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

MR. GATES: Good morning. It's exciting to be back here in Chicago. As Eric said, the last year has been a year of incredible change. The importance of using technology in the right way has never been more clear. I think the opportunity is really quite incredible. Now, today I wanted to spend some time updating you on these latest developments. As part of getting ready I went back and looked at my speech from last year. And there was one part of it that really stood out. In fact, we've got a little clip to remind those of you who were here, and for those of you who weren't here to know one of the highlights of that speech last year. So let's go ahead and take a look at that.

(Video shown.)

MR. GATES: So a lot of people have asked me in the last year, what happened to that guy?

(Laughter.)

MR. GATES: And I was talking with Chris a couple of weeks ago, and he said he wants to try again. So let's welcome Chris Capossela.

MR. CAPOSSELA: Hey, Bill.

(Applause.)

MR. GATES: We've got beta Windows here again with Universal Serial Bus (USB).

MR. CAPOSSELA: Once again, that's right. You know, in the 24 hours that followed that demo I got about 400 email messages, most of them asking me what state my resume was in. But, my dad really had the best one when he emailed me and said, hey, it's great, I finally know how to explain to people what you do at Microsoft. I just tell them you go around and crash Bill Gates' demos, and they're very impressed.

So we thought we'd give it another try. And, you're right, Bill, we have Windows 2000, a beta version of that, and I've got this same scanner that I had last year. I've gotten to know this scanner very well. It is a USB scanner, which means that it only has  this one USB connector, it doesn't need power. And I'm a little nervous, but I'm going to go ahead and plug it in to the back. This is a laptop that has a USB port on it. I'll plug it in, sounds just like last year, it loads the right drivers for me.

Now, USB is a bi-directional BUS. So I can just press a button on the scanner, and the scanner is going to tell Windows what software to launch for it. I don't have to know that using the PC right here. So USB is very nice, I just plug that in, it's going to load the right drivers for me, and then I can just press the button and it will load up the right drivers for me. And then I can just press the button and it will load up the software. I'll click on this "scan now" button, and I have an image right here. Let's go ahead and feed this in. I can feel it grabbing that. And after 365 days of practicing this demo, it's looking right.

(Applause.)

MR. CAPOSSELA: Now, of course, we've made it very easy to get this image in here. We can crop it, play with it, email it to friends or family, and we're off and running. Now, USB has really taken off in the last year, Bill. And you see in front of you a whole bunch of different devices, many of them for business people. We've got a whole bunch of USB mice that are shipping. I've got a USB printer here, trackball, we've got some speakers. Here's a hub, I can just plug this in, and plug in my net cable, an infrared hub. This is kind of a cool one, it's a fingerprint scanner. I like that one for authentication. There's just tons of work going on here in the industry.

We also have some consumer oriented devices, joysticks and game pads that are coming out. Here's a keyboard from Microsoft that we're working on. It's not yet ready, but it's a new natural keyboard, and one of my favorite features is the fact that it's got two USB ports built into the keyboard, so I don't have to reach around the back of my machine. I can just plug USB devices right into the keyboard itself.

There's also one other device I want to show off today. This is a brand new mouse that Microsoft is announcing today. It's called the Microsoft Intellimouse Explorer. And we're really excited to be showing this off for the first time. Now, this is a USB mouse, just like our current shipping mouse, but it's really a radical new design for us. And this is a little four-inch version that's great on my desktop, but I wanted to get everyone to get a good look at this mouse. So we built a slightly bigger one. Let's go ahead and take a look at that.

MR. GATES: It's beautiful.

MR. CAPOSSELA: Yes, it is beautiful. This is the data center mouse right here, or the server mouse. You can see, Bill, it's a completely new design. We're actually using titanium for the case here, and there's a wheel like you're used to seeing. That's pretty straightforward. Why don't we go ahead and rotate this around and take a look at the side of the mouse. You see, Bill, that we've added two buttons to the side of the mouse, one is for going forward, and one is for going back in the browser. But, these are totally re-programmable. So if you use Word a lot, and you want it to be cut and paste, or print and save, you can go ahead and re-map them.

This is all great, nice, radical, new design, but let's take a look at the back of the mouse, and you can see the new technology that we've added to the mouse. So, Bill, this is a completely sealed case design. The problem that people have with today's mice is that over time they get dirty, and the pointer will jump around the screen, and they'll stick, and you often see people kind of slamming the mouse down on the desktop. Well, we basically got rid of all the moving parts that caused those problems. We got rid of the rubber ball, we got rid of all the mechanical wheels and counters, and we replaced it with a completely optical solution.

MR. GATES: That's pretty amazing that this will be taking 1500 pictures a second. What there is is a little camera and a digital signal processor that uses those images to decide which direction the mouse is moving in. The only other part they had to put in is this little light, so that when it's dark down there underneath the mouse it can actually see what's going on.

MR. CAPOSSELA: That's right. It's a lot like a flash in a camera, lighting up that surface. So this mouse no longer needs a mouse pad. It can work on just about any surface, it even works on your leg or your arm, or the chair next to you. And it will work as well five years from now as it works today, because there's nothing to get dirty here at all. So we're pretty excited about the mouse. It's going to be shipping in September, and available in October. And you can go by our booth and see it today. And again, this is just one more example of the USB momentum behind this peripheral, despite my best efforts last year at the show.

MR. GATES: Super.

MR. CAPOSSELA: Thanks, Bill.

MR. GATES: Thanks, Chris.

(Applause.)

MR. GATES: Well, this industry is really about empowerment. Twenty-five years ago when we got started we talked about the computer on the desk, the computer in the home. And that vision has really become a reality. People don't think of computers as just a large device for big organizations. They really think of it as something that is quite personal.

Right now the PC is achieving new records every year, records in every dimension you can think of. The price permits, the capability, the small-size devices, this year over 100 million new PCs will be sold. It's a pretty amazing number when you think that every year for the last five or six years people have said, well, this is the peak, this is the most that could possibly ever be sold. We'll get no more home penetration, no more business penetration. And yet, we go from record to record.

Now, part of that is that the PC itself is appearing in much better form factors. The mobile market is an increasing percentage of the overall market. Here in the U.S. about 25 percent of the new machines are the portable machines. And that's a number, a percentage that we think is going to increase quite a bit, as people have gotten these machines under three pounds, with very little compromise in terms of what the machine can do.

But, I would say, if you take the vision of a computer on every desk and in every home, we've had to step back and actually expand that vision. The PC is still very much at the center of what people do, but now we want to think about any device, not just the full screen PC, but any size at all. You want to connect up any time, anywhere, you want to have all your information without going and giving a lot of commands. So, this is about Internet connectivity, giving you power where you want it.

So, it's almost like renewing the vision of what the industry is really going out to do. Empowerment is still the central idea, but it's not just confined to the one type of device.

What does this mean? Well, for students, it means in the classroom itself, seeing a display that the teacher can put up. It means having their work with them wherever they go. For citizens, it means, even if they don't have a PC, that there will be kiosks out there that will let them get at government publications, government information, avoid paper forms, avoid standing in line because they can interact in a self-service fashion. In the home, it really means a lot of devices talking with each other. You ought to be able to use any screen device you have to control any other device. And so you won't be stuck with just having little LCD displays that you see off of each individual device. You can go to the large screen, get the rich interaction, get the help text, and have control over all the different things in the home. That's why we have the Universal Plug and Play initiative to allow all that information to be moved in a standard fashion.

Even the phone itself is part of it. As we have the advanced speech recognition, you'll be able to take your phone, dial-in, get your messages, get your schedule, get any information that you want, stock prices, weather reports, travel plans, all right there from simply having the phone that you access.

For the mobile worker, we want to bring the pager, and the home-priced pocket devices, all of this tied back into the central server.

So, what are these new devices. Well, the palm-size device is the one that's getting the most attention right now. Those color LCD screens have come down in price. The battery life has gone up. The key element is how do we get it connected up to a wireless network. Most of us today have to go back to a PC to get the information to replicate back and forth. So, not only is that too much trouble, but you actually have to give a lot of different commands. We can simplify that very dramatically. We can bring in the handwriting software even for that small device, as well as some limited speech capability.

New scenarios like digital MP3 music being downloaded onto that device make it even more of a useful thing to have and carry around. The TV through a new generation of set-top boxes will connect up in a two-way fashion to the Internet. So, having ads where you can get more information, being able to chat with your friends while you're watching, being able to get your electronic mail there, that's been ushered in by devices like Web TV, but it will be brought to a whole new level as we have that high-speed two-way connectivity.

Now, there are many new devices that are going to be invented here. Because we have this digital approach, we have this Universal Plug and Play standard, things like an advanced digital camera or a home control system, all of them will be part of this and will complement the PC.

The PC, the definition there is the device that you use which has a large enough screen to create and edit documents. It will have that role of running the office productivity software, and yet sharing that information out with all of these other devices. And so, it's not a replacement of the PC, it's an evolution of it with the other devices fitting into the picture in a simple way.

All of these devices will be connected up to the Internet, and all of them will have a browser built-in as an integrated feature. With Internet connectivity, we're getting a lot of new options. In fact, this whole area is a very important one because it's probably the limiting factor in terms of how quickly people are able to get the full benefit of the Web, to adopt what I often refer to as the Web lifestyle.

The style of connection is very limiting in the sense that it's not mobile, it takes a lot of time to connect up, and it's fairly low-key. It's only these high-speed connections which you find in businesses today, or with cable modem users, that really let you easily just sit down and quickly get the information you want.

From the new capabilities that we expect will come along and include the DSL, power line access using the AC power infrastructure to get information in and out of the house, a variety of wireless approaches. This is where the magic of new semiconductors really come along, and even approaches where you use satellite connections, both geostationary and low earth orbit type satellites to send the data back and forth.

Over the next five years, as all of these mature, I think that the connectivity bottleneck will be solved. That's very important because all these other pieces, screens that you'd even want to read a book off of, fast processors, large storage that would let you have digital movies and record TV, see it when you want, even edit movies in the same way that today only a studio with very expensive equipment can do, all of those things are within our grasp. And so it's important that we get this connectivity piece in place as well.

Now, for a lot of us here, we're already using the Internet every day. We've got the Web lifestyle, and it's common sense that when we want to buy things, when we want to organize a trip, we go out there to the Internet. Sometimes, though, it's important to get a little dose of reality and find out how are people broadly thinking about this. And so we often ask a consultant to just go out on the street and just ask people some questions about what they see going on in the computer industry. It's very enlightening, so let's go ahead and take a look at that.

(Video shown.)

MR. GATES: So we still have a long ways to go to get it so that computing is really easy, and just taken for granted, the way it needs to be. Well, improving the software is a huge part of that. Making it so there's less commands, less error situations. Now, Microsoft sees itself in a very important role in this simplification. And Windows, of course, is our most important product. And it's a family of products, from the very low end, where Windows is embedded, so you don't actually see it, whether it's inside a communications switch, or a copier, to the smaller devices I talked about, those TV sets or those palm devices. And that's where we're using Windows CE. Then up to the consumer space, which has transitioned from Windows 95 to Windows 98, and then the business space, including business users wherever they are, and all the different servers, even the very high-end servers, where our technology in Windows 2000 will be the key element.

Now, every one of these, these new versions of Windows, is advancing, based on customer feedback. Windows CE is the newest element of that family. We've got a little bit over a million copies in use right now, a huge growth from last year. And the key here is the applications. We've got the development kit that allows you to take the work you do for Windows and easily map it over to these devices. So we think we're going to continue to see pretty amazing growth there, coupled with the fantastic hardware innovation that's coming from our partners.

In terms of the consumer space, we're continuing the evolution there. We have one new release that will come out next year, which is the last release that will be based on the Windows 9x kernel. The focus here is simplicity, making it easy to not only install the applications, but to connect up a home network, easy to create a personal home page, with audio and video, and making it so that downloading digital music, or taking information from that digital camera and organizing it, and sending it out to other people, that's all just built in. It's not something that you have to learn a lot of special capabilities, or buy extra things for. And so there will be major excitement as we drive those new scenarios forward and make things simpler.

But, really the centerpiece of our investment is Windows 2000. This product is -- the same technology is used in many different versions. On the desktop, it's Windows 2000 Professional. Now, there's many things that make this attractive, even if you only take one system and upgrade it to Windows 2000. That's a very key point we're making now, is that whether it's one server or one desktop, those benefits show through. There are some benefits that you get by the integration of the two talking to each other. But, the things we've done in terms of simplicity, mobile support, this IntelliMirror that lets you get your information whenever you want it, and the easy deployment management, that's aimed at improving things for the individual user.

Up on the server, that's where the incredible advances in reliability would be crucial. The active directory that let's you do this rich management of the network, very important, the distributed services fabric, things like transaction capability built into the operating system, so that people writing high-end applications automatically get support for clustering. And clustering is a key technique, because it's an approach that gives us not only very, very high scalability, but also reliability. So that if any one of the nodes goes down, the system as a whole continues to work very, very well. Scalability has been a major focus here, taking this as a team server product, up to something that goes beyond even where a mainframe has been used.

Across this entire platform, we're thinking through the key scenarios. Knowledge management, making it so that the information in your databases, your file system, your mail system, all of that is easy to navigate. In fact, if you take Windows 2000, combined with the releases of Office and Exchange that will come out at about the same time, we're really revolutionizing the whole way that your corporate memory and collaboration will be done, the directory being a significant element of that.

We're also enabling electronic commerce. Virtually every company wants to have a great Web site. And the definition of what's an adequate Web site has gone up and up. Now, it's not only transactions, it's personalization, and so having development tools that make it very easy to build those applications, and having that right platform, there's incredible demand for that. Also, you want to take all the information in your company, not just what you have on that Web site, but the things that used to be in paper, like the sales data, and have those to empower all the workers in the company. And so those Web business solutions will be very important and allow information to move in new ways. In order to achieve that, we've had to devote over a quarter of our R&D budget to interoperability, allowing you to reach out to any of your existing systems to create these very rich Web views.

The best way to understand our excitement about Windows 2000 is to see it in action. And so we've created a business scenario around an insurance company. We're going to show you how people will be working in a different way with Windows 2000. And so let me ask Chris, and Keith White, and Doug Groncki to join me in showing what Windows 2000 is all about.

MR. CAPOSSELA: So as you mentioned, Bill, we've created an insurance company to build our scenario around. And each one of us plays a different role in the insurance company. Keith is a sales person and a claims adjuster, and he's going to be going on the road, and we're going to show off some of the mobile features of Windows 2000. I'm a finance person, working in the finance group, and I'm actually working on a presentation that we're going to give to the board at the end of our demonstration. And Doug, over here, is our IT administrator, who is responsible for keeping everything up and running very smoothly.

We're going to see how Windows 2000 affects all these different types of users. And let's start off with Doug.

MR. GRONCKI: How are you doing, Bill?

MR. GATES: Hi, Doug.

MR. GRONCKI: What you're looking at here is Windows 2000 Server beta three, actually a pre-release of beta three. And I'm going to start by taking a look at the active directory. This is where I manage all of the resources in my network. And in particular, let's take a look at the finance group, of which Chris Capossela is a member. We also have the sales group, and Keith White is a member in that group.

Now, these groups of users have very different needs for their applications and documents and resources that they need to do their job. But, I as an administrator want one central location where I can manage the different settings for these two different groups. And the way I do this is through IntelliMirror. So let's minimize this window, and let's take a look at our sales group.

This is the policy that applies to Keith. When I go into the software settings, you can see that I've specified a number of applications, including Microsoft Excel, FrontPage, PowerPoint and Word. These applications will be available to Keith White when he logs onto the network. Similarly, when I go to the finance group, I can specify policies to apply to all of the users in the finance group.

So, here's the finance policy. And when I drill into software settings, you can see that I have a whole different set of applications that are going to be made available to the people in the finance group, including business applications, ERP applications from Baan, and document management solutions from FileNet, solutions from Visio, and also a number of Microsoft applications as well.

In addition to making applications available, though, I also want to make sure that we're reducing Help Desk costs in a number of ways. So, when I go to administrative templates, we can prevent users from going to the start menu and installing applications from the run menu. So, we'll open the properties, and we'll remove the run menu from the start menu.

If I go in the system, I can do some more advanced things. I can disable the registry editing tools, and I can also specify the Windows applications that users will be able to run. And you can see right now that applications like Age of Empires and Quake are currently enabled, but we're nearing the end of the month and we want to make sure that Chris closes out the books, and he's not wasting any time. So, let's remove Age of Empires, we'll remove Solitaire, we'll remove Quake. We'll click okay to this and we'll apply it.

So, what you've just seen here is how I, as an IT administrator, am empowered with the Active Directory and IntelliMirror to centrally manage all of the settings and the documents and the resources that the differing users are going to need in the organization.

So, why don't we take a look at what this looks like for our user in the finance department.

MR. CAPOSSELA: Okay. So, again, I'm in the finance group. I'll take a look at my machine. I'm running Windows 2000 Professional, and let's see that when I click on the start menu, there it is. When I click on the start menu here, Bill, you'll see that the run command is completely gone. I just don't have access to that because Doug made sure I didn't.

If I drill down into accessories, games, and choose Solitaire, instead of Solitaire I get a dialog that says the operation has been canceled because Doug is being hard core and not allowing me to play.

And if I go ahead and click on programs and I choose Visio, which was one of the applications that Doug made available to everybody in the finance group, you'll see that instead of me having to go through a bunch of dialog boxes and choose where I want these files installed, and whether I want a minimal installation or a maximum installation, Doug has done all that work for me centrally. He's answered all those questions. So, anybody in the finance group who selects Visio from this sub-menu, the installation just happens for them. This is what we call a just-in-time install, or a hands-free install, because I'm simply not answering any questions whatsoever.

I also didn't have to know where Visio lived up on the network to go get that set-up program. I simply clicked Visio, it found it for me, and maybe 30-45 seconds later after I choose that, we have Visio up and running.

Now, Doug rolled out Visio, but he actually has control over the entire life cycle of rolling out applications. This means sending out an application for the first time, upgrading it, repairing it and removing it. So, repair is an interesting one that we should take a quick look at. If I'm like many users, I cruise around my hard drive and pick files that I don't think do anything interesting to free up hard disk space. Here's Visio, the .exe and a couple .dlls. Let's go ahead and delete those. And I'm going to ignore all these questions about, are you sure you want to delete them. And, in fact, let's go ahead and remove it from the recycle bin just to make sure that that is going to go away for us.

Now, in today's world, you, of course, know Bill that if I come back and choose Visio, this is going to give me an ugly dialog box that says, hey, I can't find visio32.exe, and I'm not going to know what to do. I'd probably pick up the phone and call the help desk, and I'm generating support costs for the company. With the new Windows installer technology that we're showing here, Visio knows how to repair itself. It knows how to find the files that are missing or corrupt back from that original location, and it knows how to bring those down for me. So, again, it looks just like it's installing something for me, and in a few seconds, I'm going to be up and running.

So, this IntelliMirror and the combination of Windows 2000 Professional on my machine, and Windows 2000 Server is really a fantastic combination for scenarios like this, where my applications and documents and settings all follow me no matter where I go.

Okay. So that's looking good. Now, Keith is about to head out on the road, and I'm going to take some time out from creating my presentation to help him. He's a claims adjuster, and he's about to go off to a house and take a look at some things. But he needs the latest figures from me, being the guy in finance.

You'll notice, though, that we've got a little digital camera on top of my monitor plugged into a USB hub. Let's go ahead and bring up NetMeeting, and you're seeing now NetMeeting on our machine, and Keith is also running NetMeeting over here, and we have a live NetMeeting going on.

Now, we could share a light board, we could launch an app like Excel and then share that.

MR. GATES: Work together.

MR. CAPOSSELA: Exactly, collaborate in rich ways. And things are looking pretty good, if you keep your eye on our screen where Keith is waving, you'll notice the thing looks -- actually, it looks like we're having a little trouble here, and that's because Doug, over there, is being somewhat of a bad guy. He's generating a whole bunch of network traffic, which is slowing down our NetMeeting. Well, before this would be an issue and we really had no control over it. For the first time today, we're actually showing, or we're going to show, something that we call quality of service, which is a brand new feature that you get, again, when you combine Windows Professional and Windows 2000 Server.

So, Doug, why don't you take us through how you can guarantee me quality of service for this call?

MR. GRONCKI: That video really does look pretty bad right now. If you look at the screen behind me, you'll notice that there's a small application running. So, we're generating a lot of network traffic. When I choose stop, you'll see the quality of the NetMeeting improve dramatically. Now, the reason this happened is because I stopped generating traffic. This isn't something an administrator typically has control over. Except, with Windows 2000 we have the ability to specify a quality of service. So, what I'm going to do is, I'm going to choose the quality of service admission control behind me, and we're going to choose a policy for the sales group. And we're going to increase the bandwidth that's allocated to everybody in sales from 10 kilobits per second, and we'll update that to 100,000, and we'll click 100,000 there, and we'll make this 100,000 as well. Then we'll click apply, and then we'll click okay.

And now it's going to go out, and it's going to take that policy, and it's going to apply it across the network. You're probably noticing that this is a --

MR. GATES: Yes, it's a very nice little device. This is a portable here. It's small. Is this a Windows Terminal?

MR. GRONCKI: It is. It's actually a Windows CE device running the new Terminal Server Client so that you have the Windows 2000 experience move to a whole new class of devices, including Windows CE devices like this. We're connected to the network with a wireless connection right here.

So, I'm doing all of this completely remotely. And you can see that we have complete control over the server. Now, I've upped his policy. When I regenerate traffic and I start again, you can see that there's a lot of network traffic. We've regenerated that, but the quality of the video didn't fail at all. So the NetMeeting can happen even when I have a lot of network traffic.

MR. GATES: It's a real breakthrough that now we can throw video and audio stuff onto the network and feel like we can control whether it slows down the other traffic or not. That's great.

MR. CAPOSSELA: Now we're all set to go over here. I'm going to work on the presentation that I need to give to the board. And I think Keith is about to hit the road, so why don't you go over and take a look at the mobile support.

MR. GATES: Okay, Keith.

MR. WHITE: As Chris mentioned, I'm a claims adjustor, and I need to go on the road. But before I do, I want to make sure that I've got all the information that I need. And one of the key things you talked about earlier was that the mobile devices are growing, the amount of laptops that are sold. And so we went out and really talked to a lot of mobile users to find out what their issues are, and we tried to address those in Windows 2000 Professional.

So, one of the key things we heard was, we want to be able to take critical data with us on the road when we're disconnected from the network. And we made an attempt at this with the briefcase feature in Windows 95. In fact, just last week I met a person in Kansas who actually still uses the briefcase feature for Windows 95. So, not too many people did, not too many people even knew what it was.

So, what we've done here with Windows 2000 Professional to make it easier, you can see I've got my local drive and I've got my network drive. Well, when I open up the network drive, these are all the folders with all the information that we have for our group that we want to let people see in a central location. And one of those is this claims in progress. And this is the Johnson claim, and this is where we're going to go in a minute when we go on the road. I want to have this information available to me.

So, to do that, I just simple right click on the folder and choose make available offline. Now what this is doing is actually synchronizing the information on the server down to a cache on my local hard drive. So, in effect, we now have two copies of that information, and you'll see a little tag applied to it, just as it is to my folder, my personal folder, over here. So, this makes it available for me offline.

Now, the way that we see this is if we go to something called the synchronization manager. Accessories, synchronization manager. This allows me to basically manage all the different types of information I want to synchronize on my system. So, as you can see, I've got offline files, I've got Web pages I can synchronize no a regular basis, Web folders. It will soon turn into email. Even SQL Server 7 allows us to keep databases up-to-date on local machines when they're not connected.

MR. GATES: So, that's all in one place, and automatically these things would be kept up-to-date?

MR. WHITE: Exactly. And you have a lot of control over it. So, for example, I can have it synchronize when I log on to my computer or log off. You'll notice that I can do it when it's idle or during scheduled times. I can even decide what I want to synchronize per connection. So, if I'm modemed in at 28.8, and I don't want to really synchronize a 10-megabyte PowerPoint file, I can do that if I'd like as well.

Let's cancel out of this, and now before we go on the road, you'll notice that I do have a couple applications open. I'm running Word, and I've got Paint open, and I'd like to keep these things open. Typically, though, the start-up time and shut-down time with Windows NT typically haven't been the fastest process that we have. So, what we want to do is, we want to take advantage of the power management, and instead of actually shutting down and restarting the machine, I'm going to go into standby mode.

And now, for the audience, the screen is even going to go black here for a second as it goes into standby mode on the system itself. So, it will take a second for that to happen. Okay. So, we've gone into standby mode.

The other nice thing about the technology is that we can hot undoc and warm document and redoc these types of devices. And you mentioned earlier some of the smaller form factors. We're using a Toshiba Libretto, it's a sub-notebook, 233 megahertz processor, 64 megs of RAM, and a four gig hard drive all in this small device. So, it's pretty amazing.

So, let's go over to the customer site, and as I mentioned we're mobile. So, let's go ahead and pop this into a docking station just so we can get video out so that everyone can see on then screen. Again, this is going to take a second for your screen to adjust. But you'll see that when we come out of standby, it only takes a couple of seconds.

And again, we're dynamically loading and unloading drivers, so there's no network, there's no mouse that we had plugged in before. It automatically recognizes the fact that we are by ourselves now, and it should pop up, hopefully, on the screen in a second here for the audience. Let me log in.

It's secure, so we have to log in each and every time that we go into the system, so people can't steal your laptop and try to get into it. And you see that we pop up and that the applications are available to us.

Now, remember that I went into my computer last time and we had our network drive available. Now, when we go into my computer, it still shows that it's available to me, and when I double click and open that up, we just see the folders that were made available when we synchronized, because remember I synchronized the claims in progress, synchronized my folder, and I can go and work on this document if I'd like to.

MR. GATES: So, everything in those folders is automatically available to you now?

MR. WHITE: Exactly. So, it's just as if I was connected to the network. It's the same process of going to the net drive and going to the share as I would as I was connected to the network.

So, there's one more piece of work we've got to do here. We're at the customer site, and we need to basically take a picture of some of the damage that's happened as a claims adjuster. So, what you'll notice is, it looks like someone put a golf club through their TV set, which is a typical scenario that we see as a claims adjuster.

So, I'm going to sneak down here and take a picture of this. Now, what I'm using is a Casio digital camera. As many of you know, with digital cameras you either have a wire that you have to connect into a serial port, or you have a floppy disk that you get the file from in order to transfer it to your computer.

Well, we've made this much simpler with Windows 2000 Professional. In fact, this camera is an infrared camera, so it has a little infrared port here. All I have to do is put it close to my infrared port on my PC, and transfer. And if you look at the bottom right of the screen, you'll see a little infrared pop up, and it will automatically transfer the files from the device into the PC itself. So, I didn't have to set this up, I didn't have to tell it what camera I was using, any device, you can do that automatically. It's pretty cool.

(Applause.)

MR. GATES: I've gone ahead and put that into the My Pictures directory.

MR. WHITE: Correct. So, with Windows 2000 Professional, we've created a new directory called My Pictures underneath My Documents. So this is just a place for us to store graphics files so we can basically manipulate these files a little bit easier. I can zoom in and really get a close up of that golf club inside of the TV set for our claim when it comes through. So, that's pretty much the mobile experience that we have.

Now, I could take this information and paste it into my document. When I go back to the network, it will automatically synchronize back up with the server, so I always have the latest data up on the server.

MR. GATES: So a much better way of working.

MR. WHITE: You bet.

MR. GATES: Great.

MR. WHITE: Chris is ready for you in the boardroom, so we'll hand you over to him.

MR. CAPOSSELA: All right. I lasted through the demo. I'm ready to give my financial statement to the board. I've got my PowerPoint files ready to go, I've got an Excel spreadsheet in case I want to drill into more data. I've got a browser up, in case we want to take a look at an internal site, or a site on the Internet. And the great thing is, Bill, that the boardroom has a pretty amazing machine that I get to use. So let's bring it out and take a look at what they have.

This is a pretty nice machine. This is actually one PC that's running on nine monitors. If you take a look at the back of the machine, it's got three different graphics cards from Appian and each card has four ports. So we actually have --

MR. GATES: We've got the power to spare here.

MR. CAPOSSELA: That's right, we've got power to spare. And you can see that screen saver going across all of them. So if I get rid of the screen saver, you'll notice that I've got my PowerPoint slides up here on one of the screens. I can just drag that over to some other screen if I like. I've got the browser up here, I've got Word down here, and I've Excel over here. Windows 2000, of course, has great multi-monitor support. And if I want to start off the board meeting, there's a little video, we can go ahead and stretch that across and just let that play. I think our board will get a big kick out of that.

So this is a pretty comprehensive look, although a very quick look at the breadth of work that we're doing with Windows 2000. We've taken a look at the IT administrator, and the work we've done to make that much, much better, lowering the cost of ownership, and you saw how my applications followed me and installed for me. And we saw how Keith was able to work in a real mobile scenario. And, again, we took a look at the multi-monitor support and the peripherals with USB. So we're excited to get the product finished and get customer feedback on it.

MR. GATES: Super. Thanks, Chris.

MR. CAPOSSELA: Thanks, Bill. Take care.

(Applause.)

MR. GATES: Windows 2000 represents the biggest investment we've ever made in a new piece of software. It's a pretty incredible team, but the team is also getting incredible help from a set of customers that have been working with us on all the different beta releases. We are announcing a new program today called the corporate preview program. What we're going to do is take beta three -- that's coming out by the end of this month -- and make it available for IT evaluators anywhere. So there will be a low-cost way they can buy it, for the cogs, and that includes all the tools and all the different versions. And it's really based on the feedback to these people that we'll decide exactly what the final ship date will be.

We're also strengthening what we do with the application developers. For the last several years, through our conferences, through our MSDN program, we've been doing a lot to make sure people will be ready the day Windows 2000 comes out. In fact, we've initiated a Windows 2000 ready applications directory, so you can just go up onto our Web site, under Windows 2000, and for each software developer you'll be able to see what they're doing, which versions of their products they're testing, is there a patch, what they're doing to take advantage of Windows 2000 with their latest applications. We've got some specifications that make it very clear to people how they can go the full way to take full advantage of Windows 2000, and we're making that easy for the development community with our one-on-one support in the labs that we've got out there.

I feel very good about the great support we're getting from developers. Their timing and our timing really fits together very well. Across the industry, there's a lot of different kinds of support. Over 20 OEMs are making machines available that will have beta three pre-installed. So if somebody wants to do this evaluator program, that will just be available on a machine. We have in place training for 100,000 channel partners. So these are consultants that will understand Windows 2000, how to set it up in customer solutions, well before the day it's shipped. We've got thousands of software developers, and peripheral developers, who are doing their drivers and testing with the product. Over 140,000 developers have had the product over these last few years. And as part of this new program, we'll get the product out to over 500,000 different customers. And so that's a record, even for us. That's really what it takes to make sure that Windows 2000 covers everything that the PC industry would like to see.

Well, what we're seeing here is the evolution of the PC. A move from the way we think about the PC to it becoming a far more powerful device, moving from the CRT to the flat screen, and that flat screen resolution getting far, far better than it was in the past. Moving from opening the machine up, and putting different things in and having to configure those, to having these ports like USB or IEEE 1394 that lets you just connect something up and it's up and running. Moving from the network that's only wire to a wireless network. That Windows terminal device we were showing was using an RF network with 2 megabits of connectivity. That means you can take it into a meeting and have it wherever you go, with full capability.

We're moving from having to think about moving your files around. When you get a new computer, right now it's a lot of trouble to get things over onto that machine, or if your machine fails you don't have access to your files. Because of the way we replicate it up to the server with IntelliMirror, those problems go away. You pick up a new machine, you log in, and the replication gets the information there right away.

We're moving from just having text and graphics to now having things like the video conferencing, the audio and video, at much higher quality levels than ever before. We'll actually start to think of these devices as something that even a very long document you'd be willing to read, and so breakthroughs like the clear type software we're doing, and some of the other software pieces are coming together to make electronic books actually a reality.

And finally, the toughest thing, but a very important element, is to go beyond the keyboard and the mouse. Go to handwriting recognition, speech recognition, and even vision as we take that camera we saw and use it to not only see who's using the machine, but also understand what gestures they're making or what they'd like the system to do. So year by year, over the next three years, every one of these changes will become part of how we think of the PC, making it a far better tool than ever before.

So this fits into the big opportunity that we all have. The Internet becoming pervasive, having these new PCs and new devices all connecting up there together. And the result is that we can do business in a far more efficient way. We can reach out and communicate in new ways. We can buy, we can sell, we can learn, and being involved in this is certainly one of the most exciting things of all time, and we're all privileged to be a part of it.

Thank you.

(Applause and end of event.)