Digital and Microsoft Announce Expanded Alliance to Accelerate the Adoption of Windows NT Across the Enterprise

Microsoft Chairman and CEO Bill Gates and Digital CEO and Chairman Robert Palmer
San Francisco, CA
January 28, 1998

MR. GALLOP: I'd like to take this opportunity to welcome the members of the press, the industry analysts, and the other invited guests who have come to San Francisco today to hear from Bill Gates and Bob Palmer as we announce the next level of a very special partnership between Digital and Microsoft, the Alliance for Enterprise Computing.

I also want to say good morning, good afternoon, or good evening, depending on where you are, to the worldwide audience that is watching this event either by telecast or cybercast over the Internet. I'm not sure how many people that constitutes electronically, but I guess it's something less than the 800 million that watched the Super Bowl on Sunday. But we have a little different agenda. That was all about competition, this is all about cooperation and collaboration today.

Microsoft and Digital formed just such a team two-and-a-half years ago, the Alliance for Enterprise Computing. It was formed in order to meet the requirements of customers' demand and to build the foundation that is focused on supporting the deployment of Windows NT across the enterprise, today and into the 21st Century. The message we want to convey today is that the Digital-Microsoft Alliance for Enterprise Computing has been very successful to date, and today we're here to talk about extending it.

Let me share just a few key points with you. The alliance has already demonstrated strong business results measured in billions of dollars in systems, service and software sales. Windows NT is proven for the enterprise, as shown in many implementations delivered by Digital and Microsoft to customers such as Reuters, whom you'll hear from a bit later, Lockheed Martin, Dow Chemical, and many other very well-known names.

Our successful Exchange program is clearly accelerating, being adopted as the messaging standard by many of the world's major corporations. And speaking on behalf of Digital, the Windows NT business is growing very rapidly, as indicated in our last quarter's results. We announced that our NT solution business grew by 94 percent.

Today, you will hear how the Alliance for Enterprise Computing will accelerate the adoption of Windows NT in the enterprise. Bob Palmer and Bill Gates will give you the specific details of technology collaboration, expansion of services and support, and new target market initiatives. Following Bob and Bill, Peter Job, chief executive officer of Reuters Whole News PLC, will join us via satellite to share how Digital and Microsoft are working with his worldwide enterprise. Then, Mr. Jeremy Coote, president of SAP, will tell us what the combination of Digital platforms and Microsoft Windows NT mean to his customers. So, a full agenda.

And let's begin. So, ladies and gentleman, please welcome the Chairman and Chief Executive Officer of Digital Bob Palmer.

(Applause.)

MR. PALMER: Thank you, Mike. You know, it was almost exactly two-and-a-half years ago, on August 2 of 1995, that Bill Gates and I sat together here in San Francisco to announce the Alliance for Enterprise Computing. We had a strong mandate from customers to bring Windows NT to the enterprise, building on Microsoft's strengths in client server software and Digital's leadership in enterprise platforms, services, and systems integration.

As we consider the successes of the Alliance for Enterprise Computing, it's exciting to contemplate how we might take the partnership to a new level. The announcement this week of Digital's merger agreement with Compaq gives us just that opportunity. The dynamic combination of Digital and Compaq will further strengthen the alliance and make up the strongest and most viable Windows NT solutions provider in the business. This is a very positive and exciting development for our customers, our partners and for the industry.

In a few minutes, John Rose, Compaq's senior vice president and general manager of their Enterprise Computing Group, will join me on the podium to offer his comments about this exciting development. You know, as I stand here today, I see an alliance that has succeeded where it matters the most, with enterprise customers. For example, the customers who have turned to Digital and Microsoft for mail and messaging solutions built around Microsoft's Exchange running on Windows NT and Microsoft BackOffice, and powered by Digital's Alpha and Intel-based systems. The customers who are implementing Internet solutions based on Microsoft commercial Internet system designed and deployed by Digital's systems integration business. And the customers who are integrating Windows NT with Digital's open VMS and UNIX operating systems for scalable, mission critical computing.

Our alliance with Microsoft is strong and enduring, in an industry where alliances, partnerships and coalitions are commonplace and often short-lived. In fact, we believe that the Digital Microsoft Alliance for Enterprise Computing has worked so well that it serves today as the showcase for how two companies should work together in the best interests of their customers.

Here are just a few of the highlights of the accomplishments during our first two years. Digital has, by far, the largest Windows NT and Microsoft BackOffice professional services workforce in the world, more than 1,600 Microsoft certified systems engineers and Microsoft certified solutions developers, around 4,000 Microsoft certified product specialists, plus thousands more trained as NT service professionals. We have opened two Digital Enterprise Solutions Centers for Windows, one in Bellevue, Washington, and the other in Bayonne, France. And a third facility is scheduled to open in Kuala Lumpur, Malaysia, later this year.

Digital operated more than 128 Microsoft Certified Solution Provider Centers around the world, half of all the Exchange seats in large enterprises today have involved Digital. Digital has two million Exchange seats under contract throughout the world, far more than any other vendor. We were the first to provide Windows NT clustering and are one of the market leaders with over 6,800 licenses sold. Digital has continued to build on the broadest range of systems running Windows NT in the industry, from Intel-based notebooks and desktops to the most powerful 64-bit Alpha servers. In fact, just yesterday, we announced a new line-up of Intel and Alpha-based servers specifically designed to run Windows NT.

With Microsoft's support, we have demonstrated the power and scalability of Windows NT solutions for the enterprise. Digital's Alpha Server 4100, for example, is able to handle 10,000 Exchange users, and at Microsoft's Scalability Day we demonstrated over 50,000 Exchange users on a single Digital server.

As a result of these and other performance advantages, more enterprise customers are turning to Windows NT solutions. Recently, Dow Chemical selected Digital to install a new Enterprise mail infrastructure at 115 of its global sites. With more than 1,000 mainframes, UNIX, VAX, Macintosh and Intel mail servers, Dow needed a company with the experience and the resources to implement Microsoft's Exchange quickly, maintain the old and new system at mission critical levels, and lower operations costs. In a record six months, together, Digital and Microsoft successfully migrated and upgraded Dow's entire worldwide infrastructure to support the new Microsoft Exchange mail and messaging environment for 36,000 new accounts, six months.

Reuters is another example of a customer working with Digital on a very large Windows NT project. I want to thank Peter Job, Reuter's Chief Executive Officer, for the speech he will do later today.

I'd now like to ask John Rose to join me for his remarks. John.

(Applause.)

MR. ROSE: Thank you, Bob. It's a pleasure to be here this morning on the heels of Monday's landmark event [announcing Compaq’s acquisition of Digital], it is particularly fitting that Bob and I are here today with Bill. We announced just two days ago a vision for the creation of a new force in the computer industry, a force that in partnership with Microsoft will accelerate the adoption of Windows NT into the enterprise. The new Compaq and Digital relationship is tremendously exciting for all of us, and for customers. The strengths of Digital, including leadership platforms, innovative technology, and, of course, global services, are key elements of our success going forward.

Compaq continues committed to these investments and its strategic assets. Compaq places tremendous value on the customer relationships that Digital has cultivated for almost 41 years. We're committed to supporting customers, the customers' investments in Digital's NT products and services, including those PC products. The combination of Compaq, Digital and, of course, Tandem, will create the new leader in global enterprise NT solutions. Together with our partner Microsoft, we will empower our customers with unparalleled competitive advantages for their businesses.

It's a pleasure to be here, and thank you, Bob.

MR. PALMER: Thank you, John.

You know, it's funny, John and I worked together at Digital for the same executive. When I joined Digital, we were on the path, and I believe you worked there 16 years?

MR. ROSE: That's correct.

MR. PALMER: That's great.

MR. ROSE: It's fun.

MR. PALMER: There are many executives at Compaq that, at one time or another, had worked at Digital, which gives me a lot of confidence in how easily we're going to be able to accomplish this merger.

But, anyway, today we're announcing an expanded Alliance for Enterprise Computing that confirms Digital's position as the first worldwide prime integrator for Windows NT enterprise solutions. For customers dealing with a prime integrator means a single point of contact for the acquisition, the design, the implementation and the support of solutions for NT and BackOffice products. It also helps customers to reduce the risk, because the prime integrator offers global life cycle support, and ensures that Microsoft's own service organization is part of the engagement.

The alliance will concentrate on three important areas. On joint marketing initiatives, on joint technology development, and on expanding our service capabilities and offerings. In the marketing initiative, we want to replicate the tremendous success that we've had with Exchange. The enterprise infrastructure initiative is designed to make it easier and cost-effective for enterprises to adopt Windows NT server and Microsoft SQL server for 64-bit systems, enterprise applications, and data marks. And the Internet initiative will provide highly scalable, integrated, manageable, and low-cost computing solutions to large customers.

The second part we will focus on is technology. This will include new SMP-based hardware architecture for Windows NT server systems that will substantially increase high-end scalability and performance. During 1999, this hardware collaboration will allow customers to deploy NT servers using 32, 64 or even more Alpha processors. We will develop added-value enterprise class software to enhance and extend the scalability, availability and manageability of Windows NT. This will enable customers to deploy mission critical applications on NT sooner and with lower risk than from any other vendor. Digital and Microsoft will continue to develop integration and migration tools for all the VMS and UNIX recognizing that most companies continue to have mixed operating system environments.

The expanded alliance further strengthens Microsoft's and Digital's commitment to the Alpha architecture. Microsoft will continue to ship Windows NT products with the same features on both the Alpha and the X86 architecture. The products include NT Workstation, NT Server, all major BackOffice products, and the complete set of application development tools. We have agree to ensure that application developers will have a common programming model for Alpha today, and Alpha and Intel's IA-64 architecture tomorrow.

The third area of focus for the alliance involves services. As Microsoft's worldwide prime integrator for Windows NT enterprise solutions, Digital will expand its service capacity and its offerings. Together with Microsoft, we will develop five new services. Total cost of ownership, migrating from PROFS to Exchange, building on enterprise intranet with Site Server, building a Web commerce site with Site Server, and LAN readiness assessments. We will also double the number of Microsoft certified systems engineers to over 3,000 by the end of calendar '98. One thousand of these will be certified in Microsoft SQL Server for deployment of data marks, others will have extensive training in Exchange, Internet/intranet, and Windows NT migration.

The expanded Alliance for Enterprise Computing is committed to helping customers deploy Windows NT across the enterprise from the desktop to the data center. It is a deep-rooted alliance that is not based on talk but on action, and results. A partnership that gives customers a competitive advantage, and that will give them even greater benefits as Digital and Compaq move forward with their merger.

Thank you.

And now it's my pleasure to introduce the Chairman and Chief Executive Office of Microsoft Corporation, Bill Gates.

(Applause.)

MR. GATES: Well, good morning.

The alliance we've had with Digital has been a fantastic success. Both companies can say that it exceeded the expectations we had going into it. A key element of this was that Digital was willing to be on Windows NT and Microsoft Exchange when those products were just coming to the marketplace. They saw that the demand would be there, and really this alliance, I think, has been a key element in the success that those products have received.

Windows NT momentum is very strong. It's over 100,000 servers a month, greater than all the UNIX shipments combined. And a part of that that we're particularly excited about is the way that Windows NT is being used in Internet infrastructure. A majority now of new Internet servers are based on Windows NT and that's been a big area of focus and something that Digital has had a lot of expertise in helping to pull together.

Now, the alliance has had many parts to it. Part of it was, at the technical level, great support for the Alpha chip that we've done with a broad set of products to show off the capabilities that that technology has. Another element has been getting out there and really helping customers put these solutions to work. With Microsoft Exchange, Digital has over 2 million seats that they're rolling out. And that's a substantial percentage of the Exchange seats, really the expertise there, Digital has definitely gotten out in front. The centers that Digital has put together, on in the United States, one in Europe, and one being put together in Asia, those have been fantastic in showing people that very demanding tasks can be done using this technology.

Now, Microsoft has a lot of different programs that we use in working with partners. And Digital is really the only company that has worked with us on every single one of these things. And we've put it together so that it's seamless for the customer. Their ability to license our software, support our software, their ability to come in and provide consulting, working with us. We even have some support offerings, where it's transparent to the customer, whether it's the Digital support center, or the Microsoft support center, that's dealing with the issues that they have there.

Today we're talking about all of this combined, making Digital a prime integrator, for enterprise NT solutions. And that's a very concrete thing, because we have a lot of customers, some of them that we got early in the alliance, some that are very recent, that saw these combination of services as the reason that they could bet on Microsoft products, and count on Digital as something to pull it all together and make it work very effectively for them.

Now, the technical teams at Digital and Microsoft have been working very closely. That's one of the reasons why the Alpha benchmarks are so good, is that the tuning is there. One of the big things in today's announcement that's new is this commitment by Digital to take out the servers. So we'll have 32 or even 64 processors, and work with us to get Windows NT taking advantage of those systems.

If you think about performance, there are many elements that are coming together, faster processors, from both the Intel product line and the Alpha, more processors in the system, which is a big boost up, more clusters, where you get systems working together, as a single complex, and then very substantial improvements in the software performance, for example, the advances that we'll have in database, as we go from SQL version 6 and 6.5 to SQL version 7. And all of those factors compound with each other. And so the rate of improvement will be very dramatic.

The reason that Digital and Microsoft are making the investment to do this is that customers are expecting even greater transaction rates now than they ever have before. It's not just moving applications that ran on mainframes and other systems onto NT. It's new applications, particularly applications that run across the Internet, where the transaction loads will be very incredible. And the desire to analyze all of that traffic will be critical for a company that wants to understand what it should be doing to it's products, and responding in a very real time way.

So there's the clustering initiative, there is some middleware software that Digital is developed expertise in over the years, on their Open VMS product. They'll now be moving that over onto Windows NT, things like batch job management, that you need as you get NT into the data center, with lots of different products there.

Another particular initiative is taking the emulation software, that Digital calls APEX 32, and not just having that run on top of NT, but have it built down into the NT product, so it's really transparent, whether you're running an application that's been native compiled, or an application that's using the emulator that they have there. And so between the evangelism we do to people to do the native compilation, and the other applications, you get the full benefit of being able to work on Alpha.

As was said earlier, there is a doubling here of the number of certified people that Digital is going to have. Digital has actually slightly more certified NTSE employees than even Microsoft has. That puts them way ahead of anybody else. But, the demand exceeds supply. The interest in having those people with that background in the marketplace is very strong. Even as Digital moves up and doubles that to 3,000, we have no doubt those people will be very, very busy. Digital is also leading the way in getting involved in SQL Server certification. And so there is a very significant commitment there, that's a major bet by both companies that SQL growth that we've seen will continue and even accelerate as we get version 7 into the market later this year.

We're taking the success in Exchange and building on that. We're building programs that are very focused on cost of ownership. Things that we're doing today and, of course, a major milestone with Windows NT 5. And so many of our mutual customers will be getting the NT 5 beta 2 in the next few months, and be able to give us feedback on how we make sure that really solves everything they're interested in, in the cost of ownership area.

So this is a very broad alliance. It's a technical alliance. It's a go to market alliance. And I think it's really a model for what partnerships should be like in this industry. And I just want to thank Digital for their support. And I think the evolution that will take place as Digital and Compaq come together is definitely a fantastic thing for Microsoft.

So it's great to be here this morning, thank you.

MR. GALLOP: Thank you very much, Bob, Bill and John. As someone who spends his life out talking to CIOs around North America, I can personally attest to the power of talking about solutions at this level, with those corporations.

Now, we are going to take a look from a slightly different perspective. Digital recently announced that Reuters has signed a contract for the supply of Windows NT Servers from Digital, for use throughout its worldwide network. Reuters will be installing servers from Digital, running Microsoft Windows NT Server, at its data centers, and customer sites, on a very dispersed basis, worldwide. Digital will also be providing warrantee and maintenance services to that network environment. To tell us more, we are very pleased to have with us, live via satellite, from London, Peter Job CEO of Reuters holdings PLC.

Welcome Peter.

MR. JOB: I was thinking, as I drove over here from my office, that if I was younger, and a bit more beautiful, I could say I was a bridesmaid at a lovely wedding. Of course, it's more complex than that. People have many partners, nowadays. But this is a notable pairing up. Not, the least because we've known this couple for quite a while. Digital was the first supplier of the key equipment that allowed us, in the early '70s, to launch a revolutionary new service for the foreign exchange market, which was called then The Reuter Monitor.

And by 1982, or thereabouts, I recollect, Reuters realized that it should not be writing too much proprietary software, when it wasn't necessary, and it quickly lighted on the virtues of Windows, which I think helped, Bill would agree, to popularize that throughout the financial community. Now, moving on again, from there, what we see is that this -- these two organizations are still very well placed to give satisfaction in the financial services community, albeit, at a more complex level all the time.

And if we were to try and describe the complexity, I would say it's, from my point of view, something like this, in a dealing room today, in a high moment on Wall Street, you'll be having about 3,000 changes per second, hitting that dealing room. And you may have in that dealing room, perhaps, 1,000 people, but each of those thousand people is interested in one or more, a small subset, probably at that time, of those 3,000 changes per second hitting the dealing room. You don't resolve this kind of technical problem without some fairly high power software and hardware. And the experience that we have, particularly in Europe, is that the NT software is very good for this purpose. UNIX is stronger in the United States, but that's partly for historical reasons. And we see NT getting stronger all the time. And we're using it ourselves, for our most complex and power demanding applications.

At the same time, Digital is a company that knows how to build hardware for these demanding situations. So those 3,000 updates, those 1,000 users, they're going to need this combination. And they're going to need a combination, because they want a way to take the complexity out of their lives. What Digital has, we know, is a very large work force around the world. Which is able to come and take some of the load of those -- getting those things to work properly. It's often not easy, even for the most sophisticated customers to get the array correctly working, on fairly high specifications.

So Digital brings, in addition to its powerful tradition in hardware, it brings that support capability. Microsoft has the software, and by the way, I expect it to deliver more important things. We're already, obviously, using object-oriented software for dealing room delivery. We're writing now to Active X controls. And I'm expecting that before long, what we see happening at Microsoft means that we'll be able to find a good software route for very efficiently delivering very high performance video into dealing rooms.

So this is a partnership which greatly appeals to us, and the addition of Compaq to it, if that goes forward, as I believe it will, will only help, because again, the addition of more power to the partnership gives more capability to go to those people, who at the moment struggle with different suppliers, and get single answers from the group.

So thank you very much, and I wish you both well with your partnership.

MR. GALLOP: Thank you very much, Peter. So there's a perspective from the user's side. And now, next on the agenda, a perspective from yet again a different position in the marketplace.

I'm personally pleased to introduce our next speaker, we've done a lot of good work in the North American marketplace together, and that is Jeremy Coote, President of SAP.

Jeremy, welcome.

MR. COOTE: Good morning, ladies and gentlemen, I'm proud to represent SAP, as a valued business partner of Digital and Microsoft, as we support their announcement today. SAP is the market leader for enterprise-wide business applications. And as the market leader, we're constantly looking for ways to provide the most innovative, mission critical business backbone solutions.

We're committed to offering the market, the most robust solutions possible for today's high competitive online world. Enterprise customers want and expect at least three things. One, highly scalable and reliable solutions, in order to drive large, common, 7 by 24-hour applications. Two, world class, professional services, to implement and maintain these systems. And three, a commitment to investment in new and future technologies.

Today's announcement from our strategic partners, Microsoft and Digital, allows us to further our mission of continually bringing premier business solutions to our customers. We at SAP realize that our customers need to stay current with technology, as well as changes in their business environments. And, of course, a great example of this sort of change now awaits Digital and Compaq, and one thing that we will help them through that, is that they are both SAP customers, and we're therefore confident of their future IT infrastructure.

In the history of SAP, many of our brightest innovations grew from change. Back in 1987, SAP began working with Digital, as a development partner, on a new generation of our software. That open client and server development vision eventually became the R3 System. In 1993, SAP began working with Microsoft, and in 1994, R3 was first released on the Microsoft Windows NT platform. Since then, after a steady growth to 4,000 worldwide installations, Windows NT represents over 31 percent of our total customer base, and its momentum grows.

While the UNIX platform continues to be strong, in the R3 marketplace, Windows NT has been key to opening new market opportunities for SAP. Today, looking at the past year of 1997, we've witnessed 45 percent of new R3 installations shipping on Windows NT, with brand new customers buying R3 on Windows NT, at a staggering rate of more than 50 percent.

Last year, SAP shipped more than 2,000 new R3 installations in Windows NT, and nearly 500 of those were shipped for use with Microsoft's SQL Server. Actually, now that Digital plans to merge with Compaq, this new computer giant will support more than 50 percent of our current customers, running Windows NT. A sampling of these customers include the following, whose size and computing requirements are as diverse as the industries they represent.

Happily, together we can count joint customers in Dow Chemical, Pennzoil, McCaffrey Associates, PetSmart and so on. And what excites these, and all of our customers, though, is not congratulating their current success, but exploring the plans we have together for the future. Imagine a world in which applications such as R3 can enjoy 10 to 100 gigabytes in main memory, avoiding bottlenecks of disk access, while at the same time allowing for the analysis for of masses amounts of data.

In a business context, manufacturing and distribution companies, utilizing SAP's supply chain software for advanced planning and optimization applications, will soon be checking online credit and inventory availability while simultaneously processing new MRP runs. In the future, a whole new generation of data warehousing products will be available using 64-bit technology, allowing for online access, to seemingly endless analytical data, because in 64-bit computing, developers and engineers believe that current business processes will be executed at least 100 times faster.

I am here today on behalf of SAP to recommend to the software industry at large that I join us in embracing these new technology innovations, offered by Microsoft and Digital, because of innovations like these announced today, combined with world class, professional services, possibilities for new application functionality seem endless.

In conclusion, we at SAP stress our commitment to working with Microsoft, Digital, and Compaq to continually bring down the overall cost of computing. Together with our partners, we pledge to fully enrich this modern client services business application architecture, so that our customers can focus on improving their businesses and most importantly, adding to their bottom line. Thank you.

[Question and answer session follows.]

**

MR. QUINLAN: Tom Quinlan, from the San Jose Mercury News. I have a couple of questions. One, is Digital actually shipping 32 and 64 processor systems? Will the work it does on NT and SQL Server to support those systems be transferable to the Intel platform? And perhaps the representative from SAP could say whether he intends to support the 64-bit processor, immediately on Alpha, or will he wait until 64-bit processing comes on Intel, as well, before he starts developing software for that?

MR. PALMER: Tom, we have not yet developed that sophistication, as far as scalability is concerned. And it's an extraordinarily complex task. But, working with Microsoft, we intend to get that into the marketplace, in calendar year '99. Relative to the other question, I think fundamentally we are clear that Alpha will be available on 64-bit computing ahead of Merced and at least by the technology road map that Intel has indicated, we should have the 64-bit support from Microsoft prior to Merced. So I think many customers will look at it as if you can start today on Alpha, and migrate an application later, or choose to stay on Alpha, or whatever. But, you can get started today.

QUESTION: Can Windows NT support 64-bit architectures today?

MR. GATES: NT today is 32 bit. The first large memory version of NT is NT 5.0. And NT 5.0 will on the Alpha support VLM, very large memory, and the way we've done that makes it very easy for SQL, Exchange, SAP and other applications to take advantage of that. So it's with the shipment of NT 5, that's the first time we move up to the VLM environment.

MR. EVANS: Jeff Evans, Computer Paper of Toronto.

The combination of the three firms, Microsoft, Intel and the new Compaq-Digital, will result in something which is larger than IBM, and perhaps is more significant in the market than IBM ever was. Do you see Windows, partly as a result of that merger, Mr. Gates, displacing UNIX much faster than might have been imagined?

MR. GATES: Well, there certainly is competition between Windows and UNIX today, and every day that goes by Windows is getting a higher share than it's had in the past. If you look at that on the desktop today, it's pretty dramatic. UNIX desktop solutions actually went down in the last year. And, as we're going into the areas where they've been strong, the CAD type areas, the real-time trading type areas, we expect to see an acceleration on the desktop.

On the server level, there's definitely a need to interoperate between UNIX and NT. There's a lot of UNIX systems out there. There are still going to be UNIX systems sold for a long time to come, quite a variety of UNIX systems. Remember, there are dozens of flavors of UNIX, and we need to interoperate with all of those. So, we're actually increasing the things we do to interoperate, while at the same time competing. NT on the server gets stronger and stronger, but I think it's inappropriate to say that it will ever take over the market. There's always going to be lots of different operating systems out there. Windows NT will just be more prominent than it is today.

I do think the combination of Digital and Compaq is a very positive thing for Windows NT.

MS. DiCARLO: Lisa DiCarlo with PC Week. This question is for Bill Gates.

Can you comment on how this deal compares with your NT alliance deal with HP, and if Microsoft is interested in expanding its enterprise alliance with HP in this way?

MR. GATES: Well, the situation we have is that the demand for NT expertise in the marketplace exceeds the supply. And Digital certain got out in front in being willing to train their people and get really involved in those things. Now, in no way is that exclusive to Digital. We are working with other partners as they build up their capacity. And we are very interested in expanding what we do with other partners. What we're seeing today is that Digital has built with the customers a very strong reputation for doing these things quite well. They are not the only one doing these things. But if you look, for example, at Exchange the 2 million seats is way, way beyond what anybody else has been able to achieve there.

So, yes, we're anxious to have more people working with us on this, because we see the customer demand for it. But we've taken what's been successful with Digital and decided to bring that to a whole new level, doubling the number of people they have with the certification.

QUESTION: I will say this is pretty much related with the one before. I just wanted to know how much market share do you expect for Windows NT, and when and if you expect such a prominent position for Windows NT like Windows in the world of PC?

And my second question is for Robert Palmer. I just wanted to know if Digital at some point in the future will stop selling UNIX and when?

MR. GATES: In terms of market share, I don't think there is any specific number that -- you know, we don't make forward predictions on anything, whether it's earnings or market share or volume, anything. We're very conservative about making any predictions. Windows NT is growing in its acceptance. And there's a positive thing that happens, that is the more momentum you get, the more service capability you get. The more momentum you get, the more applications you get. And that feeds on itself where people are doing more innovative hardware. Customers are training their people and getting more used to it. That positive cycle that definitely drove Windows on the desktop, that same cycle, all those same dynamics, are driving Windows on the server.

And so, although I don't think the server market will ever be quite as simple because people keep systems around longer, people have more specialized needs on the server, Windows NT is going to be very strong on the server. And getting up to these 64-processor clusters that we're talking about here, getting the very large memory support, these are very specific things that customers are telling us we need to do, and that's why we've increased the R&D we put behind Windows NT, and the joint R&D we have with Digital quite substantially, because the demand is out there for those capabilities.

MR. PALMER: With respect to your question on Digital's 64-bit UNIX, Digital was the first systems company to offer 64-bit general purpose UNIX for the marketplace more than five years ago. We have, by most analysts' accounts, the leading implementation of UNIX with or without regard to 64 bits, if you look at V.H. Browner, Gartner, whomever. Because of that leadership, we've been able to attract most recently Sequent Computer Systems to look to the future for 64 bits on the IA-64 architecture, and to stay partnered with Digital.

Bill mentioned the many, many flavors of UNIX that are out there. Obviously not all supportable as they go to 64-bit capability. These companies do not have the volumes to afford the investment to develop a new 64 implementation. Their choices come down to a relative few. They can go to a watered-down version of Solaris on IA-64 that in no way will be comparable to the Solaris on Sparc, or they can come over Digital's 64-bit UNIX, which is the same, whether it's going to be on IA-64 or Alpha, and it will have partners already like Sequent, and I expect many others. And the agreement with Compaq to acquire Digital can only strengthen that.

So the answer to your question is quite clear, we have the best opportunity we've ever had to establish Digital's 64-bit UNIX as the standard on the high 64-bit architecture. We expect to ship it when Merced ships, and we will have the same ISV environment for both IA-64 and Alpha.

In addition to that, although you didn't ask, we will continue to invest in, support, and sell and service open VMS. This has been committed by Eckhard Pfeiffer on numerous interviews that he and I went through on Monday, and it makes all the sense in the world. The number one most attractive thing to Compaq about Digital was its huge, loyal, installed customer base, and Compaq is totally committed to protect their $10 billion investment by protecting the investments for those customers.

MR. RAJ: Winston from PC Week Asia.

I just want to know whether Open VMS sales will be eroded in the future with your commitment towards NT?

MR. PALMER: I think that it is well understood that Open VMS is only growing in specific applications where the unprecedented high availability and the faster recovery features that Open VMS, which are still better today than anybody's UNIX, including our own, where those have real merit. If you're trading hundreds of millions of dollars a day, I'd suggest you get something that doesn't go down, you know. But it's clear that with the investments that are being made at Microsoft, the quality, the security, the scalability is inexorably improving rapidly. And I see that that is the future. That's where things are going. So, we're emphasizing, how do we make sure the interoperability between today's leadership disaster recovery operating system and what is obviously going to be tomorrow's is the best in the industry.

QUESTION: It's for Bob. Do you consider NT 5.0 a true 64-bit operating system such as your UNIX systems, and if not when do you think NT will catch up and be as scalable as UNIX?

MR. PALMER: I think NT 5.0 is going to astound the critics. We are excited about it. We could not be more eager for it to come to market. But, as you know, in software, whether it comes from Digital, Microsoft, or anybody else, it is complex and difficult, and thorough and rigorous testing must be performed in order to ensure a quality product enters the marketplace. When it's available, we'll be ready there to support it, and we know it is going to outperform the critics.

MR. BARAN. Nick Baran, Windows NT Systems Magazine.

Could you comment, Bill, a little bit further on time frame for NT 5.0, and what some of the problems are with bringing it to market?

MR. GATES: We're making excellent progress with NT 5. The only very specific date that we're giving for NT 5 is that we'll put out the beta 2 before the middle of this year, and that's a major milestone for us, because all the functionality will be there. It's based on the customer feedback we get on the beta 2 in terms of how do they like the performance, how do they like the reliability. It's after that that we'll commit to a final schedule. We feel we're getting very close with the product. We're making very good progress. It's a major thing. It's the biggest release of NT that we've ever done. There's more new lines of code in this than even in any of the releases we've done. And it's the directory, it's the security, it's the IntelliMirror breakthrough for cost of ownership, and it's the platform for building the rich distributed applications.

And so, what I encourage you to do is fork along with us, talk to the customers that get beta 2, get a copy yourself, see how that looks. Our top priority is making sure that that is a super high quality product that the customers believe that we're ready to release that product. And so, it's based on that that we'll -- that's when we'll put it out.

MR. HARDING: James Harding from VNU. A question for Bill Gates. How can you be as confident that Compaq will be as committed to Windows NT as Digital is?

MR. GATES: Well, the answer is pretty simple. They already are. Compaq really, because they're in a sense newer to the computer game, they made their bet on Windows even more strongly than companies that had their own operating system, where Digital had VMS, which has been a very important product for them. Compaq bet on Windows.

So, if you look at Compaq servers, Windows NT has an overwhelming share there. If you look at Compaq desktops, Windows has an overwhelming share there. The only real major criticism of Compaq that people have had is that when it comes to complex networks and putting together enterprise solutions, they just don't have the capacity in the field and in their experience to have the same expertise that, say, an IBM or a Digital have in those areas. And that's why we see the combination of Digital's strengths, and Compaq's strengths working together for NT being very, very exciting. But there's no lack of commitment on Compaq's part to Windows NT. And John Rose is here, and he'll make that crystal clear if you have any doubts about that at all.

QUESTION: This is a question for Bill Gates.

Do you expect to sign an agreement like this one with any other companies other than Compaq and Digital? If so, what is the competitive advantage for Digital?

MR. GATES: Well, the agreement that we reached over two years ago provided great competitive advantage to both Digital and Microsoft. It's certainly been great for us in getting out into customers that Digital built up the capacities, and was there to meet those customer demands. And this new strengthening of their capacity and some of the new focus that comes out of this, both technically and field capacity wise, that's going to be a great competitive advantage for Digital.

Now, there's not an exclusive in here that says that somebody else can't go out and certify other people as well. There's nothing in here that says that we won't do things with other companies. But you have to say that Digital has gotten out in front on this, and with what we're talking about here today, they are very committed to staying out in front on it.

And so, where do you end with real competitive advantage, it's in the customers. I mean, why did Reuters, which is about as big a deal as has gone down in this industry for a long, long time, why did they pick the combination of Digital and Microsoft? It's largely because of the capacities that have been built up under the first arrangement with Digital.

Now, there are other companies that look at that Reuters’ deal that are jealous of it, and you bet that will motivate them to build up some of this capacity. And we're not going -- we at least are going to encourage them to do that. That is the nature of this deal. But I feel Digital has done what it's going to take to stay very, very strong in all of this, and get a lot of benefit out of it.

MR. PALMER: You know, I agree with Bill. There are a lot of companies that coveted that Reuters deal. Compaq paid nearly $10 billion to get it when you think about it.

(Laughter.)

MR. BANK: David Bank with the Wall Street Journal.

Mr. Palmer, can you tell us what kind of partner Microsoft has been, maybe detail some of the ups and downs, and also what Microsoft offered in this to get this deal?

MR. PALMER: I can do that with great enthusiasm. I already did actually with a customer event that occurred earlier this morning, because I had a speech that was all full of bits and bites and things, but Bill had already covered those more than adequately. So, I was left with very little to say about the technology. I decided I'd say something about the relationship.

This relationship started, as I said, August the 2nd, 1995. And, at that time, my associates and friends and competitors in the systems business said, well, I can't believe you'd do that. It won't work out. And whatever, and so forth. I can tell you that we've not had any relationship with any partner, although we've had many good partners, that's gone better than this relationship. I have never literally looked at the contract since it was signed. I did look at it pretty carefully before it was signed. But after we signed it, we never had to look at it again. And why? Because it was working so well.

Microsoft not only met every contractual obligation, but even more important, in the spirit of what we were trying to do, and as new things came along, there was never the least hesitation on Bill's part or his company's part to work to a customer advantage with Digital. And I'd like to think that the same could be said of my company working with Microsoft. You talk about ups and downs, it's only been ups.

MR. GATES: Now, just to give you some of the flavor of it, whenever there's a big account that we're looking at, there's a lot of electronic mail going back and forth. In fact, we've exchanged mail on several occasions to really put together customer references where they can see how we're working together. And we've won a number of major deals, even in the last month, because the other customers were willing to go in and talk about how the two companies were working together.

QUESTION: (Inaudible.)

MR. GATES: Yes. I think the question is, when will we see betas of NT taking advantage of the large memory?

MR. PALMER: Well, fundamentally, as Bill was saying, that's really a function of the information that Microsoft learns from the beta 2. And the platform is obviously ready today. We've been shipping 64-bit VLM, which we developed with a different partner, on UNIX. In this case, Oracle, as you all remember, in April of 1995, one of the better days in my career, when we announced the ability to put all of that data in main memory, and exceed mainframe performance by two orders of magnitude at a fraction of the cost, which really demonstrated the VLM that was pioneered between Oracle and Digital.

So, just like Digital's partnership with Microsoft is extraordinarily important to our customers and to our company, it's not exclusive. We have others. But this is going to be the first time, I think, that you will have such a low cost capability of taking advantage of VLM and 64 bits. And the competition is healthy for the industry. It clearly will cause more competition. It will cause better choice and better availability in the marketplace, and we're eagerly awaiting it.

MR. GATES: Let me add two specific points on this. The VLM support is in beta 2. And, in fact, applications like the SQL 7 betas that are out take advantage of that VLM. The VLM and what we're doing with NT 5 is the same thing that was done with the UNIX.

And when you say true 64-bit, you can actually mean something that goes beyond VLM, that is beyond what was done in UNIX or what's being done in NT 5. You know, VLM is a pretty specific definition where you use the very large memory for buffer pools, and so you avoid all the disk accessing. The place that gives you big, big wins are things like databases or Internet servers. And that's why you've got great benchmark results coming out from VLM-based systems. Today those are on UNIX. We believe we'll match or exceed those benchmark results on NT VLM, and we're using the beta right now to make sure that that takes place.

True 64-bit, which has not been done on either of those systems, is being done on NT. But that's on a time frame somewhat after the NT 5 time frame.

QUESTION: Bill, what will Microsoft be offering by way of services in this area, or do you intend offloading all of it to partners?

MR. GATES: Microsoft made the decision that we should focus on building software products. Now, you can't do that without having a lot of service capabilities. You've got to have 24-hour support, you've got to have regional support centers. You've got to have systems engineers in the field. And so we have built up that capacity.

But, in terms of systems that involve more than just Microsoft software, when you have hardware involved, where you've got a communication network involved, where you have applications, the people who can support those systems are our partners. And we've made an explicit decision not to turn our services business into an P&L.

If you look at Oracle, which would be sort of the extreme example, they today get more than half their revenue from services as opposed to product sales. Microsoft, we get only a few percent of our sales from services. But we have consultants out there in the field that listens to customers, and gets the feedback to us. But our goal for those consultants is as much as possible to build up our partners' capacity, to build up our customers' capacity, so that they can move on to the next situation.

And so that's the opposite of a service organization where you're really trying to treat it as a business, which is a valid thing to do, it's just that that's not what Microsoft has chosen to do. Part of the reason we chose to go this way is, it allows us to work very, very well with partners like Digital and that has been incredibly successful.

The real test of it is to talk to some of these customers and say, did what Microsoft come up with in terms of services you expect directly meet your needs, and did they have partners to take the broad systems view and fill in what you needed there, and that, we have really risen to that challenge, the partnerships, particularly the Digital one, have been central to that.

MR. ABBOTT: John Abbott, from Computergram.

I wondered if Bob could make it clear to us a bit more about the technology behind the 32-bit and 64-bit processors, as it relates to the technology you have there out in the market at the moment, and are you now looking at the Tandem technologies that Compaq has been looking at in this area, as well?

MR. PALMER: We are not at this moment looking at our competitors’ technologies. I think one thing that needs to be really clear is that although we have announced that we have signed, and our boards of directors have enthusiastically and unanimously approved the merger agreement, that until the authorities in the European Commission, the United States and other geographies, and until Digital shareholders have the opportunity to vote on this issue, we remain competitors. And we compete aggressively, assiduously, in the marketplace and will continue to do so.

On the other hand, we expect that the appropriate regulatory process will run relatively smoothly. It's obviously a good thing for the industry. And we expect that we will see that close in the second quarter. At that time, I think it's very clear that some of the technologies that are resident today in Compaq, resident today in Tandem, resident today in Digital could be better combined to create new systems. The systems we're talking about today have been under development for some time. And these systems, as far as the hardware is concerned are not radically different. I mean, we're continuing on our Alpha road map, of innovation.

There will be some new announcements very shortly of even more powerful processors and all of that sort of thing. But, it's more software, it's systems architecture. And, in fact, Digital's primary core competency in my view, at least, has always been architecture. And so it's a new architecture, very dramatically expanding the capability and scalability in these systems.

MR. GATES: And just to clarify something, the scalability announcement about 32 processors, and 64 processors, that's not 32-bit, 64-bit, that's a separate issue. That has to do with the memory model on the individual processors. But, we are announcing that for scalability, Digital will have 32 processor systems by early '99, running Windows NT. And then we'll take that up to 64 and even to more, beyond that. So that -- you can take the performance you get out of all those processors, and multiply it by the power you get out of the individual processors, and whatever improvements are on the software, to get the total increase in system performance.

QUESTION:This is with regard to the additional 1,400 certified engineers. Who is responsible for finding these people, and funding the effort, and training, and if there is such a shortage of certified engineers, where are these people coming from?

MR. PALMER: Well, that's a very good question. We're responsible for identifying, and recruiting, and training those people, or taking experienced systems engineers, with VMS experience, and getting them retrained. And frankly, because it's so exciting, the opportunity and the obvious growth in this phase, it isn't that hard to recruit people and retain them. Our actual turnover of Microsoft certified engineers is lower than the turnover in other categories in the company technical ranks, because it's such an exciting opportunity. People, engineers in particular, want challenging problems to work on. And they want to be appreciated for the work that they're doing. And this provides exactly that kind of environment.

With respect to investment, both companies are clearly investing heavily to bring the maximum competitive advantage to our customers.

MR. Lutrell: Okay. Folks, we promised you we'd be back with a wrap-up. First of all, I should point out that this is all, of course, on top of the Compaq-Digital merger. So let us give you some of the high points from this presentation today. The main message is very clear. Microsoft is endorsing Digital as the first and the only prime integrator for Windows NT enterprise solutions, which obviously gives Digital a major advantage over all of its competitors. Now, there were perhaps two -- well more, but two key product messages. Digital and Microsoft will co-engineer a new generation of high performance servers, that will drive Windows NT performance to unprecedented levels. Also, the commitment to Alpha continues ensuring concurrent, simultaneous release of Windows NT, and BackOffice on Alpha, and Intel platforms.

Now, service messages, one thing you should probably take note of is that as Microsoft's prime integrator, Digital will expand its already very, very rich portfolio of Microsoft-based services, and will double its delivery capacity to 3,000 Microsoft certified systems engineers, and developers. And, of course, Digital right now has more Microsoft certified professionals than all of its competitors combined.

The prime integrator status is Microsoft's recognition and endorsement of Digital's services, worldwide depth, breadth, and capacity. And that is very important, a very major distinction.

Also, if you joined us late, if you joined the telecast or the cybercast late, you'll be able to hear both -- or you'll be able to hear the audio portion of this event, beginning about one hour after the event concludes. And this is going to be available to you for 48 hours thereafter. All you have to do is to call in the United States, 800-633-8284. And I assume that we've got that up there on the screen for you. But, if not, okay, I'll repeat it. It's 800 -- write this down, 800-633-8284. Now, if you're calling from outside the United States, the number is (303) 248-1201. And I'll repeat that. Outside the U.S. it's (303) 248-1201.

Now, you'll need a reference number for those calls. And the reference number for both the calls is 37-65-916. That's 37-65-916. Field engagement resources, you probably want some information on that. You can visit the AEC internal Web site, and that's at -- let me see, I think you've got that there, where is it? The internal Web site is http://dsn.mro.dec.com/alliances/microsoft/. And I would repeat that, but let me get through the rest of this first.

A resource information kit, by the way, is being assembled right now, as we speak, to help Digital and Microsoft account teams win businesses, win new business, I should say, together. So to order that, the title is, The AEC's Field Engagement Kit. And the part number is EE-E8931-21. And you can order that through -- that's, I hope, and I believe it's on the screen right now. So, a lot of numbers there. You can order that through the literature ordering system, LOS. And that will contain all of the collateral materials that were developed for today's event, and also a guideline so you can put together consumer events.

Also, a videotape of today's announcement event, here in San Francisco, will be available shortly. And that order number is P/N -- I had it just a moment ago. Here is it, P/N-V156-CX. And you can get that through the information repository. And I, again, hope and believe that that was on there on the screen for you, right? Okay. If not, let me repeat that, the videotape, which you may be very much interested in, is P/N -- this is the order number, P/N-V156-CX, that's V156-CX. And you can get that through the information repository.

Well, folks, you can see all the excitement. It's beginning to subside, and move into areas outside this room. We just to thank you very, very much for joining us. I'm Buzz Lutrell for the Digital Video Network. And again, happy selling, a wonderful future, bright outlook, you've got to be happy about all this. Take good care. Bye-bye.

(End of presentation.)