BOB MUGLIA: (Applause.) Thank you, Stephen.

Well, one of the great things about working at Microsoft is working with great people like Stephen Elop and the opportunity for us to work together to do fantastic products that really solve customer problems and drive all sorts of new business opportunities for Microsoft.

And what I wanted to do this afternoon was talk about the future for Server and Tools and some of the great growth opportunities that we see, the opportunity for us to continue to take the businesses that we are very strong in today and expand them and then move into new opportunities.

But I wanted to begin with a little historical perspective on what's happened for the past year. And if you recall, for those of you who were here a year ago, I talked about how the server business, my business, Server and Tools, is very interrelated to the growth of the overall server-hardware industry.

If we take a look at where we had an expectation of that industry going during this year, this is the picture: We came out of our fiscal year '08 with IDC showing about 10 percent growth in the server market, and when we were here at the Financial Analyst Meeting a year ago, IDC had a future prediction of server growth on the order of 6 percent during our fiscal year. So slight downturn, but relatively stable.

And we started that year reasonably consistent with that, but what we saw was that as the economy got soft, so did the customer buying and the business buying for servers, starting around the middle of October into the end of our fiscal second quarter and certainly through the entire part of our second fiscal half this calendar year. We've seen a pretty dramatic decline in the server marketplace.

For the past six months, we've seen the server marketplace declining on the order of 23 or 24, percent, ending the fiscal year down about 15 percent. So significant, significant downturn that, of course, has a substantive impact on the Server and Tools business because a significant part of our business, around 40 percent or so, is of a transactional nature. So we definitely have some impact there.

Now, what we were able to do during that year was track a it better with revenue against that downturn in the overall marketplace. And there's a couple of reasons why we were able to end the fiscal year growing about 8 percent. The first reason is that, as I described a year ago, our products are overall outgrowing the market. We are outgrowing in Windows Server sales, and we are selling premium editions, and in general, we are selling more products to our customers, thus allowing us incremental revenue on a revenue-per-unit basis against the server sales that are sold by the industry.

The other opportunity we had is that a substantive part of our business is annuity, and so we are cushioned somewhat because of that annuity revenue. Our business is one of the highest annuity businesses at Microsoft, and so when we have a short-term down-tick in sales, we see that less. In contrast, when we have a short-term uptick, we also see that less. And so what you have, in essence, is somewhat of a shock absorber to the business so that as the market's gone down, we've been able to remain much, much more steady. And then as the market recovers, stabilizes and recovers, we will grow. But we will also need to begin to put money into the bank as the market begins to recover sometime in the future.

Now, we're not sure when that will happen. No one has clear predictions of that, but as it does happen, we will begin to continue to see annuity growth.

And I will point out that our annuity sales have remained reasonably strong during this period as we've seen the value that the products have delivered to our customers as being viewed very significantly. So our customers who are buying annuity products have had a strong propensity to renew their annuities, and we have seen new customers, many new customers begin to choose our products, particularly in some new areas like virtualization.

And when I look at some attributes of the business, although the market was extremely weak, we have some major highlights associated with this time. One of Kevin Turner's favorite things to talk about is that during an economic downturn, it's the time to really focus on share of the marketplace, share from a units perspective, which is our primary way of measuring it. And what we saw was some very strong growth in a number of different dimensions this past fiscal year.

I'm very, very pleased to have watched what's happened with Windows Server relative to its competition. Primary competition for Windows Server has been Linux. And this year, fiscal '09 was our strongest growth year against Linux that we've had since Linux has been a competitor of ours. So this was our strongest year of competing with Linux, and we outgrew the market by two points, now taking 75 percent of the overall market share, of run rate this past fiscal year as measured by IDC.

So that's a really strong performance that has been built on the strengths of the 2008 product that we released a little over a year ago, as well as other great products in the Microsoft portfolio such as SharePoint as well as developer interest in the Microsoft platform and custom applications being built on it.

So a breadth of strength associated with Windows Server, and we are predicting continued share growth relative to Linux. I know it's a core part of my job, and I think we are very well poised to continue to deliver on that relative to our primary competition.

In the database market, Oracle is a very strong competitor. They've been around for a long time. I've been focusing on databases in some senses for my whole career at Microsoft. My first job at Microsoft was program manager for SQL Server. And so we have a very tough competitor in Oracle, but we are very tenacious with Oracle, and we have gained share relative to them this past fiscal year.

I'll talk about some of the things we have coming during the next fiscal year and into the future that we think will help us to gain further share relative to Oracle. And here the main thing to recognize is that SQL Server is the unit share leader in the database market, but it's number three in the overall revenue share in the database market.

So we have a significant amount of revenue growth opportunity as we sell higher-end editions of SQL Server and penetrate deeper into the enterprise, which we are actively doing with this product.

Certainly, a major highlight for us this past fiscal year has been management and virtualization. A year ago, we were a newcomer into the industry. We had just shipped Hyper-V, and nobody knew whether Microsoft would actually show up to this game and really have any success.

Well, over the past fiscal year, we saw incredible strength with our 2008 generation of Hyper-V and System Center Virtual Machine Manager. We have been very effective in competing against VMware, exceeding my expectations of how we would do during the fiscal year.

What we have seen now is that in every account we have access to, which is just about every account, when we go in and talk to a customer about Virtual Machine Manager and Hyper-V, and they compare us head to head against VMware, 70 percent of the time we win.

And during this period, we've gained substantial share against VMware. We are gaining share against VMware every single day. And the reason we're gaining share is because we provide a very complete solution that is more comprehensive than VMware provides, at a fraction of the price.

And so in a year where we really just entered the market, and a year where we were newcomers, seeing this sort of strong growth has been particularly rewarding. And the one thing that we've had going against us is VMware has had a feature they call VMotion; we call it Live Migration. We lacked that feature, it was a key customer feature that many accounts required. With our R2 release that we have now shipped, we have that feature, and it is our expectation that our growth will accelerate substantially this fiscal year, largely, and almost completely at the expense of VMware. So it's got a lot of great future associated with this.

And System Center is our fastest-growing business in Server and Tools, growing at north of 30 percent year over year, fiscal year. It is very strong—as Kevin said, a $1 billion business that continues to grow, and we are very, very excited about the potential future of that business.

In the developer tools space, we have been really focusing on breadth and reaching more and more developer customers. Over the years, we have not done as well at reaching students and startups as well as other people who are really beginning to develop products. And we've launched a few programs there that have had some incredible results over the fiscal year.

We launched a program called Dream Spark that provides a full developer tools suite plus Windows Server to any student on the planet. It's now available to college as well as high school students, and we had 6 million downloads of that during the past fiscal year. So that started during fiscal '08, so incredible growth in that program starting from effectively nothing.

We also launched a program called BizSpark, which provides the full Microsoft portfolio for startups for free for three years. One of the big problems that startups have is they don't have a lot of money when they begin, and so the open-source choice was an obvious choice for them. Well, the Microsoft platform is more productive. With BizSpark, they can now afford it because we provide them the entire Microsoft platform for free for three years, and we've now seen 16,000 startups in just really seven or eight months join that program with a tremendous amount of interest and some very interesting products being driven through the startup community in that space.

So a good year for share gains overall. A good year for us—in a tough year. It was a year where we made major progress in areas that are of long-term importance, and we continue to have this very solid foundation and this solid core.

Now, sort of looking at the business and looking at where we go from here, you know, we begin with a very strong foundation, as I said, with Windows Server now having a strong, rooted position against Linux and gaining share very clearly there. SQL Server is in a strong position with tremendous growth opportunity ahead of it, particularly revenue growth opportunity. Something that we're really focused on. And what we're doing is taking steps to drive our business forward both over the next few years, as well as in the years beyond that so we can continue to grow our business at a very fast clip, certainly much faster than market.

In the short term, the drivers for our growth are things like management and virtualization. I do anticipate that management and virtualization will continue to be our strongest performing, as a percentage-wise part of our business during fiscal year '10. We'll continue to see very strong growth in that business, continuing to drive share gains against VMware during this period where virtualization is being used very broadly across businesses to lower their costs and have a fast ROI. So a lot of strength there.

Our security and identity business has a lot of upside potential. This has actually grown to be quite a substantial business. It is connected with our sales motions for selling our desktop software overall, and our overall—we call it enterprise client access licenses (CALs), and so we see very strong growth in that business, and we have a very strong opportunity in the Forefront space to take a substantial part of that business, and we see good growth there.

One of the areas that I am most excited about, and I'll show this in a couple of minutes, is business intelligence and data warehousing and the potential to grow in that market. Business intelligence I'm going to focus on in a minute, but let me talk about data warehousing.

A year ago, actually at FAM a year ago, we announced that we purchased Datallegro, which provides a scale-out data warehouse. And we've been actively working on converting that to .NET and SQL Server and will begin the beta test of that product later this calendar year. So we're very excited about the potential for us to reach in and scale up to the highest-end data warehousing solutions where SQL Server has never been able to participate.

You've had products that are very special purpose like Teradata up there that charge exorbitant amounts of money, we're going to take an industry standard product like SQL Server and deliver the familiar capabilities of SQL Server scaled out for the needs of the largest data warehouses that companies have. And at the same time, there's a tremendous opportunity for substantial revenue growth associated with that. So good opportunity in the data warehousing space.

And then of course in the services space, Windows Azure is incredibly important for us. I will talk a little bit about Windows Azure in the context of the movement into the cloud and talk a bit more about the Windows Azure business and the opportunity for that to be accretive to Microsoft and grow our revenue overall, as well as growing our profitability.

But we announced Windows Azure last year at the Professional Developers Conference in October, and we've seen incredible interest from customers—many, many customers taking and trying this out, many applications being built on top of this platform—and we announced two weeks ago at the Partner Conference the pricing for Windows Azure. We gave the industry an idea of how we'll do pricing for that product, and we told customers that we'll begin charging for the product in November, but while we're in the beta stage, Windows Azure is available now for people to use. So we continue to get growth in that and continue to get extremely strong interest there, and I'll talk a little more about Windows Azure.

The one other thing I want to hit upon is that we are expanding beyond the platform part in the online space and the services space with our System Center Configuration Manager product. We have the leading product in the industry managing desktops. And we will be introducing this fiscal year a service that enables customers of all sizes to manage their desktops. So we've achieved a tremendous amount of early interest on that product, and we see it as another growth opportunity, another substantive growth opportunity for our systems management business.

But the primary thing here is by taking the cost of running that operation, running the operating of managing desktops out of an organization, we can provide customers with a great value while achieving very substantial revenue and profitability growth. And it follows our model that we already have with business productivity online services in terms of the value proposition that that provides to customers, as well as the revenue and profit growth opportunity for Microsoft. I'll talk about this in the context of Windows Azure, but this management product, System Center Online Desktop Manager really has a substantial opportunity to grow our management business as well, so pretty exciting stuff.

With that, what I'd like to do is talk a little bit about business intelligence and the opportunity there, and I'll show you a demo of this. Let me speak a little bit for a second to the opportunity.

The market opportunity for BI is very substantial, and we see a tremendous number of customers adopting BI and looking at the amazing amount of data they have within their organization and saying, "Okay, I have all this business data—how do I translate that business data into insight that my people can use to make better business decisions?" The systems today that businesses run are generating vast amounts of data. And the data in general is not available in a form that people can comprehend to make the best business decisions that they need to make.

And so what we're doing with business intelligence is we're taking and we're going to do something very different in the industry. The industry overall has a set of products that are available for people to use to analyze this business data, but there are a couple attributes to it: It requires a lot of work for IT departments to set up and structure it. Often, it takes many months. It's very, very expensive on a per-user basis, and it uses tools that are hard for people to use, so it's only available to a specialized few.

Well, we're taking a somewhat different approach to business intelligence. Let me bring up the demo. Great. So what we're doing is we're taking the power of the best BI tools in the industry, the power of the data warehouse and services like SQL Server Analysis Services, and we're putting that in the hands of normal end users, normal productivity workers within organizations, and giving them access to things that they've never been able to see before.

So what I've got here is SQL Server Analysis Services working with Excel 2010. And if you look back at Excel over the years, historically, Excel handled about 64,000 rows of information. That was the maximum amount of information data you could put into Excel. The current version of Excel 2007 supports about two million rows. But what we're doing with this 2010 version is we're enabling much, much larger data sets, in this case, we're supporting 100 million rows of data on a user's desktop.

And, you know, not only is that data available, but it's incredibly fast to work. I can scroll through it, I can do things like sort against it. And you see the results are basically instantaneous. I can do a query in that. If I had tried to do a query or a sort like this—in this case, let me just select Canada and France. The results come back subsecond. If I tried to do a query like that with Excel today, it would take many minutes for it to happen. This is all happening subsecond.

Now, not only is it happening subsecond, this is not some monster machine running in a back room, this runs on a standard laptop—an under $1,000 2 GB laptop fits 100 million rows of data. And it puts access to an amazing amount of information in the hands of an information worker. And so from this, I can now use the tools that I would expect with Excel. I can go into Excel, and I can create a pivot table. In this case, what I'll do is I'll show you a predefined application. Literally, if I had another five minutes, I could build this application for you, in front of you as an end user.

But now I have a fully functional BI application that I can go ahead and take a look at. For example, this is sales results. I can take a look at sales results in the United States during 2008 and get different end-user views of that data. And, of course, because it's part of the Office suite, it's very straightforward to take that information and then go out and share it with other end users through SharePoint.

And so, you know, here is a view of SharePoint 2010 looking at a set of reports that have been shared. This is a combination of SharePoint together with SQL Server; this is what is available. And now that same information is available to any end user, any colleague of an end user on their desktop, fully active, fully functional. They can click and run it as a BI application.

So what we're doing is we're taking an application that previously would have taken IT months to build, and we're giving it to end users so that they can build it in just a few minutes. We're taking an application that used to take weeks and weeks of training, and we're giving it to users in the form of a program they've understood for 20 years, Excel, and we're taking a solution that typically costs thousands of dollars of desktop, and we're going to reduce the price of that to simply a fraction.

In essence, we're going to do to BI what Microsoft does, which is provide much better value to the customer at a much better price and do so in a way that covers a much broader—makes it available to a much broader set of customers.

So that's what we look to do for BI. And through this, we see great growth opportunities both in the context of helping to drive Office 2010 deployment as well as selling new versions of SQL Server and new licenses for SQL Server that complement this because those two things go together. It's a core business growth opportunity for both our Office and for our SQL Server businesses. So it's something we're incredibly excited about as we move out a year or so for business growth.

Now, let me move in and talk a little bit about the cloud and sort of our strategy here as we think about this across a spectrum of different opportunities.

The biggest difference that Microsoft brings to the picture when we think about the cloud is this massive install base. We have of tens of millions of Windows servers that are productively running business applications for our customers.

So we start with this incredible base of customers who already know and love Windows Server. And what we're doing is taking a step-wise approach, providing what is really the most comprehensive approach the industry has to providing customers with the ability to choose the way they want to deploy their software.

The first step of this is virtualization and the move to using virtualization to lower the capital costs associated with running a datacenter, getting higher utilization of those machines. And thus providing customers today with products like Hyper-V and System Center, and incredible return on investment as a short-term thing.

But then as people start thinking about the cloud, the benefit that the cloud provides is IT becomes a service that's available to business units within an organization, and the cloud provides the opportunity to dramatically lower the cost of managing applications, lower the people costs associated with managing applications, by enabling a set of automation. And particularly, that automation comes through evolution of the applications that the Microsoft platform will provide.

So the movement, the movement to cost savings associated with the cloud is primarily a driving-down of people costs associated with taking advantage of some new application paradigms, some new platform paradigms to enable scale-up applications.

You move from a world, essentially, where you have to manage applications 24 hours a day, seven days a week, to a world where management is much more of a nine-to-five activity, where when something goes wrong, the system self-corrects it. And if a part needs to be replaced, if a server needs to be replaced, if that happens next week, that's just fine because the cloud has replaced that server with another instance that is taking up and running the load. So it's a shift in cost associated with the way people have to manage things.

And we'll be providing several options. We'll be providing Windows Server and System Center to companies that want to run and build their own private clouds within their on-premises environment. We will also be providing System Center and Windows Server to our many thousands of hosting partners that want to either enable private clouds for their customers or build their own public clouds.

So one attribute of our business, which has always been very partner focused, is to continue to provide them with new opportunities to build businesses. In fact, the hosting part of the Windows Server business from a segment perspective is the fastest-growing part of our business, and we anticipate that the move to the cloud will accelerate that as more and more hosters begin to offer their own cloud services.

You see, we don't see Microsoft as the only provider of a public cloud. We will be a very broad provider with Windows Azure, and we will provide a great value proposition with running software there, a very geo-distributed value proposition, a very leading-edge value proposition, but we know there will be many reasons for customers to work with their existing hosting partners, and we will be supplying the core technology associated with that. And of course as I said, we will provide Windows Azure. And we see that as a very substantive growth opportunity for us as we move forward.

And in thinking about that, thinking about how that grows, the way to recognize this is to look at the costs today and then to look at how those costs change as well as how the revenue to Microsoft and ultimately the profitability of Microsoft shifts. If you look at a customer deploying an on-premises server application today, the cost of the software that comes to Microsoft on average is about 19 percent, just under 20 percent of the overall cost of the application.

If you pull all the pieces together, what you'll discover is the hardware is 30 percent or so, but the people cost associated with running and operating that system is where the predominance of the cost is. This is just operational cost. This doesn't include software development. And really if you average it, you find about half of the cost of an ongoing cost of an application is the people cost associated with operating it. And so Microsoft's software revenue is just under 20 percent, and of course we have our profitability underneath that, our margin underneath that.

Now, as we move to a cloud environment, we see this environment shifting and providing better value to the customer, but ultimately better revenue opportunity for us. One of the things we've done is we've looked at our software pricing, and we've essentially equalized the software pricing whether a company is buying or running Windows Server on premises, whether we are working with a hoster and they are running the software on behalf of a customer, on a monthly basis, costs about the same if you take our software price and average it down to the per-monthly price.

And if you look at our Windows Azure prices that we published two weeks ago, our software price is built into that. So our baseline profitability associated with the software remains constant as we move from an on-premises world into a cloud-based world, regardless of whether we're hosting it or whether one of our partners is.

Now, the good thing about a cloud is that it brings down the cost to a customer—the customer cost drops by about 20 percent. But what the shift is now is the vast majority of that cost to the customer is booked as revenue to Microsoft because we're providing the software. We're providing the hardware, and we're providing the operations for the system. The customer's paying less. The customer's paying less, but our revenue is going up considerably.

Now, our COGS, of course, goes up with that as well, but so does our profitability. And so the net of it is that, yes, of course because we have COGS associated with running these applications, it is somewhat dilutive in the long term to our margins. But that's really a long-term statement. In the short term, our margins will not be affected by this, they're actually quite immaterial associated with this.

And even if we go out five or ten years and we assume that the cloud becomes a very substantive part of the server and tools business, what you'll still see is higher overall profitability numbers from Microsoft, higher overall revenue, higher overall profitability. So we'll continue to grow both key aspects of our business.

The software business is about as good as they get when you actually run a service, there's a bit more margin pressure, but fundamentally, these are great businesses and ones that we will embrace.

And, in fact, as a company, we've been very much embracing the cloud and have been working on this for many years. One of our opportunities associated with running the cloud is the great experience that we've had over the years with properties such as MSN and LIVE and Bing search and things like that running on broad datacenters, and Microsoft has a very comprehensive set of data centers. And we're doing a whole set of things to be very leading-edge in the industry.

And so what I'd like to do now is invite Debra Chrapaty up, who is the corporate vice president of our Global Foundation Services, who runs all of the data centers for Microsoft. Debra, good afternoon.

DEBRA CHRAPATY: Thanks so much. Good afternoon. I appreciate having a few minutes of Bob's time to talk about how we're scaling up very efficiently to win in software plus services.

So if you take a quick look at this slide, you'll see two things: First, take a look at the green line. The green line is a proxy for capacity growth in our environment. Essentially, what it represents is servers deployed. It's an index to servers deployed in our environment from FY '05 to a projection out to FY '10. And so, obviously, you see we're growing our capacity pretty significantly.

You know, a couple of years ago back in FY '05, we were focused mainly on the consumer marketplace, as Bob mentioned. So in those numbers, you see things like early growth in MSN, Messenger—consumer-based products.

When you look out to FY '08—FY '09, you see our investments in other types of services. What you see in there are numbers representing investments in Bing, in our business, online services, and, of course, in growing our Windows Azure environment and our cloud.

So the investments there are 16X growth in that index from FY '05 to projections for FY '10. At the same time, if you compare that with the blue bars, the blue bars represent a benchmark that I use to measure the cost of running servers in our environment. It's called the SHUU. That's a funny name, but it actually stands for a "server hosting utilization unit." And so what the SHUU essentially represents are things like data center costs, power costs, server costs, even people costs in running the environment.

And of course what you can see is that, you know, we keep driving efficiency into the environment. As Bob mentioned, this is very important as we look at sort of our total offering, COGS plays a big role, and we're working relentlessly to do that.

How are we doing that? This is a little bit of our secret sauce. We call it the modular efficiency framework. And it's based on four main components. Of course, as one would expect, data centers, servers, networks, and power.

You know, on the data center side—many of you read our blogs—you know that we've been in the business of running data centers since 1989. They were mainly leased facilities way back when. And then over the past five years, we've been building data centers.

You know, what I want to share this afternoon is some work that we've been doing that I think is really, really exciting in modular data centers. We call them our "gen-four data centers." You can think of them as sort of building blocks. They're completely modular, prefabricated, mechanical, electrical, security for the back end of the data center that tends to be very big, very bulky and quite expensive.

And modular design and deployment as well for the servers in something called "containers." If you've read at all about containers, you can think of these as modular, raised-floor, server deployment units.

So you think about the time to market and the scale that it gives us when we have this completely modular framework.

We've done some estimates on our gen-four designs, and we believe that it'll get us into market a completely built data center in less than half the time, and it will provide us the ability to do that at about a third or more of the price of building a data center. So this is very significant as we build out our capacity in the environment.

Servers as well. We've been spending an enormous amount of time on designs around servers, and we've been partnering with our OEM community to design a server standard that's 30 percent more power-efficient than a standard server that you'd buy off the shelf from a provider.

As Bob mentioned, virtualization is key in our environment. We've been partnering with System Center as well as with the Windows Azure team to really drive virtualization and utilization into everything that we build and run from the server side.

Think about it: If we can save, you know, cycles and build less, deploy fewer servers, we have to deploy fewer data centers. So these end up being very big numbers when you analyze sort of utilization and its impact on datacenter build, the network build—it all contributes to the bottom line for us in a very big way. And so we're focusing a lot on virtualization within the environment as well as automation.

Bob talked about System Center and tooling. Think about our environment. We run one of the largest environments out there. And when you think about the number of people it might take to do that if we weren't completely automated, it would drive up our op-ex costs quite significantly. So tooling is also a huge factor in running these environments, and doing it with an automated tool set has a big impact, again, on op-ex costs.

From a network perspective, we're quite fortunate. You know, we are one of the largest networks out there. And so we get to take advantage in the process of scaling up of volume. And so from a peering perspective, you know, we have very low network peering costs. They've declined for many years. We expect them to decline again in FY '10.

We're also doing an enormous amount of innovation in the network space. You know, people talk a lot about the data centers and the servers, but the network is a very core part of this modular framework. And so we're doing an enormous amount of innovative work, not just in our network designs for efficiency, but also in some new work around caching and edge computing, as well as some work in network virtualization.

You know, we talk a lot about server virtualization, but network virtualization is also a very essential component when you really think about running a high-performance, efficient cloud. And so a key pillar in this whole modular formula is certainly the network, and then energy.

You know, energy is quite a huge part of the cost factor in running a facility, and we've been focused on a number of aspects of energy management, first of all, energy sourcing. You know, just making sure that it comes from the most affordable sources. And when we make decisions around where we're going to place facilities, we do deep analysis on the cost of power, of course.

Sustainability and clean and green, when we can, is also a big factor for us. We're part of Climate Savers and Green Grid. We want to make sure that we're thoughtful about this when we can be.

And we're also doing a lot of technical R&D and innovations around power management, innovations in chilling. We have a patent out on a unique design on ambient air cooling for our containers. You know, if you don't spend a lot of money on power to cool facilities, you can use it to power servers.

So it's all part of this efficient formula that we're working on as we build out the infrastructure. We think it's pretty exciting stuff for the company as we build out the cloud and expand our business online services. And I know I covered a lot very, very quickly. So what I'd like to do is just show you a quick video and kind of take you there with me, and hopefully it will make you as excited as I am around where we're going with infrastructure as we build out software plus services for Microsoft. So can we run the video?

(Video segment.)

BOB MUGLIA: So thanks, Debra, that's great to see the great work that you and your team have done.

So as Windows Azure comes, what's the impact that will have on our datacenters?

DEBRA CHRAPATY: Absolutely. Well, from our perspective in my organization, Azure is the platform and it's our job to deliver the platform super efficiently for Microsoft and for our customers.

BOB MUGLIA: That's great. So a world-class platform plus a world-class data center architecture.

DEBRA CHRAPATY: You got it.

BOB MUGLIA: Thanks a lot, Debra, I appreciate it.

So whether it's with today's servers or it's into the future of the cloud, we are really focused on how we can continue to grow this business with the real emphasis always being on providing a better value for our customers.

We have an incredible product line today. A year ago, I said that we had just finished the rollout of our best release of new products ever. And as I look forward over the next fiscal year, we're refreshing virtually the complete set of our products. So we have a refresh coming and a very rapid cycle, a very rapid innovative cycle that will both reinforce the strengths that we have today with products like Windows Server, SQL Server, System Center, and our other products in Server and Tools as well as growth into the future.

We look toward the opportunities in the shorter term. New things, whether it's virtualization, which is red hot, on fire, where we're growing much, much faster than the industry and going after VMware every day, taking share every day against VMware, or whether it's areas such as BI and data warehousing, which are great new growth opportunities where Microsoft can really have a transformative value proposition for our customers.

And, of course, as the cloud emerges with Windows Azure, SQL Azure, our overall cloud platform, we have an incredible portfolio that enables our customers to take their existing investments forward into the future.

With that, what I'd like to do is invite Stephen Elop up to join me and we have a few minutes to do some question and answer.

END

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