Microsoft Chairman and CEO Bill Gates and
Brad Chase, Microsoft's vice president for Windows marketing and developer relations
June 25, 1998
San Francisco, CA

[Due to the varying sound quality and subject matter of tapes, the information in this transcript may contain inaccuracies. Downloadable Word document is located at the bottom of this page]

MR. BRAD CHASE:Welcome to the launch of Windows 98. I love that tune. We're pleased to have you join us in San Francisco to launch Windows 98. But this is more than San Francisco. Actually, we have around 100,000 people, give or take a few, less or more, joining us from around the United States. We have people joining us from retail stores, like CompUSA, Computer City, Frye's and Wal-Marts who are watching this live. We have people joining us from UA Cinemas across the United States in many, many locations. And we have people watching it on NetShow on the Web. So there's lots of people watching it here in the United States. In addition, though, we even have South Africa watching this live, all the way from, of course, South Africa.

Now, one of the nice things about Windows is it's a world-wide phenomenon. We actually have this product being introduced over the next few months in 150 countries in about 30 different languages, of which about 14 are shipping today. You'll see the rest of them coming over time. But this gives you a sense for how widespread the PC phenomenon is around the world.

Now, a lot of people ask me, why did you choose the theme Route 98? Well, we chose that theme because there's something magical about the open road, and applying that open road to technology. It sort of symbolizes that we've come a long way down that road in just a short period of time in this industry. Windows 98 is a major milestone for consumers on that road and, at the same time, the road still has a long way to go. A long way that we're pretty excited about.

But today, I'm here to talk about Windows 98. And in preparation for this launch, and the milestone it represents along the road, we went out to a lot of customers and gave them the product before we actually released it today. We asked them to use it, to test it, to play with it, to apply it to their business or to their pleasure, and see how it works for them. And we got a lot of nice feedback, going out on the road across the United States.

And what I want to do throughout the presentation today is share with you some of that feedback. So, what I'm going to do is start with a woman who is using Windows 98 in her business and for fun, and let you hear about Windows 98 with her words.

Let's go to the video.

(Video shown.)

Ms. REBA McINTYRE: I think Windows 98 will make it easier for just about anyone to use a computer. I had no idea what a computer was when I was a little kid. We barely had a copying machine at the little school we went to. My son, Shelby, has computer classes in kindergarten. Right now, computers don't scare him at all. Whereas, when I first got started with the computer, I was petrified. I thought anything I put in, I was going to erase it immediately.

Windows 98 is easier. It's simpler to use, and we really do like it. It makes it easier on everybody who works here at Star Struck. When I'm on the road, Windows 98 helps me to keep in touch with the office and the family. It's great because it allows me to choose when and where I want to do my work.

As a performer, the enhanced CD is a very exciting way to connect with the fans.

MR. : One of the neat things that we did with this enhanced CD was, we put an Internet Explorer browser on there, so we actually have a custom Reba Browser. We put together this shot of you in your dressing room. So what it is, it allows a fan to go inside your dressing room and check it out.

MS. McINTYRE: DVD is going to make it possible to put whole music videos and movies right on the CD, right on the computer. I'm looking forward to that.

And then you can go all the way around the room, 360 degrees?

MR. : Oh, absolutely. This is a brand new song a couple of our writers just wrote, it's called One Honest Heart.

MS. McINTYRE: Music fans are going to love Windows 98 because it's great for entertainment, and it's so easy. Windows 98 is becoming a part of this business from the creation of the music to helping Sandy design my wardrobe.

SANDY: So, over here I have a skirt, I have tall boots. What do you think?

MS. McINTYRE: I do like the skirt versus the pants better. I just feel frisky in that. I love it.

I enjoy reading and responding to email from my Web site. It's a lot of fun and a great way to get feedback. I love your new album, Invisible really hits home. What kind of shampoo do you use? Terry wants to know. Okay, Terry, it's the brown bottle on the shelf.

Reba, thank you so much for having this section of your Web page. It gives your fans a chance to get to know you better. My question is, what is your favorite song to perform live and why?

That's tough.

It's amazing that Windows 98 works so well for everyone, for work or just for fun. Around here, sometimes it's the same thing.

(Video ends)

MR. CHASE:Now, when we talk about Windows 98, we talk about some key areas of the product. We talk about how we've improved the entertainment capabilities and support for the links and hardware. We talk about reliability and the improvement in performance. And we talk about ease of use and the Internet integration. And Reba, in fact, talked about that a lot in her video in how she was using Windows 98. As one of the most popular female performers in the world, it's really exciting to see how she's using Windows 98 for her business and to communicate with her fans.

Let me show you a little bit about ease of use and Internet integration live here in San Francisco. I have a Windows 98 PC sitting in front of me, and I'm just going to go to the top and double click on My Computer and open that up. And you'll see it's pretty similar to Windows 95. But immediately you get one of the benefits of the Internet integration in that there's this little HTML background that gives a little design behind the Windows here, and if I click on the C drive I even get information about how much disk space I might have free.

I can further explore my hard drive and look and see what else I have on it. Now, yesterday, I came back from a trip to Yosemite with my family, and I actually brought a digital camera with me and took a lot of photos there. One of the nice things about Windows 98, and the way we've improved ease of use is, I can look at some of these photos without having to open up the application and see what's actually happening. Maybe this is the one I want to send to members of my family with my middle son Sam, or maybe I want to show something like Yosemite Falls, or maybe I want to send them, I don't know, just a picture of the water flowing in Yosemite. There's been so much rain and snow that this incredible volume from the waterfalls and the rivers there are truly quite something.

Of course, we could preview regular productivity applications as well, like Excel or Word or other things, and that helps me use my system more effectively. Now, perhaps I'm doing that project, trying to figure out what images I want to send to members of my family, and I want to go to the Web and maybe do some research for this launch event. Well, normally I'd have to go launch a separate browser and do that, but information I want to be able to use, whether it's on the Web or on my hard drive, so I could actually go right to the address bar here, and type a Web site and go right to it. In this case, I could learn about Route 66, and the things that are in the history that helped us get to the theme that we have for today.

Now, one of the nice things about the Internet that we've got to take advantage of when you really think about it, and I think you'll see it throughout the industry, is the Internet allows us to improve our products over time without always having to have a major release.

So, for example, let me close this down for a second, and let me bring up a new feature of Windows 98 we call Windows Update. Windows Update is the online extension of Windows 98 that allows me to get new updates and information online over time. For example, I could go to the product update section and see that there's lots of new information available for me. In this case, the computer and the Web work together. This is a local scan of my system that tells me what I actually have on my system, so Windows Update can tell you what you might want to add by knowing what you have and what you don't. And you could go through the system and see the various things we have available for you. For example, we created a Route 98 desktop theme that people could download. And there's all sorts of things on here today, and will be improved over time. I'm just scrolling through it, and you can see there's things like, you get additional Web fonts, or additional features over time.

Now, one of the nice things about Windows Update is that it, too, because it's a live thing, will improve over time. So, for example, what I want to show you is a feature of Windows Update that will come out this fall, and that is a feature we call the Task Center, and the Task Center takes things that we often find hard to do as users to customize the system, and helps me go through those steps so I can easily do that. So, for example, I could change my screen resolution here, you can see that, or I could change my background, or I could change my screen saver, and I can do other things like, as you look on the left-hand side of the screen, optimize my system performance.

Let's take a look at how I would change my desktop background. I just click on the click on the word "change" here, and the system says, okay, you have a Windows 98 background right now, here are some of the other backgrounds you can choose from. There's bitmaps on your computer, you can choose from them. I'll create a background for you, or I could choose one of them from the Windows Update Gallery. In this case I'll choose the Windows 98 one, and click "finish," and now if I close Windows Update, there we go, I have the Route 98 bitmap on my background, and I've made it personalized to what I want for my PC. Again, the Task Center is a feature of Windows 98, it's specifically a Windows update that will be available this fall.

Another way we'll improve Windows 98, in an Internet related way, is with a new feature that we call Chrome. Chrome is the code name for a feature of Windows 98, that will be available late this summer or fall, as well. Now, Chrome is a pretty interesting feature. It requires a very high-end PC. I'm running this on a 350 megahertz Pentium II processor, that's why I switched machines here. And this machine is required to take advantage of Chrome, this add-on feature. But, the benefit for customers is that you can get very cool effects, that work even over a low bandwidth, like a 28.8 baud modem. So, for example, as I move over these graphics, for this mocked-up weather site, you see that they come up, but when I click on it watch the effect. You get these nice effects, where in effect I could sort of see multiple Web pages at the same time. There's many Chrome effects, I'm just showing you one of them here.'

Again, this is a feature that's very interesting if you're building intranets and you want them to pop, or you're building an Internet and you want them to pop. You want to present business information in a really cool way, or you just want to have a Web site that's a lot more fun. It does require a very high-end PC, but it requires very low bandwidth on the wire, because these effects are very easy to author for, and they're very, very small over the wire. So it's very cool, you get really rich multimedia in a very small amount of space.

Now, what I want to do now is talk a little bit more about ease of use with Windows '98, because that's how I sort of started this section. I can only show you a small part of it. For example, I didn't show the help system, which uses Internet technology to make help a lot more compelling in Windows 98. So instead of me showing more, and trying to get through it, I thought what I would do is I'd go on the road again, and show you how another user is using a different aspect of the ease of use improvements in Windows 98.

Let's go on the road.

(Video is shown)

MR. : Well, Jimmy calls me Johnny Internet, and I'm a personal friend of Jim's. Jim is a Chicago police officer, great guy, born and raised on the North side of Chicago, went on a shots fired call, on October 16th of 1996, and this guy just opened his door and just started firing. And he put off two shots of a 357, and one of them hit Jimmy square in the middle of the face, shattered his jaw instantly, and it lodged right into the base of his spine.

MR. : Johnny Internet, that's a wild story. He came to meet me in the hospital, and here comes this guy in telling me, we've got to get you a computer, we've got to get you online, we have to do this. Within a couple of weeks I had a computer in my room.

MR. : I knew that they had software out that runs on Windows that would allow him to operate a keyboard, operate a mouse, just as fully as I could. And I knew that if we could just teach him that, that it would give him some hope that, hey, he can live a normal, productive life.

MR. : Icons down here are very large, and it really helps me to move around without difficulty. One of the other things I really liked about Windows 98 was the ability to install with such ease. Everything is easier, really. Through my foundation, we equip people with computers, and really open up the world to people with disabilities. I feel when you're on the Web or getting email, you don't have a disability. The way I look at it is, this is the hand that I was dealt, and I'm just going to have to play it. And now what I've been trying to do is to help other people get over their injury, and try to use computers to their advantage to show them that there are no limitations or barriers, or discrimination.

MR. : Definitely a thumbs up for Windows 98.

(Video ends)

MR. CHASE:I mentioned earlier that this broadcast is being shown throughout UA Cinemas in the United States, as well as resellers and Net Show. Well, Jim is actually joining us in Chicago. He's actually there watching this presentation live. And I would appreciate it if you could join me in a round of applause for the courage he has shown.

The next area I want to talk about in the product is improved performance reliability, that helps people like Jimmy and everybody. We've done a lot to improve the product. And the developers who worked on Windows 98 did a terrific job with the whole product. And one of the areas they focused on is improved performance and reliability. Things like shutting down the system are just faster than they used to be. Even loading applications is faster with Windows 98. In general, I think you'll see an improvement of about 25 to 33 percent, loading applications. In fact, I'm going to do a little demonstration for you right here and right now. So I have a little friend here that's coming over my shoulders, I'm always afraid he's going to hit me in the head. But, the power of modern technology. Here he comes.

So let me show you what I have. On this system right here I have a Windows 95 system. Already selected is an application, Photoshop, and this system is exactly the same, in terms of memory and configuration as this system over here, which is a Windows 98 system that also has Photoshop. Again, you can see that -- or perhaps you can see that Photoshop is selected over here. You probably can't see it, but trust me on that. So what I'm going to do is go over here. I've got nothing up my sleeve. Who laughed? Okay. And I'm going to put my finger on the enter key, and I'm going to count to three and launch both. One, two, three.

And around the first turn, it's Windows 98 by a head. Around the stretch Windows 98 is up, Windows 95 is still coming. Windows 95 is about to come, and there's Windows 95. So simple application loading is much faster on Windows 98. Now, of course your mileage may vary, not every application has this kind of improved performance. But, in general, again, you'll see a pretty good performance on your machine and the application itself.

Now, we did other things in Windows 98, to really improve performance, as well, in a different sort of way. For example, let me close down Photoshop here on the Windows 98 machine, and let me launch what we call FAT 32, one of the more consumer-friendly names we've ever had for a feature at Microsoft. Now, what FAT 32 does is allow me to essentially store more data in the same hard disk space or, put another way, take a file cabinet drawer, and I could put more paper into it. This is what we can do with FAT 32.

Now, the D drive here is about 2 gigabytes of data. What I'm going to do is scan it, and then I can tell you approximately how much disk space we can save with FAT 32. And here you see that we get about 715 megabytes of additional disk space with FAT 32. So there's another way we've improved performance, by giving you more disk space. Now, again, there's lots of additional ways that we have improved performance and reliability. Reliability is sort of a hard thing to show, in a demonstration. So what I thought we would do is go back on the road, and do that. But, before we do that, I want you to think back for a second. What we're going to do now is go to a high school in Arizona and watch how they use Windows 98.

Now, I want you to think for a second, do this, what were you using in high school? Did you use a typewriter, did you write your documents by hand? It's amazing to think about how far we've come in just a short, short period of time. Let's now take a look at the high school kids in Arizona and how they use Windows 98.

(Video is shown)

MR. : Five days a week my kids come in at 6:00 in the morning. They produce a five-minute show. We record features ahead of time. We show 3D animation intros and other types of things. And the kids work really hard on it. I pride myself on trying to provide the most technologically advanced education for my kids. They do photojournalism, photo imaging, they produce the yearbook, they do television production, and newspaper out of this lab.

MR. : Hi, I'm Spencer, and I'm an excellent 3D animator.

MR. : My name is Jason and I'm a photographer for the yearbook.

MR. : This is Calvin, and I'm a computer programmer.

MR. : I'm Jeff and we do a completely digital yearbook.

MS. : I'm Alison and I'm photo editor for the yearbook.

MS. : I'm Carly I participate in photojournalism, and I'm a TV anchor in computer production.

MR. : Windows 98 does everything I need it to do. It didn't seem as though Windows 95 was completely ready to handle some of the intensive digital imaging issues that we had. We do a lot of video capture, we do a lot of non-linear editing, and there were some problems with Windows 95 being a bit unstable that Windows 98 fixed.

MR. : We capture all of our video to the computer, store it in huge files, and then we put it all together online. And then we render it out and play it. And Windows 98 handles it really well, huge files.

MR. : I notice when I was doing my yearbook spreads on Windows 98 they weren't crashing, and I'd be able to get more done in less time.

MR. : I use a tremendous amount of peripheral hardware in this class. Windows 98 has the ability to identify USB devices, on the fly, you don't have to reboot, and it immediately finds the drivers, installs them, and enables you to immediately use that device. And that's a spectacular asset.

MR. : I expect DVD to play a large role in the way it teach my kids in the future, since I think DVD is going to be a form of media that will take hold quite quickly.

MR. : I would venture to guess that this classroom is the most used classroom in the whole school, maybe in the whole district.

The moment I installed Windows 98, it resolved a number of different conflicts and hardware issues I had in my lab. Windows 95, as good as it was, wasn't able to do a few things that I needed to do. As soon as Windows 98 was installed, it found all the devices, treated them as plug-and-play devices, found the driver for them, installed them, and I immediately had all of my conflicts in my lab resolved. Not one issue remained once I installed Windows 98.

(Video ends)

MR. CHASE:Now, we showed a lot, and George showed a lot and talked a lot about reliability, but he also showed, if you were paying close attention, how we have some great new support for the latest in hardware devices in Windows 98. And, in fact, there's a now famous demonstration where we add a scanner to a PC. You think it's funny.

What I want to do is talk a little bit about USB. USB stands for universal serial bus, and what it essentially is, is a connector. This is what it looks like, and it's sort of like a phone plug, and it's designed so that it will be as easy to add hardware devices like a scanner to your PC as it is to plug in your phone. And so, now, I'm going to actually do it here. So, I'm going to take the USB connector, and on the back of the PC here, right here, is the USB port, and I am just going to plug it in. I plugged it in. It immediately detects -- why am I putting my hands up? It immediately detects that the scanner has been installed, and installs the software for the scanner. I don't have to install any additional software that I don't want to. And what I'm going to do not is actually scan in a picture. So, let me press the button, and it launches the scanning software, and I'm going to actually put in the picture. And let me choose scan now. And now the picture is going in.

Now, here is the picture. This is actually my youngest son, Benjamin, who is seven months old. I'm completely objective when I tell you he is the cutest baby in the entire world. The only thing I feel bad for when it comes to Benjamin is, he already has my hairline. Now, what we did with Windows 98 was more than support for just scanners. USB allows you to connect all sorts of devices. It could be a joystick or a digital camera. It could b a mouse or a keyboard. So there's lots of different things, but I don't intend to demonstrate all of them today, but just to give you an idea of how things are getting so much easier to add to your PC. I didn't even have to pop open the case and put anything in.

Now another area that they sort of talked about in the last video was entertainment. And I want to show a little bit of what we've done to improve entertainment with Windows 98 as well. One new feature we have is what we call Web TV for Windows. And what I'm going to do is go down to the bottom of the screen here, and there's a nice little tool tip, sort of, that I get that tells me I can launch Web TV for Windows on this button bar, which is a new feature as well that makes things easier. So, I'll go ahead and launch it.

Now, it will go to the last station I watched, which was a station I was watching for work. Now, if I go to the top of the screen, I could actually go through the guide, and see how Web TV allows me to watch TV on my PC. And it actually shows me all the stations that are going on now, and I could scroll down and look at some of them as well. So, I could look and see what else is going on. So, for example, I might want to look at Oprah Winfrey, and there's a commercial, of course, or maybe I should go down to Sesame Street, and there's a preview of Sesame Street. Now, if I want to watch it, I just simply go over to the button that says watch, and click on watch, and then I'm able to watch this show on my TV. This is what I do at work. I close the door, I -- oh, I guess I really wasn't supposed to say that.

Now, Web TV for Windows allows a lot of other very interesting things to happen. For example, there's something that we call interactive television, which is the combination of basically watching a television show and a Web site, so that I could click on link and maybe learn about the stars of the show, or participate in a chat. Well, this type of interactive television is just starting now, and we'll actually have a station that's showing it later, if you want to get a sense for that.

In addition, the same line or signal that you're using to get your television show can be used to do things like download Web pages. So, for example, a company named Wave Top has a selected number of Web sites that you can choose from. And perhaps while you're sleeping at night, it will download to your system the latest Web pages from your favorite Web sites of the ones that they have to choose from. And when you wake up in the morning, boom, you can go browse the Web without even having to go online. So, there's a lot of cool additional things that Web TV for Windows allows.

Now another entertainment feature we talked about was DVD. Sometimes people call it digital video disk, sometimes they call it digital versatile disk. But what it really means is a lot of fun and a lot of possibilities. What I'm going to do now is launch DVD and show something that's showing off the native support for DVD on Windows 98. And think about the possibilities when you have a disk that has seven times the size of a CD-ROM. Let's take a look.

(Video is shown.)

MR. CHASE:Okay, you get the idea. For the kids watching, don't do this at home. Now, that was something played on my computer here. Now, I bet for at least a second you forgot that you were watching something playing on a computer, and you thought you were watching a real movie. The quality is that good. And think about the possibilities for things like games, when instead of having multiple CDs, because I hold seven times the information, I can do very interesting things with DVD.

So, that gives you a sense of some of the entertainment capabilities of Windows 98, some of the new hardware improvements as well. I want to go back on the road now, again, and show you an example of Windows 98 from one of our customers that touches many aspects of what we've talked about today, and again sort of, I think, captures the spirit of how Windows and PCs and all the things our partners work on, and we all work on together, really can help people. Let's take a look.

(Video is shown)

MS. : One of our seniors happened to mention it to her neighbor, that the senior center was wanting a new computer lab. And this neighbor, Marilyn, happened to be president of the high school PTSA. And her son was very involved with computers, and she thought, what a great project for the students. They were making some critical decisions, plus they wanted to see if they really knew enough to teach.

MS. : I read a book and it said, if you want to know anything about computers, go to your local high school. And that's when I found out about the class they were offering.

MS. : Some of them had a hard time using the mouse, and others didn't really know like what the basic things were, so you had to kind of repeat what the basic things were.

MS. : At first, I hated the mouse.

MR. : I've learned patience, it means a lot to PCs.

MR. : I learned that everybody needs help. One senior, she thought that she deleted the Internet for the whole world. And we kept trying to tell her not to worry, we can fix it.

MS. : We're a little bit intimidated by teenagers, and we find out, hey, they're okay.

MR. : So, when they're willing to learn, like Victor is, it's really fine.

MR. : Yes. This is really great. This is more than I expected.

MR. : I thought she would understand how to do it, but she went over and beyond what I thought she could do.

MS. : My brother didn't write to me for 17 years. Now I've had four letters from him on the Internet.

MR. : Windows 98 is a lot more user friendly. Windows 95 was a system to help you get around. It didn't want to let you get around. Windows 98 allows people like Victor who are novices to use the advanced functions with ease. It's going to take very few minutes. So, why don't we go ahead and get up, and then we can go to lunch, and it should be done when we come back.

MR. : Here's to the class, the computers that we worked on so hard, and let's hope they keep going for the many years of Mount Rainier High School.

MR. : Windows 98 is that I did like it, yes. There, okay. No, that's after. Yes.

MS. : What I liked about Windows 98, you can change it from a two-click on the mouse to a one-click, as I have a broken wrist, and it helps me with my fingers on that.

MR. : I like to put the graphics on it just the little things you can do to your Windows and menu bars.

MS. : It's my turn? Well, I like, when you're on your own and you can't figure anything out, I really like all the help that Windows 98 has for you that I didn't find in Windows 95.

MS. : And the shortcuts in the channel bar that allows me to go to Infoseek and Yahoo easily, without having to log on into the Internet.

MS. : It's kind of nice to go into your environment and find out that they weren't as scary as I thought they were.

MR. : They're pretty tough, these computers.

MS. : No, I was talking about the teenagers and being intimidated by them.

MR. : Three cheers for Windows 98.

(Video ends)

MR. CHASE:Now, go ahead.

(Applause.)

MR. CHASE:Now, this is going to be a little strange, because I'm going to ask you to clap again. But, like Jim Mullin who is watching in Chicago, many of the people in the videos you saw are actually here today joining us live in San Francisco. And, for example, George is here, the teacher who did all the great work with that classroom, as well as the people from the Des Moines senior citizens center.

I'd like to thank them for their help and participation.

(Applause.)

MR. CHASE:We're pretty fortunate so far. We've had the opportunity to get Windows 98 in a lot of customers' hands, even though it didn't launch until today. And we feel pretty good about the results. The product has received very large numbers of orders from people who were sort of pre-ordering, you know, reserving their copy, so to speak. And, information fact, if we actually delivered all those copies that were reserved, it would have made Windows 98 the number one product in the industry during that time period. We've had very, very positive results from things like Midnight Madness where, because of Windows 98, and great deals and offers by computer resellers, people were lining up in lines at midnight to buy Windows 98. In some places, really fun things were happening, like in St. Louis where it was very, very hot, and there was as long line, and the local Baskin Robbins brought ice cream over for everybody. I wish they'd do that for me.

So, we've had really nice pre-orders. We've had really good feedback from customers so far. And we want to sort of continue that momentum. In fact, what we're going to do is have our product support lines open through the weekend, in fact the following weekend as well, and extend those hours. So, if we have customers who need help, we're there to help them during the initial rush for Windows 98. So, that gives you a sense of the early results.

I want to go back to Route 98 for a moment. We call it Route 98, and I told you why, because we've come along way very quickly, and we have a long way to go. I had the opportunity here to tell you about how Windows 98 fits I that as an important milestone for consumers, in the improvement of Windows, improvement of PCs, and helping the entire industry take a step forward. I think it's only appropriate that we now talk about where we've been and where we're going to go. And for that, I'm pleased to introduce our chairman, Bill Gates.

(Applause.)

MR. BILL GATES: Well, this is certainly an exciting day for us. We've been working for years to get this product out, and we believe it's a foundation that people are going to build on, and do a lot of fantastic things. We picked as our theme here, Route 98. And that's because we think there are some incredible parallels between what the auto industry did, and what the PC industry is just at the beginning of doing.

The auto industry gave people a lot of freedom, freedom to go new places, and it was a lot that had to grow up around it to make it all work in the right way. We think the PC is doing exactly the same thing. Although we'd say the PC is going to do it far faster than in the case of the automobile. Just think of these last three years. When we brought out Windows 95, the majority of the orders for the product were for the floppy disk version. That required 13 disks, and we sold millions of copies of that, where people had to take those 13 disks and put them in and out of their system, and it took several hours to put it together.

And the PC back then was not nearly as powerful, not nearly as inexpensive as it is today. And the Internet, although it was there, has not gotten to critical mass. We put in our very first browser as part of Windows 95, but it was quite limited. And we didn't exploit all the ideas of tying it to the other parts of the system, because Internet usage was very, very low.

Well, today it's very, very different. The Internet is at the center of most things going on in this industry, and we're moving at an incredible pace, enabling scenarios that your wouldn't have thought of in the past. You know, when you thought about getting the best insurance policy or buying a car three years ago, you wouldn't have thought about your PC as a tool that could help you get that done. So we are moving along. But, I'm going to suggest today that we're really sort of at the 1920 stage in this industry, when we compare it to the auto industry. There's a lot more that needs to be done. A lot of things that need to fall into place.

I did go back and look at some of this auto history, to see if the analogy held up in a good way. And I found that early cars were bought by enthusiasts, just like PCs, people who kind of got a kick out of doing something with the PC, even if it wasn't the most efficient way to do it, people used to like to go out in their car and kind of show off. There were some wonderful magazines at the start of this business, My Automobile, and The Horseless Age. If you go back and look at the Horseless Age, it's sort of like the Byte Magazine of the PC industry, very hardcore, tries to cover all the models in-depth, kind of explain what's going on inside. And although Horseless Age didn't have long-term success, it was definitely part of getting things going.

In the PC industry, one of the things we did very early on was go out and start computer clubs, the first PC was a kit computer called the Altair, and when I went out there with Paul Allen to do the BASIC for the Altair, we sat down with the people from MITS, and decided we ought to get a big van and drive around the country and start up these clubs. We went to California, that's where the Homebrew Club and several others were created as part of that grand tour. And we got 30 different clubs going. That was a great thing, because of that enthusiast need for the audience. It was interesting, those clubs also became a place where people copied a lot of software, so we weren't sure if that was a great thing or not, but it probably was a necessary step.

Even today, I'd say with PCs enthusiasts are at the center of what goes on. If you look at the thickness of the trade magazines and the incredible circulations, people are willing to try new things on their PCs and they're very proud of it. But, as the market expands out, you'll have buyers who are in a sense more demanding. They'll be making a pure comparison based on efficiency/utility costs of is this the best way to get information, is it the best way to stay in touch for certain things, and so the requirements will be far more demanding than they've ever been.

Early cars had some terrible limitations, and I look back and laugh at the idea now that you had to get up and out and manually crank the car, very hard to get the thing going. Well, the boot process in a PC, I don't know if it's worse or not, but it's pretty archaic. Not only having to sit there, but the chance that, you know, maybe the right drivers won't load or something strange will happen. We had an era where people, if you wanted to do anything to your PC, you had to open up the case, put a card in, understand about different switches that were there, and even understand certain resource conflicts that would take place, things like IRQ conflicts. And so even the hardcore people found it daunting to go out and extend their PC and add on the peripherals that could really take full advantage of what could be done there.

Early cars didn't have easy going. They had mud roads, they'd get bogged down. And the original concept of the chauffeur was not somebody who would drive you around, much more important was somebody who would fix the car when it broke, so you could still get somewhere. And, of course, that concept didn't scale very well. They had to make the car a lot more reliable, so that everybody could manage it themselves, which we still aren't fully there yet in the case of the PC.

The automobile, as the volume got to be substantial, was the focus of incredible innovation. The car companies themselves did great innovation, the people who did the add-ons, new companies were started up. There were few centers of activity that were particularly important, like Detroit, but all over the country there were new companies coming in and proposing new things. A lot of them didn't pan out, but many of them went on to become key elements of the car, things like having an electrical system, so you could have the radio, and the car lights, use the car at night, which wasn't possible initially, taking that electrical power and making it so you didn't have to be so strong in order to steer or do anything, even rolling the windows up and down. You could help the user out with that.

We need a lot of these same things in the case of the PC. Certainly the rate of improvement has been amazing, and there our speed is faster, exponential improvement that we have through Moore's law with the chips is a lot better than anything that you'll find that the car industry had available to them.

One of my favorite books on business is the book that Alfred Sloan wrote. Now, he's the person who took General Motors and led it to significant success. It had been put together when people realized that all these different car pieces you really wanted to buy it in one place and not have to do much assembly yourself. And so GM had a lot of divisions, but was somewhat disorganized. And Sloan really sort of invented a lot of modern management techniques. He invented the concept of the model year, he thought through what it meant to have used cars in the market, and what that meant about how General Motors should deal with that.

One of the interesting quotes going back to this book, which I think draws a very strong parallel to the PC industry is the need for integration. He says, the problem with the development of the automobile was to raise its level of efficiency, and this often meant raising the level of its integration. The automobile today is a very complex and closely integrated piece of machinery. And we're seeing that in many levels in our industry. We're seeing that at the chip level, you know, floating point and math chips, or interrupt processors. No longer do you have to go out and buy separate chips, in fact, the PC will eventually move to be very, very few chips, probably just the logic chip and then the memory chips being separate.

We're certainly seeing it at the software level. If you think about Windows 98 and how many separate pieces of software you'd have to go buy to get the equivalent utility, it's quite a lot. And it's not just the price of doing it, it's the different interfaces, the different support policies, and the fact that developers can't count on those things being there. And so they can't write their applications, knowing that something like the TCP/IP, or our browsing support is built in.

So integration is an important principle for us. It's also one that you're seeing taking place in the distribution. There's a lot more integration getting the information back to the manufacturer, cutting out some of the complexity and so you always know what's going on, get the latest information. For us, now, reaching out to our developers through the Internet, and getting user feedback through the Internet, just makes us that much more efficient at knowing what we need to do next. And so a lot of speed of development coming out of that simplicity.

MR. GATES(In progress.) In the area of infrastructure, it was a lot of work to build the roads and bridges, to make the car something that could give you total freedom. The streets were initially mostly dirt, where they existed at all. Most places didn't have a lot of streets, because there wasn't that much reason. Over the '20s there was a huge investment, and that's continued. The peak of highway construction was actually in 1959. It's come down quite substantially since then, as essentially the key connections have all been made with first class roadways.

The highway, of course, is the equivalent of the network. And early PCs had 300-baud modems. So we were connecting up at a very, very slow speed. We were just simply using the phone network, which was optimized for voice and converting the signals that way. We were extremely lucky that optic fiber came along. And the way that optic fiber, you encode information, is purely digital. And so a large number of companies, like Cisco, 3Com, Bay, and many, many others have thrived by providing the equipment that connects up to these optic fiber highways. And it's wonderful to see that the level of investment in these highways is skyrocketing this year. You have new people like Quest and Level 3, you have people like Sprint making new announcements, you've got the merger that's proposed between AT&T and TCI, which would be an acceleration of this.

You've got a lot going on with the phone companies and cable companies. Phone companies doing DSL, cable companies doing cable modems. In fact, this infrastructure area is probably the most uncertain piece of our future development. How quickly will a high percentage of U.S. homes have these very high-speed connections, because the high speed connections are fairly key in delivering on some of the most demanding scenarios involving the Internet. It's going to happen. It's just a question of how quickly. And this is something that every company needs to get involved in, because there are regulatory issues here, there's a lot of software to be done, to help manage these things, and take full advantage of them, and really drive all the pieces that come together.

The government isn't having to invest in this, it's all being done on the private side. And there is certainly a disparity. Businesses are being connected up at very high speeds, whereas residences, that's a little bit slower. And that's what we'd like to see a major breakthrough on, to really get the full acceleration.

Now, there's a huge number of related industries that have to grow up. For the car, auto shows, drivers training, service stations all over the place, you can get gas wherever you want, and even places to stop if you're on a long trip. So the first motel showed up in 1925. For the computer industry, this is another interesting area, because it could be a little bit of a bottleneck. We're having to train lots of people to understand the systems, the number of new jobs and services around high technology is going up even faster than supply. This is an amazing area, and whether it's the new small companies that are providing the services or the large firms, like EDS or an Arthur Anderson, they're growing at pretty incredible rates.

We're getting a lot of the material out on the Internet now. We're getting rich certification programs, and so I think the infrastructure is coming along. It's a very necessary piece to get out there and have businesses not only connected to the Internet, but managing their information in a way that makes them as efficient as they can be, allows them to make quick decisions, allows them to work with partners in a better way, allows them to reach out to their customers in new ways. The thinking to help every business do that is something that a lot of service companies are going to be able to step in and do very well, if they are good at providing that. So every bit as important as it was in the case of the car industry.

Well, the impact is really hard to exaggerate. I mean, once something like this happens, your whole mindset changes, and you can't even really go back and compare. Particularly when it's happened over several generations. You know, the idea that there are shopping centers, we take that for granted. You know, something like grocery stores, the average size is four times greater than it was 30 years ago, and that's because with the car people can get out and you get the scale economics of having larger sites with more selection. The whole idea of suburbs comes from the freedom that the car provided.

Now, the equivalent with the PC is that distance doesn't matter at all. You can live in the middle of nowhere, and if you've got the connection, then you're set, whether it's to do your job, or simply to connect up and do a multi-player game. I often talk about some of my friends, who live all over the U.S. that I'm able to connect up with, and play multi-player bridge. Some of them have gotten so used to it that when we meet face to face, they're not used to it at all. They're used to being able to type in little pithy comments, or not have to think about what they're wearing. So I think some of them actually prefer to do it over the Internet now. They're a little spoiled by that.

Microsoft had a big event just a few weeks ago, which was a CEO conference. I've done this -- this is our second time, 120 people come in, and they're across many different industries, and from all over the world. And what's fascinating to hear is what was top of mind for them. And truly in a completely unprompted way, virtually all of these people were talking about, what were they going to do to make sure their company was a leader on the Internet, even the ones who've already done quite a bit were trying to see how they could do more.

And so they saw this shift in consumer taste, and were investing very heavily and wanted to get things done in a year. They weren't talking about projects that would take two or three years. And what does this mean? This means we have a very high level of investment, almost a gold rush atmosphere for commerce sites to be set up. You know, sites now are doing more and more business. Stock trading has been the first category, where over a quarter of the business activity for retail stock trading is now done through the Internet. In other categories like cars and travel, it's still down in the 2 to 4 percent range, but growing fast enough that we'll certainly get up to very substantial numbers in the next two or three years.

And so the -- although the car reshaped things, you know, changed which retailers, what approach to retailing made sense. They changed what happened in real estate, let people -- let the population expand, here, I think the impact will be even greater. And it won't just be within one country. The idea of going out and finding expertise anywhere in the world, using the Internet to search for somebody who has, say, an engineering background, that can help you out with a problem, or exchanging the plans over the network, that's going to mean that services activity, which was necessarily local because of the need to collaborate and find each other, that too will move to a global market in the same way that manufacturing has. And so that's a really very, very substantial change.

Well, what are the timeframes here? The car, it's pretty well known, it took almost a century between the time when it first appeared, to when 75 percent of people in the U.S. were all able to use a car, and thought of it as just part of their normal activities. In the case of the PC, our growth already to date has been far more rapid. A PC is less expensive, the country is more affluent at this point, but also the rate of improvement is a very, very big deal here. I'm going to go so far as to be bold and make a prediction about the next three years.

The reason I picked the next three years is that this is the timeframe where Windows 98 will be the consumer platform. During these next three years, the hardware manufacturers, the peripheral companies, the software vendors, will all be taking Windows 98 as the given. And they'll build on top of it, whether it's the automatic detection of the peripherals, whether it's the rich capability to do browsing capability, whether it's the -- simply the speed or the advanced graphics that are built in there, this is the phase. And so Windows 98 is a key foundation piece.

I think during the next three years, we'll continue to see a rapid rise. I think we'll get up in this country by 2001 to 60 percent of the homes. And another factor here that I think is also important is, today, only about half of PCs are connected to the Internet. Just six months ago it was less than half. So it's just crossed over. So you can say, of that 40 percent, only half of those households get out and use the Internet. I think that penetration will rise even more rapidly. So of these households, 60 percent with access to a PC, I think 85 percent of those will be connected up to the Internet. So really sort of unprecedented increase in the number of households that are doing something new.

And there's a lot of reasons to believe that. It's the speed of the machine, it's what we know we can do with the interface, it's the rich storage capability, and we've gone from being able to just store small programs on a floppy, to now having the CD, which is 1000 times bigger. We're going to the DVD, which is 10 times bigger than that. And in not too long, certainly during the three year period, we'll go to a read-write DVD. So in terms of storing photos, or even motion video, and editing that, and being able to send it around, that will become a common sense scenario. And it's really these scenarios that will drive the popularity.

You know, think about, pursuing your hobby. Well, this platform lets you get to the Internet in an easy way, let's you store the information, send it around, lets you collaborate with other people in that area. Think about digital photography, virtually every feature that we have here, you take advantage plugging in the camera, plugging in the scanner, the way that you browse to find the images. Digital photography is a very limited use activity right now. But, during the next three years, it will really skyrocket, and it will be common sense that that's something to use the PC for, even though that's something new.

So the blast of impact of the PC is going to be amazing. We really are just at the start of this. The impact on living anywhere, and doing commerce all over the world, the ability to get music and books, as we get flat screen technology, and as we get standards that protect music rights, you won't even have to deal necessarily with the paper book or the CD. The books and music, it's ironic that they're actually two of the most popular things for people to buy on the Internet today, because overwhelmingly the physical form won't be necessary. They will move from atoms to bits, to use Nick Negroponte's way of dividing the world into the physical versus the virtual type world. And so entertainment, certainly you'll be using your PC as the audio and video come in and get far, far better.

Every business is going to be connected up. It will be kind of common sense. You can track what percentage of business cards you get have that electronic mail address, or how many business have shifted to do most of their business without paperwork being involved, already the leaders are there.

I've added two areas where I think PC impact will be pretty dramatic, where I couldn't really come up with strong analogies to the auto. Most things I thought of had the good analogy, but in the case of education, I think the PC will do something that there is no parallel to, that is create a device where no matter what you're curious about, you can reach out and get information. Teachers will collaborate with teachers. Students will collaborate with students. All the material that's at the Library of Congress or the university library, it will all be there. And so, once a kid has access, whether it's in their own home or going to the library, they'll have that wealth of information available to them and be able to participate with anyone else who's connected up.

A final area is government. Today, finding out how did your representative vote, what did they say in Congress? Is it something you agree with, disagree with, and giving them feedback. That's fairly difficult. You see the articles in the newspaper, but it doesn't directly relate to the person that you voted for and what they're thinking. Well, with the Internet's ability to customize information, and let all of that be out there and easy to access, I think this will change. You'll be able to dig into particular topics, how is money spent, why were decisions made the way they were made. And every advance in communications has been an advance in helping participative democracy. And here's we've got such a big advance that I think it's worth noting along with all those other areas that we'll take full advantage of it, and there will be some big benefits.

Over time, the PC won't look anything like it looks today. The size will simply be the screen, the tablet-sized screen that you can either connect to a wire, or carry around in a wireless fashion. We're going to have a lot more simplicity. All these error messages that are so cryptic and kind of leave you dangling, those have got to go away. You know, why shouldn't the machine be able to self-maintain. If you're going to get an error, why not have all the software connected through the Internet look and see what's wrong. And, if necessary, a human is contacted and can look at your screen and help you out. And so, you can virtually guarantee satisfaction because you're always going to be connected up with the expertise, both the software expertise and human expertise. In fact, you'll be able to backup all your information. So, if your PC fails, you'll never lose anything, or if you go somewhere else, that information will be out there on the Internet. Any device we have to connect up, identify yourself, and that will be available to you.

The breakthroughs in interaction aren't going to come in the next three years. We'll have some additional speech recognition, but it won't be the center of the interface. But in the three-to-six-year timeframe, I feel very confident that that will be not only a standard thing, but built into the operating system, and something that applications will sit on top of and take advantage of. Those are the kinds of things that companies are working on today and making really, really great progress.

And so the form factor of the PC will be different. The way we interact with it will be different, but one thing will be the same, the breadth of software that you can choose from, the huge number of companies that both cooperate and compete to drive it forward and create these standards.

To come back to today's announcement, it is a milestone, an early milestone, but a very important milestone. Windows 98 is quite different than its predecessor. Windows 95 required you to change your drivers, required you to learn a new Internet, and to get real advantage of it, you had to buy new applications. Windows 98 doesn't have those speed bumps in the way. In 30 minutes, you put it in. It's up on your machine, and you'll start to see the extra speed and reliability without the new applications. You can get even more benefit out of it if you want to buy some of those new peripherals, and if you take advantage of its help system, which is based on the browser. The help is always up to date because you can connect up to our Web site.

And so in the world of helping users, we've gone from a machine that was off by itself, now to having a machine where the help gets updated throughout the Web site. The software you can go and get updated through the Web site. And the final step in the future is to make those things automatic, so you don't have to go and get the software, you don't have to go and get help, that the system automatically responds when there's a problem or when there's some new stuff to get to. So, we're moving down a progression there to get to that kind of automatic maintenance.

Windows Update, Windows Help, are going to let us learn a lot about how to do that, so those are two of the most interesting features whose importance will grow over time, as we have that input. I've said three years from now we'll probably have a major new platform, and today we don't know exactly what that will be, because it will be shaped by the feedback we get between now and then. In the same way that we took all those calls and usability tests and input that people gave and defined Windows 98 around that, that's exactly what we're doing for the consumer market. And, in fact, we're driving with even more resources now toward that next horizon. In-between, there will be some modest updates, but it's only every three years or so that we have something that's very, very dramatic.

One key thing about this product milestone, just like every other milestone in this industry, it hasn't happened simply because of one company. The participation we've had, the input we've had from every participant in the industry really has been quite amazing, and I do mean pretty much every company, software companies, and everyone you see here. In fact, these companies are all part of today's event. As soon as I'm finished, you'll all have a chance to move behind the screen here, either off on this side or this side, and that's where we've got our demonstration areas where each of these companies is going to show off what they're doing to take advantage of Windows 98 and let people see the power that's there.

So, let me just close with some of the opportunities here. Windows 98 is just the beginning. This is a very broad industry that although it has a lot of innovation to be proud of, the majority of what we're going to do is in front of us. And I'd say the pace of that work, judging by the investments in research and new companies, certainly the R&D that we're investing, is going faster than ever before. The PC and the Internet are going to be fundamental. They're not there yet, but we're certainly on a course to do that, and it will be just like the automobile.

So let me close by just thanking you all for coming to this big Windows 98 event. And we want to thank all of you for being here, particularly I want to thank the users who came out. It was fantastic to see a lot of them on the video, but they've really driven a lot of this, and so I give a special thank-you to them.

(Applause.)

MR. GATES: Windows 98 is available now, and let's all go take a look at it. Thanks.

(Applause and end of event.)