioned the communications network Internet site, or ComNet. The PowerPoint slides of the presenters will be available there for you today, generally shortly after the speaker has started discussion. You can also find their speaker bios, the agenda, feedback forms and more.

If you do have trouble with ComNet today, as Garth, our tech support, mentioned, please raise your yellow flag that's at each of your spots, and you'll have a technician come to help you out.

PowerPoint slides and transcripts will also be available on our Investor Relations Web site for access tomorrow when you're back at your office.

I hope that most of you had a chance to visit our product fair that was going on this morning right across the hall. If you didn't have a chance yet, we will have two displays for you at lunchtime again, and that would be Surface and the mobile device display.

If you didn't already pick up a trial copy of our Microsoft Office Ultimate 2007, or redeem your gift ticket for a Microsoft wireless mouse and a one-year subscription to Microsoft Office Groove 2007, you can do so at the reception desk where you checked in this morning.

You may have noticed by now that in the halls outside there are large screens really throughout that are showing market activity for the day so that you can keep your hand on the pulse of the market throughout the day. There are also Internet kiosks set up for you out there so that you can check e-mail or take care of whatever other business you need to throughout the day.

On the parking front, for those of you who drove this morning, please make sure that you did check your car in at the registration desk so that it's registered and there for you at the end of the day when you're looking to be driving to your next event.

Lunch is going to be provided right across the hall this year, which is a little bit of a change. We have some construction going on in the conference center, so we'll be right across the hall for lunch in the Rainier-St. Helens Room. It'll be a buffet lunch where, as in past years, the executives from Microsoft are looking forward to grabbing a bite with you and also chatting with you. There will be signs on the tables denoting which executives from which business group are sitting at the various tables so that if you have a particular interest, you can position yourself at the appropriate table.

There will be a reception at the close of today's session. And for those of you who took the shuttle bus in this morning, the shuttle buses will also be available at the end of the day to take you back to your hotels. If you're in need of a taxi, please see the business desk; they can help you arrange that.

On the ComNet, you will see that there are evaluation forms, both on the day as well as on the speakers. So we really do value your feedback for the day. This year, that feedback manifested itself in more Q&A for you. So you can be a winner twice on that evaluation form, not only in terms of influencing future days, but also we do have prizes that you're automatically entered into for each evaluation form that you fill in. As Garth mentioned, the prizes this year are two Xbox 360 consoles with various games, as well as two Zunes.

Also, on the ComNet, you can submit questions for our executives throughout the day. So when we get closer to the Q&A session, I'll let you know how that's going to work. But, generally speaking, we'll try to take a question off the ComNet as well as live questions here in the auditorium.

In addition to today's presenters, we also have the business groups and divisional CFOs with us today, as well as other business leaders. And the investor relations team, of course, is also here today and happy to help you make your day productive. Joe Binz, Charlie Tracy, Kevin Green, Ann Titterington, Zon Ellis, Dennie Muscarella, Deborah Zwanziger, Agnies Watson, and Tracy Zettner, whom I'd like to thank once again for organizing this event for us, as she does every year.

So with that, it is my great honor to introduce to you Bill Gates.

END

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