The interest in development tools and the incredible innovation that's taking place there is really quite amazing. And we're very excited to share with you over this five-day conference all the latest things that you'll be able to go out and use in exciting new ways.

Well, the biggest thing that's been happening is the Internet. The Internet has become a real phenomena. And we're now at critical mass in terms of people publishing electronic information of all types.

A big theme here this year is going to be how to take all the rich things about the PC - the development tools, the audio, the video -- and apply that in this Internet world. Now, when you look at the Internet, it's, in a sense, sort of a glass half full. There are lots and lots of missing elements. And there are now dozens and dozens of companies being started up and lots of existing companies, including Microsoft, working hard to take any of the limitations of the Internet and view those as an opportunity and therefore make it better and better.

And the closest analogy to what's going on here is the original IBM PC. That 1981 machine, any engineer could have looked at and found all sorts of problems and things that might prevent it from becoming a mass product. And yet, through the focus and the phenomena that built up around that machine, it really became the centerpiece of hardware innovation up until today.

The key element of the PC revolution was a low-cost microprocessor. But the starting point, the design that got to critical mass, was the IBM PC. With the Internet, the miracle technology is low-cost communications. Most of the particular protocols and ideas behind the Internet have been around for a long, long time.

Over 20 years ago, when I was at Harvard --not graduating, but there for a brief period -- (Laughter.) -- the protocols that we were playing with were TCP/IP. But what's happened recently is that switching costs, both the switching equipment and the optic fiber capacity, has gone up to the point where it's really possible to create this single global network.

And so that's the seed corn. That's the starting point. There's an amazing number of standards that come out of that. And we'll be taking that, together with the PC, and creating the best of both worlds. And so the skills that everyone here has are all the more relevant.

Now, there's such an explosion of interest in the Internet. We've been going around and talking to people and asking them what do they think about it. You know, do they think we've gone overboard? Do they think it's really going to become part of the mainstream way that people gather information?
One thing we did is we went down to Jamaica and got a musician down there to give us his input. And so I've got a little video that talks about that -let's take it a look.

(Video plays.)

BILL GATES: So sometimes we talk about this incredible set of activity around the Internet as a gold rush. Everyone is sensing opportunity, but nobody knows exactly when and what the payoff will look like.

The biggest beneficiaries to date are probably the consultants who go around and give shows and try and help people figure this all out.

But at the end of the day, what's going on is incredibly important. Communications companies will be making large investments, media companies will be making large investments, and the whole way that the world gets at information will be very, very different. So it's a period of intense competition. And it's a great opportunity for innovative software.

Now, the primary thing that holds back the Internet is bandwidth. Although lots of corporate networks and university networks are connected up at extremely high speeds today, the vast majority of Internet users are dialing in through a normal phone line. And this is what we call narrowband. And so that's typically a 14.4K baud modem or 28.8.

Now, it may be possible to squeeze as much as almost another factor of two out of that by doing an asymmetric modem connection that would go up to 40K baud or 50K baud. But that'll be about it.

There's a real theoretical limitation in terms of using those lines that were designed for voice. We will get one additional new feature, which is the simultaneous voice data. And that's an important step that lets you, say, call up with your computer and have a support session where you're sharing your screen between yourself and someone else. You can either do that through direct point-to-point or through the Internet.

You can also imagine scenarios that go beyond PC support, things like document sharing to negotiate a contract or go through a presentation. So getting voice in will be very valuable. And most of the new modem chips support the simultaneous voice capability.

But at this speed of connection, as you're browsing pages, although text pages come up very, very rapidly, in a second or so, pages with high-resolution pictures can often take five to ten seconds. And when we're looking at competing with other ways of gathering information, we're competing with looking up in a sales catalogue, going to get your encyclopedia, calling up and ordering over the phone or looking at the newspaper, that kind of delay really makes it noncompetitive for a number of scenarios.

So we need to move up. And a few years back, there was a vision by a lot of the phone companies and cable companies that we'd move immediately from narrowband to broadband and get incredible bandwidth for interactive T.V. applications. Well, the projections they had in terms of hooking up homes simply didn't come true. There were a number of trials, like the Orlando trial and a few others. But even most of the trials were actually canceled.

And so what we're going to have is a much more gradual evolutionary process from narrowband to midband, and, eventually, to achieve that ultimate goal of broadband.

A midband is a term we use for a couple of different technologies. ISDN. We're going around and encouraging phone companies to bring the price of ISDN down, and explaining that there's that large market out there. And it was great to see the announcement by Bell Atlantic today that they're taking a leadership position in bringing those prices down.

Getting it so it's say, $20 to $30 a month for a reasonable number of hours, I think, will cause that market to explode. In parallel with that, we have the cable industry going after PC cable modems, which although it's a shared bus approach, which makes the bandwidth comparison fairly difficult, it actually has even more bandwidth than ISDN.

And, finally, the phone companies are looking at another approach, another asymmetric approach, called ADSL. And I think that will actually surprise people in terms of its importance. It uses the twisted pair, but then goes right on to the packet backbone instead of using the voice backbone. So it's very similar to the PC cable modem, where it's IP all the way from end to end.

Now, at the data rates of those midband technologies, you get a factor of ten. And that makes still pictures come up super fast. And you can start to play with video. Putting video on there is very nice. Now, it's not a quality where you'd sit and watch a movie for a long period of time.

Broadband is still out there. You'll see that emerge first in places with high density and high affluence. So cities like Stockholm or Hong Kong or Singapore will be at the forefront of wiring every residence in the city into a broadband network.

There will be some good experimentation there. I say bandwidth is the key limiting factor for the Internet. Because even the most optimistic prognosis would say that five years from now, of the households that have PCs, that less than a quarter of them would have even a midband connection.

It's important to remember that at $20 to $30 a month, the effective cost of your communications is greater than what you spend for the PC itself. And so you have both the device and the communications charges in addition to whatever you spend for content as you get out there.

And so there is going to have to be a progression where you are able to use authoring tools that let you choose whether to optimize for the high bandwidth case that you'll see in the corporate networks, with 100-megabit Ethernet becoming very pervasive, or if you optimize for the dialect case. And tools will let you actually have the best of both worlds. If you're willing to go to a little bit of extra effort, you'll be able to have content that scales down and does the best job of exploiting both of these.

Now, there is one element of Internet that doesn't require big breakthroughs in the broad communication network. And that's the idea of using the network that's already been built up inside a company and doing better information-sharing using Internet protocols and interfaces. And this is what people call the Intranet.

In a sense, this is just taking the information sharing that people have been doing with personal computers across that network and bringing it to a new level of simplicity.

If you go back, say, just a year ago, and imagine a scenario where you're trying to go out and get sales-type data, well, a forward-looking company would have moved away from printing out those reports and having them in notebooks that people rarely look at and where the data's just impossible to manipulate. It's too detailed or too summarized, and you can't, in an ad hoc fashion, go through and look at it by product, by region, compared to a competitor. So many companies would have created spreadsheet-type views out on a network.

Now, to get at those views, you had to know the name of the server and do the NetUse. You had to know the names of the files. A little bit when you see those short file names, you might be confused about which is which or is it updated, is there some change. So a lot of effort just to get out to it.

But now, with Internet-type standards in the advances that came with Windows 95, that same scenario you'd simply have a link sitting on your desktop, a shortcut, in Windows 95 terminology, and it has a long descriptive name. You click on that underneath the covers, it connects you up to the right server. And that server presents to you a page that's fully self-describing.

And, in fact, we're doing it this way internally at Microsoft. So I've asked David Fester to come and give us a quick look at what this information actually looks like. And it's actually all information that's been there for a long time, but with the kind of interface he'll show you, we actually have about five times as many people doing this on a regular basis and taking advantage of that data.

DAVID FESTER: What you see here is a page of a shortcut that I might have on my desk-top but I'm simply going to double click on that. This might be something you might receive in the e-mail, and as you see it open up, we'll see our Microsoft home page for our financial information Bill, probably what you do on a daily basis is click on statements and see how Microsoft is doing overall. So we might take a look at different reports with my pull-downs here, and I might simply select something like revenue summary. Maybe we'd like to take a snapshot of how Microsoft is doing overall.

So I'll go ahead and click open. What's happening at this point is it's validating who I am, and then it's going to bring up a dialogue box just to say, Hey, this is confidential information, please treat it as such.

Now as you said earlier, what's good about this is it will bring information from many different sources and consolidate it right here in my same way that I browse the Internet and also the intranet.

So I said okay to the confidential information, and, in fact, you'll notice what we're seeing here is Microsoft Excel inside of the Internet Explorer 3.0. So we'll see my revenue numbers. We'll also see some pull-downs inside of Excel that allow me to see different types of information. So if I want to see a different channel I can simply pull it down and take a look at the OEM information.

So immediately right within my browser, I have the ability to view my spreadsheet information. In fact, just to prove this is spreadsheet information, we can easily go out there and if you wanted to quickly see a snapshot of graphically how we're doing. I'm going to use my same navigation buttons I utilize on the intranet as well on the browser and simply go back. At this point it says, "Hey, you've made some changes to the document. Do you want to save them?" And I'll say no.

So that's how we're using the Intranet currently inside of Microsoft.

BILL GATES: Super. I think a key point there is that the leverage was in taking advantage of the PCs and the Local Area Network that was already in place, and simply by learning how to author some pages, you could get just a lot more value out of that without a significant additional investment. Well, the key platform, of course, is the Windows family, and when I talk about family, I think that's a very key point. We actually have three levels of Windows, with Windows 95 being by far the high-volume product, Windows NT workstation a more powerful form that requires additional memory and at the other level, Windows NT server.

The strategy is to have a common user interface and API for every one of these products, meaning that the investment that end users make in learning and the investments that developers make in writing programs to the 32 bit APIs, that those are shared across all three.

And part of this is to make is easy to move code from the server to the client and vice versa. That's more common than I think people recognize. The need to, say, run something every night. You don't want to run it on the client; you want to run it on the server. But it may be a report or a query that you put together in an end user tool that normally runs on the client. Well, shifting that up to the server is very straightforward.

Conversely, if you have something you typically would do on the server, but that somebody who has a portable machine wants to be able to do out in the field, then you would shift code the other way. And as you go through designing applications, being able to shift that boundary in general or for specific cases is more and more important.

And so having a common operating system makes a big difference for building those applications.

Windows, just a status update on that. Windows 95 has exceeded our expectations. It's the most successful new software product ever, and we've gotten over 20 million users. By the end of this year, that will be over 50 million, and virtually all the machines are shipping now with Windows 95. We're very pleased with the shift in the development community over to build 32-bit applications. It's a lot simpler than become 16-bit applications so the key was bootstrapping that, getting the number of users out there so people could focus on that direction.

We're also starting to see a shift toward NT workstation. NT workstation is in much smaller volumes but a lot of corporate accounts are adopting that as the standard: We think as prices continue to go down and particularly as Pentium Pro becomes quite popular, we think the rise of NT will be very, very strong.

However, we wouldn't predict, even on the corporate desk-top that Windows NT would outsell Windows 95 in the updates we're doing there for something like two to for years. It depends quite a bit on memory prices, a little bit on the add adoption rate for Pentium Pro but the family strategy gives people total flexibility there.

Now this theme of the Internet is having a huge impact on the direction we take Windows in. We see so many opportunities here. One of the first is integration, to take the good ideas about browsing the Internet and the good ideas about browsing local information and bring those together into a single metaphor. In fact, we'll be showing that a little bit later on. I want to take the browser and just build it right in, so it's not only there; it's really in the common working set. The desk-top itself will use the browser.

So even your background, you'll be able to put on controls and have things that are actively going out to the Internet and updating if you'd like to do that. So we'll have our HTML extensions with ActiveX which we'll talk about, used everywhere. You'll use it for forms and dialogues, all of our help files, the standard editor. We'll have a single interface for all of this, and a single standard for the graphics multimedia, whether it's coming off a CD or a DDD drive or coming across the Internet. And we will be building in the concept of what's called quality of service where you can guarantee that you can deliver things, and that allows you to do audio and video at much, much higher quality.

Now, moving up to the server level, there really is a big change taking place where corporations are seeing that even their most demanding applications can move onto the server. And that's meant that the approach we've taken with not only high-speed file sharing but also general-purpose capability, has allowed us to gain a very strong position in the server business.

This just shows over less than a 12-month period how the sales in NT server more than doubled, and we know it as a comparison to NetWare 4 which is focused more particularly on file sharing and we'll see that's particularly static while we're going up in big numbers.

The key here is the momentum, the applications that you used to find only on Unix or that you used to find only on AS 400, and a new generation of applications that are better than the ones you would have found in those other platforms.

And so this growth will continue to be very, very strong. The work we're doing with clustering to give you both high reliability and higher performance is a big deal here. The performance tuning where we're getting these incredible database speeds now are very important. The multiprocessor systems are going to be pretty phenomenal, and there's really no limit in sight in terms of how these servers can be pushed forward. You know, Intel will drive the clock speed of Pentium Pro to be not only the 200 megahertz that they'll be shipping soon but that will go up to 300 megahertz and 400 megahertz and then there will be generations beyond that.

At the server level, the same security is a very big deal. That's a key point that we're making across a lot of products. Administering user groups, the names of people, you know, who can use the printer, who can use these files, doing that for all the different subsystems in unique ways is almost impossible.

Another key point, and a strong message you'll have in this conference, is our commitment to distributed COM. COM is our component object model. It's the basis of everything we built, and we're very excited that NT 4.0, which goes out this summer, actually includes all of the distributed COM capabilities. And then we'll have development kits to make those things work on Windows 95 as well. So at the server, this is where we get the unification of the storage of different types of information, user directories, files, web pages, even the database information will be unified up at the server.

Just real quickly I wanted to mention one of the server products which is Exchange, just got out a few weeks ago after six years of development, and it's already in widespread use, not only at Microsoft but 50 major customers have gone into production on that.

The value of an electronic mail system for not just short messages but for information distribution, sending around links to the web, sending around embedded documents, making sure that this thing can be administered and scaled, this is a very big deal. And some of the things we do here is we allow you to do work on the server if you want. You can just dial in with the web browser and see public folders. You don't have to have any client software.

Now, you get a little bit more functionality if you have the client running on your machine and you get the ability to store the information locally, and you move work off of the server, but it's one of the first applications I've seen where you have total flexibility on how you can let the server do the work or bring the client in and use its capabilities.

So the road map going forward, this summer is the big event with the NT 4.0 and there's a server update that comes simultaneously. Before the end of the year, we'll have an Internet add-on with some of the features we'll talk about and show you a little later. And then either in late '97 or early '98, we'll have the big, big next release. On the NT side, that's called Cairo. It's got some very rich object approaches in it. We will go for a simultaneous release so that the update to Windows 95 and the update to NT will come at the same time which will allow us to do an even more thorough job of making sure we've got exactly a superset, subset relationship and not have the period like we have right now where Win95 actually has quite a few things that aren't even in NT. And even when we ship 4.0 you'll have a few things, like power management, or plug-and-play capability that are very strong in Windows 95 and not fully present in the high-end product.

A lot of the focus of this week is the family of development tools, and there's quite a range of products here. Really, in a sense, you can say Microsoft Office is a development tool. It allows you to create content in a rich way and now we've hooked that in with events and Visual Basic in a very strong fashion. In fact, the update of Office that comes out later this year includes Visual Basic for applications across the board. So it's not just Excel. It's everything hooked in a common way and a huge advance in VBA there.

But the spectrum includes FrontPage, which is a new product for us focused on Internet authoring. It lets you see a web of pages, see which links are dangling, see which pages you made a note that you need to update, and it has lots of Wizards that make it very easy to build those pages.

We move up to our Internet Studio that's sort of the equivalent of a desk-top publishing product but aimed at the Internet. Visual basics script, a proper subset of VB built into the browser. Some neat things you can do there drawing on that expertise. We are embracing Java in the same way that we embrace C and C++ and Visual Basic. So Jakarta is the code name for the product we'll bring out that brings Java into our integrated development environment. So that's the same environment that our "C" compiler works in. Then of course we've got Visual Basic "C" and a lot of exciting work going on in all those products as well as exciting work in Visual Fox Pro.

So lots of choices. A very important point is a lot of content authors will simply take components that you build with these tools and use those to put them into their pages, so if they want to time line, if they want to map view, if they want an order form, you'll just give them a pallet and they won't have to know if you wrote it in Java or assembly language or "C," they'll just be able to incorporate it in the page. And certainly people looking at the information, all they'll know is it's a rich experience. They won't have to understand which tool was used there.

And so what we've got is Internet in all the different products: Internet in the operating system with the browser as a standard feature, Internet in the server where HTTP, a so-called information server is a standard part of HTTP and that lets us optimize the speed there in an amazing way. It's by far faster than even the most expensive Unix type server in terms of doing web HTTP and we're just going to keep tuning that and tuning that. We do have some add-on things. Our media server, which is for audio and video. Merchant Server, which makes it easy to go out and server merchandise and one we'll be talking about in some of the breakouts here, our so-called proxy server, and that goes to beta in the next month, and that's a big step in terms of letting people connect out to the World Wide Web and yet control who comes into their network or what kind of requests go out from their network.

The tools, all of them, are involved in HTML. You'll be able to build an application so that you don't care whether somebody's running right on the machine where the forms are generated or whether they're running on a browser and they're connecting up through the Internet. With the kind of extensions we're doing to HTML, it will be a superset of the rich forms capability that we've had in Visual Basic. and so you'll be able to remote the forms portion of any application without having to think specifically about it. You just use the latest and greatest rich version of Access or VB or any of the products, and that ability to run off the browser will come with it.

And Microsoft is involved primarily in building the platform for the Internet but you'll also see us get involved in building some content as well. Here in this area, we've got a joint venture with Dreamworks the new studio, and doing lots of neat interactive titles out of that. With NBC we have a joint venture that's both on the Internet and has a 24-hour capable channel, and all the content work we've been doing in the past, encyclopedias, Microsoft Money, all of those carry over and of course we have our major online service, the Microsoft network.

And so I think you can see that there's nothing in this set of products that isn't affected pretty deeply by the idea of a standard global network.

One of the key elements I talked about is this common navigation, common between the Internet, intranet, and finding files. Today, of course, those are very separate. The shell, which you see on the right, has a nice hierarchy. You can find your away around pretty easily through that hierarchy.

But when you see a set of choices, it's just simply an icon with the name it's a long name now. That's a step forward but there's no descriptive information and you have to double click to select things.

With the Internet you get to store your favorite locations, you get to go backwards and forwards and you simply single click to move to a new location.

And so the idea is to take the best of both of those and bring it together into one paradigm. So I'm going to ask Dave to come up and give us a little look at this. We've got the actual build here, which is very risky. But this is -- (Laughter) -- part of what we're going to ship as the Internet add-on later this year. So let's see how that looks.

DAVID FESTER: Okay. As you mentioned, this is a prerelease. Obviously we're in alpha code of this technology. And to bring the way we work in Windows and explore out on the Internet together is an interesting task but what we're going to do and enable people to do in Windows 95 and on NT is view not only my files the way that I normally do, but, in fact, view them in hypertext view.

Now, the advantage of that is a number of different reasons. One, if I share out my hard drive today -- let's open up a particular folder and share out, say, my documents. If I share that out today, people connect to my computer, look at the information in my documents, but most people don't have a good mechanism to understand what are the files, what's the content that I'm sharing out.

You'll notice down here we've added a button called web sharing and if I click on that button it gives me the opportunity to share this folder as an HTTP source as well and I can perform it as read only, execute scripts if we need to and also support SSL. We can also share the folder via FTP as well so if somebody wants to FTP to my compute. So this is something that will be built into Windows 95 and NT.

The additional aspect of 234 is I've got my traditional explorer navigation system so if I want to go up one level to the root of my computer, I can do that. Since we're actually look at an HTTP page, you'll notice if I move my mouse over, it immediately selects that hard drive and in fact, if I click once, it opens the hard drive.

So if I browse out on the Internet and that metaphor, we take that same metaphor into opening up and working with files on my hard drive. .We'll expand that a little bit further if I mouse click on my computer and look at slower explorer we have the traditional one that we have today, look at all the drives, the network neighborhood and you'll also notice another icon down here called the shellU or shellE. If I click on my hard drive I can view it in hypertext mode. But if I click on the explorer, in fact, we'll see as we're live on the network, the wwwms.com. And just to illustrate a point, I'll come up here to the name pace and type in www.microsoft.com, and we'll go visit our home page. So normally where we see files on the right side, in fact, we see an Internet HTTP page here as well.

We can go proceed down to browse here if I want to and tunnel down as much as we like so whew U.C. you can see we're discussing Internet PC and tech ed at the movies. On the right you'll see my shellE and see a path tunneling me down and see all the directions I've visited at in the session and in fact, bring the concept of the PC closer to the Internet, I also have my favorite, so in fact, I can open up that same document that I was working at a moment ago, the finance page.

So I think this metaphor of bringing the ability to browse and Windows 95 and NT a lot closer will make it a lot easier for end users to work with their computer and expand that out to the Internet.

BILL GATES: Super.

(Applause.)

BILL GATES: So that's the idea of deep integration. And, in fact, that feature, we'll talk about that as our PageView feature for the show. And it's probably the centerpiece of the Internet add-on.

The next area I want to touch on is, what are these pages going to look like? In a sense, if these pages are just text with links, then they're not that relevant to a developer's conference like Tech Ed.

However, page browsing and using applications, there will be no real distinction. As you're going from page to page, there will be lots of code doing work for you, dynamically generating the information. For example, taking your user profile and deciding what merchandise you should see or what offers you might be interested in.

Likewise, what you see on the page will be more than text. It will be basically a rich form with all of the rich kind of objects that we've been enabling with OLE capabilities. And so our strategy is, as these pages get richer and richer, what we call the ActiveWave, it's to take all this great work going on in the PC and the great work in the Web and bring those together so we have a common paradigm for this. It means as the Internet goes to do audio and video, that we -- we do it in a common fashion. As we go to distributed programming models, that we do that in a common fashion. And so we can have these interactive distributed applications.

At the center of this for us is what we call ActiveX, a variety of technologies that create active documents. And so what it does is it means that on the page, you can have controls. In fact, ActiveControls is simply renaming so-called OLE controls, which were in themselves a successor to the VBX controls, renaming those so they fit into this active framework.

And so the idea here is that small, little controls like something that does a little animation can be part of it, something with VBScript can be part of it, or even a full-blown applications like we showed Excel fitting into one of those controls. So let's have Dave show us a couple of pages where people are starting to give us a glimpse of what ActiveX might mean.

DAVID FESTER: Okay. I'll go ahead and open up the beta of Internet Explorer 3.0. And there's a couple of things I want to show off and how we're activating the Internet. But before I do this, you've described this concept of static pages. I think most people have seen the concept of the old volcano company demonstration that we've had in the past. And that's a traditional static page.

What we've done to enhance that static page is to give it frames. The number one request for Microsoft for browser technology was to add frames. So, in fact, we're doing that with a borderless frame technology. So you notice we don't have any borders between the particular frames. I can put nice shades in each of the frames if I choose to.

And the advantage of that is, it gives users the ability to browse the information in a much cleaner fashion.

Now, as we go forward with putting controls on the page, it's going to enable users to interact with that page in a much better fashion. So you'll see here that I have a page of Madonna with some of her favorite or popular songs. And I know that many people have used RealAudio before. And traditionally, when you bring RealAudio down off of the Internet, a window pops up in and of itself, and, in fact, if you have multiple RealAudio sessions coming up, it clutters your screen with a number of Windows. So what we've done on this page is in fact put the RealAudio active control directly on the page. So, for instance, I can simply click "I'll remember," and we'll immediately start to hear that particular music. I can stop it, I can change the volume, if I choose to. So we'll leave it about there.

Or if I'd like to hear another one, it's simply me controlling it at that point via the control.

Okay. The second type of control that I have here to demonstrate is called the shock wave control. And that's from Macromedia. And so envision, if you will, visiting maybe a site on the page. And instead of just seeing maybe a psychology marquee across the page advertising or describing what they have to offer, maybe you see something as dynamic and exciting as the Intel page here.

So the advantage of this is that we bring a control down once to your page and then anybody who has -- or once to your PC, and anytime someone has taken advantage of the ShockWave technology, you can simply view the content. So as I pass my mouse over the control, I can see a compass information on maybe where I want to go inside of the Intel page, or maybe some directions for advanced computing trends or maybe if I'd even like to explore some information about the museum of digital art.

So, again, another control immediately there. Now, the other aspect to activating the Internet is, we described how we have roughly, I guess, three million-plus Visual Basic developers out there today. We want to be able to take exactly what they do today and leverage that out on the Internet.

The advantage of having Visual Basic or Visual scripting immediately at my desktop is I can contain a lot of the code on the client side. In normal static pages, anything that I click on goes out to the server. The server processes it and brings it back. And the disadvantage of that is all of us on the Internet at the same time, it's going to generate a lot of traffic.
What we can do in this example is just send the results. So if I click a style of pizza over here, you notice that my HTML controls on the right side are in fact tied to the left side controls. As well, I see the toppings I like. Or if I click Chicago or Seattle, I see different toppings. I immediately get a total. And, of course, I can order that pizza right there. The minute I click on

order, the results get sent across the Internet.

Just to prove that this is actually live VB code, we'll go ahead and view my source. And I'm sure it's going to be a little hard to see from the back, but I think we'll just get the idea. I'm actually totaling some information. I've got some controls on here, pepperoni dot checked and tallying those across. So bringing the best of Visual Basic right into the Internet Explorer.

I thought I'd show a couple last demonstrations here. And one of those is called virtual shopping. And, in fact, envision, if you will, maybe you need to run to Safeway at 10:00 o'clock at night and buy a particular item. In fact, I think we're going to need to show this.

Okay. Well, you know, in the beauty of having prereleased code, that one is not going to

come up. Ah. It did come up. So I take that back. Envision, if you will, late at night, I want to go into Safeway and possibly buy an item. So we'll see here a box of Lucky Charms. Well, I'm interested in them. Maybe I need to eat breakfast.

COMPUTER: Lucky Charms cereal, only $3.29 a box. They're magically delicious.

DAVID FESTER: So it tells me about Lucky Charms. I realize it has a lot of sugar content. So I'm going to click on that item and try to rotate the box around. Assuming that there's some good technical information on the back, I'll be able to make a good analysis on if that's something in fact I want to buy.

So, in fact, I'll click on it and say I want to buy it. And we'll put it in my shopping cart. And I might need to also take some Anacin.

COMPUTER: Anacin, coated analgesic tablets. $5.96 a box.

DAVID FESTER: If something goes wrong with the demonstration, I might have to take some Anacin. And say buy it as well. That gives me the ability, which we'll show you further in a demo in a moment how we can actually do online shopping. But this is an add-in here to the Internet Explorer 3.0.

The last demo that I would like to show is a page that Windermere has put up that shows off some ActiveMovie capabilities. So I'm going to go ahead and open up this house demo.

So envision, if you will, you're going it go out there and buy a new house. I guess you're building your house, so of course we could put this live on the Web as well.

But if you're going to buy a house, what do you traditionally need to see? Well, I need to see some information about the house, how much it costs, attributes about it, what is going to be my down payment, and so forth. Well, you can do this now right from the Internet.

COMPUTER: The residence --

DAVID FESTER: What we're seeing is some streaming data coming down about the house.

BILL GATES: But this is actually done so that it can work over a 28.8 connection.

DAVID FESTER: This is set so you with a 28.8 modem can see. This you can optimize the movie based on the type of connection that you in fact have.

So we notice that it's finely-tuned with the -- moving into the various rooms in the house. And, again, this is similar to the RealAudio component, except it's ActiveMovie. So it's streaming down live. The movie stays on the server. Of course, if I'm interested in this particular residence, I can quickly calculate my mortgage right here on the page.

So if the total amount is four twenty-nine five, maybe I'll put down $100,000. And the interest rate is 7.1%. What's going to be my monthly payment? $2,886. So, again, taking advantage of putting controls on the page and using VBScript and ActiveMovie, I'm activating the Internet, which is very exciting.

BILL GATES: Super. It's great to see what those rich controls are going to be able to do. Now, there's a lot of new elements that will be coming to the web; not only the active pages, but lots of electronic commerce, standards like the ones that were agreed on between MasterCard and Visa and ourselves; lots of advances in security, even including eventually the idea of a smart card that new PCs will let you scan that smart card, and we will start to move away from 2D pages.

We saw a tiny bit there of a little 3D experience. I think the really popular sites on the web will be 3D. And the experiences will be very customized according to who is coming in. This idea of quality of service, making sure that video and audio data gets across the network exactly when you want it that's a necessary step before you can really view this as a broad scale competitor for long distance and something where you're going to do lots and lots of business conferencing across the network. But it's clear with the backbone of these networks be asynchronous transfer mode that we'll be able to hand the extensions through networks like RSVP in order to view this network as not just a global high bandwidth network but one where you can make sure the data is going to get there on time.

In fact, as people are willing to rely on that, I'm sure we'll start to see lots and lots of people get rid of their private networks and simply use this large public network for all the connections they want to have.

I did want to show one more demonstration, and this is taking the idea of midband connections, a little higher speed connection, a little more user customizability and show what a shopping experience might look like, say in a couple of years from now, for somebody coming in with ISDN or a cable modem.

DAVID FESTER: Okay. What we see here is the desk-top with Microsoft Exchange open, and for those of you who have been working with Microsoft Exchange you'll notice you can see a number of messages directly in your in box and they're very rich in their appearance. And as I come down here I see a number of messages that have to do with skiing.

In fact, since I recently relocated from Colorado to Seattle, I'm definitely a high-end ski person. And I see in my in-box a message from Adventure Works which is a company that sells across the Internet some ski equipment. And they're telling me about their winter sale reminder so I'm going to go ahead and click on that mail message. What comes up is an Internet page showing me Adventure Works information.

We'll see their winter information here, see some skiing which surely gets me in the mood of skiing. The page is customized to say this is Dave's page. Welcome to the winter sale. Of course we can take a look at the full catalogue, we can look at the "at your service," we can search this catalogue if I choose to do so and in fact, I can even become a member of their adventure club which is if you buy more, you get more points which enable you to get discounts.

Well, because the Merchant Server gives me the ability of purchasing across the Internet, I'm going to open up my catalogue and see what I can purchase today. But you'll notice that it's, in fact, creating a custom catalogue for me to buy the things that I want. It knows the types of things that I buy based on the trends and based on my preferences. So, in fact, we see these are the things that I traditionally need to have when I go skiing. It highlights my size based on the reference that I've given them. It also shows me the current that Adventure Works is, in fact, offering.

Over to the, if I move I'm not mouse, we'll see the previous items I purchased, Dave's checklist. I recently bought some ski boots and before that I bought some very technically demanding bindings.

Well, what's beautiful about this page is traditionally when you open up a catalogue you see a 2D view of particular items. What's nice about the Internet and active animation is I have the ability to simply hold my mouse over it and browse around that coat and say is that really the coat I like? I didn't realize it had a hood so maybe I don't like it.

Or I know I'm not in the mood for ski apparel but I'm certainly in the mood to get a good pair of skis since I moved up to the Pacific Northwest. And so this shows me the type of skis that I might like to buy, maybe a novice, intermediate or advanced, and in fact, you'll notice that advanced is flashing. It knows that based on the bindings I bought recently so I'll go ahead and click on advance/expert and in fact it lists all the advance skis we'd like to buy. So I'd like to drill down a little bit on the Dynomite VA80 which will give me more information about that type of skis and you'll notice I can get reviews on that type of ski, technical information. I can even design my own ski graphics tool to put on the top of the ski itself.

What I'd like to do is find out a little bit more technical information about that ski to decide if that's actually the ski I want. The AW site, they don't want people who visit it to leave. Traditionally in the Internet you have links throughout the Internet. AW wants you to stay at their page, so, in fact, they collect information from all the manufacturers around the world so we're bringing down live information from

Dynomite skis which is based in Switzerland at this point. We're going to take a look at the flex profile as well as different animation techniques of the ski itself. Okay.

BILL GATES: Looks like they've got a busy site.

DAVID FESTER: It definitely is. So I'll go ahead and take a look at that ski. I can see some information on how that ski might look. I'm particularly interested in how it arches. In fact, I might like to see, what is the stress or the flex profile of that ski. So I'll simply click on that. That looks pretty good, but I'm not immediately sure if that's what I want so I think I'll call up the customer service rep.

AMANDA: Hi, this is Amanda, thanks for calling Adventure Works.

DAVID FESTER:Hi. I'm looking at these skis and trying to decide if they're right for me.

AMANDA: And you're looking at the Dynomite all terrains. You've already checked the technical data. Where do you like to ski?

DAVID FESTER: Sometimes I'll go up to which is better?

AMANDA: The northwest. All right let me pull up the map. They seem to be most popular where the snow is wet, not too icy like the cascades and most of the folks in BC seem to enjoy them as well.

DAVID FESTER: That's great. That's just what I wanted to know?

AMANDA: Great. Enjoy your new skis. Is there anything else I can help you with?

DAVID FESTER: No. That's it. Thanks a bunch?

AMANDA: Thanks for calling.

DAVID FESTER: I've definitely decided I'm going to go ahead and buy the skis so I'm going to click order. It's going to ask me do I want to buy any new bindings? Remember I did buy those previous bindings so I'll say no, I'll stick with the bindings that I have and it shows me the description of the overall price that I'm going to need to pay. If I'm not sure if I really have budget for it, I'll click on my budget and it keeps track of -- (Laughter) -- my last purchases that I've done. So I'll go ahead and say yeah, I'm ready to pay and because it contains all of my charge card information and because Merchant Server 2.0 will enable me to provide secure transactions across the Internet, I'll go ahead and enter my password and simply pay now.

So it will send the request out to the server to validate that my charge card is still good and of course I can take a look at my budget once more to see that, in fact, that recent charge did hit.

Okay. And as I close that out, in fact it also tells me, ah, you have some good news about your adventure club account. Would you like to see it? Sure, I'd like to see it. I'm always into frequent awards. So in fact, congratulations, you now have 3500 purchase points. That's kind of nice. So I think I'll in fact shop a little bit more, if you don't mind.

Well, this kind of illustrates, again, how we can bring together Microsoft Exchange onto the Internet and with a midband connection with Merchant Server 2, it actually provides a rich shopping experience for those on the Internet.

BILL GATES: Thanks, Dave.

DAVID FESTER: Thanks, Bill.

BILL GATES: I think it's very important to keep in mind that PC innovation continues to move at a very rapid pace.

The machine that was a great PC three or four years ago really isn't a machine that's in widespread use even today. And the pace of innovation will probably be faster in the next few years than ever before,

because the capacity of the various component industries have been ramped up over the last few years. They've been a little bit behind demand in some areas and they're just now catching up. And that's good news for letting us have PCs that are both more powerful and less expensive. Certainly there are some elements of this that are very easy to predict. A large storage size. Today, it's hard to buy a PC with less than a few megabytes. In a few years, it'll be hard to buy a machine with less than a few gigabytes.

Faster processors, the Intel road map is a very aggressive road map. Everyone else is challenged to keep up. Pentium Pro that we consider a server type processor today. All we have to do is go out a couple years and that'll be a processor that will be used in low-cost consumer-type PCs.

Some of the things that are harder to predict are breakthroughs, say, in screen technology. A low-cost, high-quality flat screen would really shift the amount people will willing to browse information electronically. Other advances in the input technique are also difficult to predict. Microsoft is investing heavily in speech recognition, voice capabilities, basic natural language technology to parse documents, working on handwriting, even though to date that, hasn't been very popular.

Even things that people might consider unusual, where you take the video camera that you probably buy mainly to do video conferencing and use that to scan the visual image and be able to tell who's using the PC and allow them to make gestures. So if they want to move forward to read a document or move back or throw a piece of E-mail away, they just give the right gesture and it works very easily.

(Laughter.)

BILL GATES: I'm not saying that that replaces the keyboard. But a little bit of capability there can actually do some pretty exciting things.

And so the PC is the mainstream, the mainstream of all computing. It's fair to say that it's become really the tool of the information age. So the key point that I wanted to get across this morning is that the Internet's an amazing opportunity. The skill sets that all of you have are more important now than ever before. And we're going to make sure that you're able to take the tools that you like, the standards we've been building up over the years, and apply those in a full-fledged way to the Internet.

We're hard-core about the Internet. We wake up every day and think about what we're going to do to make it a better and better experience. And the size of the opportunity here is really profound. Whether it's shopping, which we saw some examples, or politics, where you can really get in and see what your representative thinks, what speeches has he given, how did he vote on any issue? You can find other people with common interests to get involved with, or perhaps most excitingly, what this means for education, allowing kids growing up to have the ability to go out and explore anything they're curious about. This is something none of us had when we were growing up. Well, that's going to be commonplace over the next decade.

So it's clear that this revolution is going to change the way that every industry does business and the way that everyone learns, and even, with a little bit of luck and some help from Hollywood, the way that people entertain themselves. So it is a time of great change. It's a time when we're moving at full speed. And an event like this to really keep you up-to-date on all the tools and the developments is of critical importance.

Thank you.

(Applause.)