Remarks by Bill Gates
CES International 2000
Las Vegas, NV
Jan. 5, 2000

MR. GATES: Well, good evening. We all survived the millennium. You know, a lot of people wondered about that. We actually had thousands of people who worked that night on-call in our product support center because we wanted to make sure that no matter what happened, they'd be there to answer customer questions. We got a few hundred calls, but they were mostly people wondering if we were getting lots of calls, and what they were supposed to do. They did have one problem that we haven't figured out what it is yet, but right about midnight one of the candy dispensing machines stopped working. And so all those people who were idle were wondering what caused that. So, you know, it was smooth sailing.

And now we've got to change our horizon. 20-30 years ago, people talked about the year 2000. Ten years ago they talked about the year 2000, five years ago they talked about the year 2000. Now it's come and we need to look forward to what comes next. And it is a very exciting time to be looking forward. The pace of innovation has never been more rapid.

In fact, many of the promises about convergence to digital media that have been discussed over the last decade will become true just in the next few years. CES is the place where people come to talk about this convergence phenomena. And it's really in full force with the advances in the PC, the prices coming down, the popularity of the Internet, broadband, the incredible advance in screen technology and microprocessors. We're going to have conversion where you can get the information and entertainment you care about on all these different devices.

Now, a key element here that I'll highlight tonight is how the software is going to connect them together and make it easy to get exactly what you want. Let's start out by making clear what convergence is not. Convergence is not having a single device that you use for everything. That's just not going to happen. In fact, we'll see a proliferation of devices. Tonight I'm going to show you over a dozen devices that are shipping today that all connect up together and are part of these new scenarios.

Convergence is not having fewer companies that buy up all the different skill sets and are able take that grid where you say a company name and all the different things owns the studio, owns the phone company, owns the chip factory, and try to put a check in all those boxes. In fact, companies will become more specialized, just as has happened in the 1980s as the PC took off. The opportunity here, the volume means that there will be thousands and thousands of new companies. And by using standards, they'll be able to work together in a way that allows success and fast innovation for all of them. And so that conglomeration approach is not what it's all about, it's the opposite of that. It's not simply putting everything on the left. When people want to get at their videos, when they want to personalize things, they're going to have devices they carry around that are portable. They're going to have devices that have storage in the home. And so the Web is part of the picture, but that's not all of it. People want to do creative things; they don't want to just browse what other people have created for them.

A final point is that we've got to make sure that as we pull this all together we don't make it too complicated, that we really empower people, whether it's to personalize their photo albums, whether it's to track their kids to see what they need to know that's going on, and to preserve their privacy. Some people have said, no, we just ought to throw that to the wind. And yet, my view is that with a little bit of software magic, there's no problem in making this an environment where you actually control things. You control who can call you, who can know what you're up to in a far more profound way than you've ever been able to do before.

What are all these different gadgets that I talk about? Well, I don't want to go through the full list, but I think the best way to categorize them is to think of the form factors. In your pocket, you'll have a screen phone, or a hand-held game, or a personal information manager. Some of those will be purpose-built, and they'll only do that one thing. Others will be every one of those things, and some will have an add-on capability so, say, you could put a little camera module on and take your pocket PC and turn it into a great still or motion picture camera. Because it's digital, because it's software driven, that kind of add-on flexibility will be a characteristic of most of these new gadgets.

We'll have big screen devices because they'll be in the den, the living room, we'll think of those like the TV, multiple people able to watch, able to play games together, but some of the communications scenarios will start to show up there. You'll be able to be notified that your kids upstairs are crying in their room or that somebody is at the door right there on that screen. Your buddy list that today you think of as mostly an online PC thing, you'll be able to see, if you've enabled it the right way, who is watching the same shows. If you want to chat with them by typing or talking as you're watching those shows, and so communication is brought to a place that you wouldn't have thought about it being before because of all that connectivity.

The desktop screen, the screen you sit close to, whether it's the portable PC or a classic PC, that will be important if you're doing homework, doing work at home, anything that requires that kind of close screen creativity. And we're going to show some examples of that tonight. And that will be on the same network with everything else.

But even things like the washing machine, when it's done with a task, it will be able to send a notification across the AC power and show up on any of these different screens. Any of the speakers in the house will in the future have digital wireless connections, so any music you select you can take that little screen device, select what you want, know where you are, and that music will arrive.

So, the home itself will be almost like a computer system, and making it easy to know what's going on and easy to control that is a great software problem, and one that many companies, including Microsoft, will be involved in.

Because these devices are digital, they will advance very, very rapidly, and the competition here is going to be quite intense. The analogy is probably going back to when people thought about motors being a very carefree sort of thing. They harness up a pulley and a system to try and use it for many things. Well, of course, today we don't even think about that. You know you have a hard time saying how many motors you have in your house, or even in your car. Today, the microprocessor with software controlling it is the same way. You won't even think about the fact that there will be dozens and dozens of these. Nor will you think about configuring them, because as they show up they'll be automatically discovered, and the ability to find them, pinpoint the new devices, that will just automatically take place through those standard protocols.

So, where are we on all this, what milestones have we achieved? Well, the PC that will play a fundamental role here passed the penetration of 50 percent. Now, over 54 percent of the homes. And, actually, over half of those homes have multiple PCs. So that's somewhat ahead of CD player penetration, getting up there in pretty big numbers. Every device on here, though, will be affected by this revolution. People say, well, isn't the PC going to be very different in the future? Yes, but we've always been used to the PC changing. Devices like the phone and the TV or the way that we get music, those have stayed the same for a long time. So, when we think of this era, it's actually more revolutionary to say that it's the post-TV-a-we-know-it era, the post-phone era, because those devices are the ones that will work in new ways. And so nothing on this list will be unchanged, and the benefits to the consumer will be pretty dramatic.

Here's one of the milestones, this year, last year actually; four billion embedded microprocessors got used. Of the PC users using the latest Windows, 91 percent were out on the Internet. And so even though that monthly connection fee is still fairly expensive, most PC users are seeing that as a primary application. And digital music, it was only a few years ago I was at a media conference and said, look, CDs at some point will be as obsolete as records were before that. And none of the music executives or many people there thought that made any sense at all. They talked about how good the CDs look on your shelf. And it really reminded me of the same conversation I had with my friend Warren Buffett who owns the World Book. You know, he said the World Book looks good on your shelf. It smells good. We never could get the smell into our Internet version, but still the digital encyclopedia outsells the printed encyclopedia 10 to 1. And that same rapid shift is taking place in music. Starting, as most of these revolutions do, like the Internet, on the college campus. And so it's really students where you look to see these trends developing. And here we've got 34 percent of them are downloading music, and playing that on a variety of devices, primarily the PC. It's likely got a digital camera on it, mostly still photography today, but able to send it around to friends, and now we've got that. So, it's not just on the PC. It's one Web TV and the other devices as well.

And so, the popularity of this stuff is really phenomenal. In fact, you can hardly pick up a magazine or a newspaper without hearing about the latest Internet stock price, or the latest startup. Really people are talking about this as the thing. You go outside the United States, and the big question is, how do we catch up, how do we avoid being left behind? Whether it's our schools, the way they use this, or businesses, or just the country at large.

So, I thought I would pull together in a little video clip some of the ways that everybody is talking about technology, and some of the things that show that we still have a lot to work on here. So, let's go ahead and take a look at that.

(Video shown.)

MR. GATES: So everybody is talking technology, but there's a lot of room for improvement. Microsoft sees its role as focusing in on its special capability of building high volume software. As we took our vision statement, which has stayed the same for 25 years, and changed it to this "empower people through great software" just last year, because the PC is now participating with all these different devices, and software in many ways is being delivered as much as a service as it is as a kind of packaged thing that you think of in the past. So really software is the element that we see working with partners to get into all these different devices.

Well, now let's go through the big scenario. What is it that people are trying to get done, and how it's going to be a lot better? The first is going to be information communication. Information access is quite imperfect today. Yes, you can search for lots of things out of the Web. But, think of your own information. Think if you want to go back and go through you photo albums, think if you have notes that you took in a meeting that you'd like to be able to share some of those with other people. Think about the files or the preferences you have on one PC you'd like to show up on another, or say your family just wants to have a little screen on your refrigerator that has that family schedule. Today it would be truly unrealistic to set that up, keep it in sync, and so it's just not done. You have different formats for all the information. And so the information access is not fulfilling that vision of information at your fingertips.

Communication is the same thing. You've got instant messaging, which is very cool, but just on the PC. You've got fax. You've got voice mail. You have all these different phone numbers, mail addresses. One at work, a different one at home, and your ability to control who can call you on those different devices. Who can interrupt your time. Who can send you a flurry of junk mail, or get telemarketing data ringing up your home. You really don't have that much control over it. So it's not unified, and the software is not giving you what you want. We can go a lot further with that, as we think of the whole list of scenarios, and not just focusing on a single device.

Well, the best way is to see this in action, so I've asked one of our product managers, Steve Guggenheimer to come on out and give us a little look at how communication and information could be different.

MR. GUGGENHEIMER: Hi, Bill.

MR. GATES: Hi, Steve.

MR. GUGGENHEIMER: How are you?

MR. GATES: Great.

MR. GUGGENHEIMER: I'm not sure how many people remember, a few years ago we were here -- a lot happened in two years. I think everybody is now very familiar with the Web, they're using it a lot. The amount of information that's there is growing. At the same time the ability to customize and have the information you care about, the news I want, the local weather in Seattle, same as it always is. Communication has continued to grow. Now, email has been the backbone of that, Internet email and Web based email is now a tool that allows you to have access to email I care about from any PC. In addition to email, basic Web communications have continued to grow things like instant messaging, personalized communities. In fact, I've created a community for my family to go to, my parents can now get access to this, for the first time in their lives they've been able to use the Web to do something with the family.

Now, that we have this kind of a background on all this information, the trick as we go forward, as more devices become available, and as they start to get connected, is to see it on a much wider array of places. So that as I move around I can continue to get access to that rich set of information. The first device is something that falls into a new category; we're calling these net appliances. It's a very simple device that allows me to get onto the Web. It has full access to the Web. And as you'll notice, I've gone straight to its email, and it has those same email messages as on the PC. I go back to home, one of the things you'll notice that it's the same web content I had on the other device, but we put a friendlier screen on the front of it. So for people who are just getting started, if you go to read email, or explore the Web, it's a very nice way for people to get onto the Web for the first time, or for those who have PCs if we want additional devices with Web access.

MR. GATES: And people like Compaq will start shipping them next quarter, I understand.

MR. GUGGENHEIMER: That's right, several vendors are out there. There are about six now that are already signed up to build these next quarter.

Let's move on now. Two years ago we actually did our first Auto PC demo.

MR. GATES: I remember it, it wasn't quite perfect.

MR. GUGGENHEIMER: Let's try it again, it's always a bit of a challenge. Auto PC, email, down, down, read, auto PC, read. An important thing to notice, it's the same email, but it's read to me, I don't want to be sitting down and looking at the screen, and trying to read this while I'm driving. So we've adapted not the content, we've made that available, but we've adapted it to the place it's going to be, in this case it's read to me.

Let's step around the table now, and continue our email tour, so to speak, our information tour. This is a cell phone, for the last year or so a lot of people have had cell phones that allow push information, I could have stocks pushed to me or sports scores. We're now entering an era where we can get access two ways. So in this case I have the same Hotmail messages, and there are three of them, that have been downloaded to this phone. They're available if I want. I can read them. I could go out on this phone, check my itinerary, for example. I could stay the extra night; I could look up other information. So in all these cases it starts from the same basis, but I have subscripts that are relevant. In fact, in the auto PC I can get traffic on that, where I might not get that on this phone.

This form factor, though, it's nice for a couple of email messages, but if I had several of them it probably wouldn't make sense. So let me switch out. One of the things I can logically do that people are somewhat familiar with, and again from my community I can -- (inaudible) -- picture of my son, because it has Web access. I can click on this device, same email messages, now in this device it's a little easier to read I can carry it around. If I had more messages it would be a little better for me. So let me set this down.

Now, as we move forward not only are we extending the devices where we have access to information, but the types of information that are available to us are going to grow as well.

MR. GATES: So this is the next generation software for the pocket PC type devices.

MR. GUGGENHEIMER: That's right. We were looking at these different palm PCs, and this is the next generation which we're talking about here, pocket PCs. Some of the initial software that will be available, for example, in this case is the eBook reader. Now, you've spoken a lot about eBooks. And what we've done is we've basically taken that technology, that clear type technology that makes it easy to read, and added it into this particular reader, so I can read a variety of books, or magazines, or even newspapers.

So, for example, I could go to an article from Slate if I had downloaded that, let's go ahead and go back to the library. If I'm interested in a book for the airplane on the ride home I have The Call of the Wild here. And now I can go to the first page, for example, I don't want the next page, and the nice thing about these books or this form factor is it's become very readable. I'm not sure how well -- (inaudible) -- and you can see that I could sit on an airplane on the way home, and literally use this as a reading device.

MR. GATES: ClearType is a real breakthrough there, and we'll have it in all the different form factors from the Pocket PC to the full PC itself.

MR. GUGGENHEIMER: That's right, and of course because we have the device here that goes a little bit beyond the traditional paper book we can take advantage of some of the underlying software. For example, if there was a word I wasn't clear on I can click on it, I can go to look up, and I can use a dictionary that's on the back end to figure out what that particular word means.

MR. GATES: One thing we'll be announcing tomorrow is with Barnes and Noble we've got a partnership that's really going to make this eBook category explode. So we're looking to talking about it with them tomorrow.

MR. GUGGENHEIMER: The last thing, again going back to my airplane ride, do I like reading the book on the airplane, sometimes my eyes get tired, 250 pages into a book I'd like to hear the rest of it. We'll in the same way that there are books on tape today there is a partner, audible, who is actually making the same type of capability available for the eBook reader and this device. So if I go to Angela's Ashes here, a very popular book right now, this is actually an audible version, or an audio version.

MR. GATES: I can go up to their Web site and they've got a -- (inaudible) --

MR. GUGGENHEIMER: Right. And now when I'm a little tired on the plane, I will say it often has a bit of an accent. But the nice thing, again, we've taken the form factor where we have our information, whether it's the pictures we want, the schedule we want, email, and now we've added a whole capability to read magazines. So, with that, I think we've covered the core here in terms of information.

MR. GATES: Great. Well, stick around, and let's take a look at some other scenarios.

(Applause.)

MR. GATES: Well, the next category is entertainment, and this is a very broad category from games that continue to get better with incredible graphics, now they're being brought into the network world. The idea of you have digital video screens that makes it far more realistic, and that your friends hooked up over the Internet can be involved in playing with you at the same time.

They have been special devices, although PC games have also been popular, done very well this year, and they've been very cutting edge, things like the advanced graphics, the multi-player. What we're going to see is that in the home your TV, your set-top box will have this rich game capability that's really just a standard thing, and you'll be able to download over the Internet most of those new games.

Music, the way you go about using it will be very different. You won't have to go and take it out of the CD box and simply get the tracks that are there on that one disk. In the digital form, you can organize it exactly the way that you want. You can carry it around with you, and have the quality that comes with using the digital format. The formats keep improving. In fact, with our Windows Media technology, even over a dial-up connection, the sound quality is very, very good. And so, we're in the process of completely changing it to be digital.

Video, we're at a little bit earlier stage, but here again is something that's belongs in digital format so that you get to pick when you watch something, how you watch it, and even have editing capability. Today, that's a completely laborious thing. Film studios get to do it, but not your average consumer. But the products that enable this are really on the verge of coming out.

So, let me ask Steve over in our living room, I guess, to show us what we can do in the entertainment realm.

MR. GUGGENHEIMER: This is one of the few places where we can bring a couch in and relax a little bit. I kind of enjoy it. So, in terms of the television and making things more personal, television today is nice, there's a lot of programming, but we really do follow what it tells us to do. There's not a lot of ability to have it be personal interactive, and that's changing.

A few years ago, we showed how we'd get Web access.

MR. GATES: Now we've got about a million of those WebTV devices.

MR. GUGGENHEIMER: Right. And now we can get to the point where we can actually get interactive. We've seen some initial parts of interactivity done with things like the weather channel. But genres like game shows, where people really do want to play along, they go out and buy the box sets so they can do the same thing, are beginning to take advantage of this medium. In watching the questions come up, we'll have an opportunity to play along. I'll give you a chance when this one is over. I'll take the next one.

So this is very -- you can imagine that for us at home, we could play along against each other. You can imagine that from a Jeopardy perspective, they have a way where you can use this to play along. They can use this to have contests; they can even use this as a screen.   A great kind of totally interactive way to play along with them and immediately feel like a participant.

Let me go back to the home now. When we think about personal television, I think interaction is one key. One of the other things that truly makes television personal, that's why it's called personal TV, is the ability to record the shows you want directly onto the box you've got. Now, this is an Echostar DishPlayer, and this particular box has a hard drive included, and it's a direct feed from their satellite, so we have very good clarity when we record everything onto the hard drive.

So, for example, I have a Notre Dame game here that I've stored. And once I go to play this, this particular video now is the same quality that it came out on the original satellite, and it's stored in such a way that we can treat it like a DVD. So, for example, after this plays, if I don't want to wait for them to go back in the huddle or anything, then I can just skip ahead 30 seconds, and we get into the next play. We can watch this play go. Now, for football it's not as interesting, but for baseball where there's all that talking between every pitch -- now, of course, again, being DVD-type capability, we can fast forward 15 times, 60 times, and again all this very high quality. So, really nice to have that capability for recorded shows, you're able to record it locally and then manage it as a DVD or digital technology of some type.

MR. GATES: Now the personal TV, we just started out with that capability. We just shipped that last year, and we've already gotten now over 100,000 of those DishPlayers out. And just today we had announcements from Phillips and Thompson that worked in partnership with on the personal TV.

MR. GUGGENHEIMER: That's right. And one more point of reference, I believe that Echostar won an award for the best in category for satellite -- (inaudible) -- integration between Web interactive television and personal television.

Now, I enjoy having the ability to take recorded shows and treat them as if they were DVD. But one of the coolest things I want to show you is the ability now to actually -- (inaudible) -- because the signal is being streamed through the hard drive at all times, I can actually tape a show.  -- (inaudible) -- I can do that; I can come back, and then when I begin to play the show again, if I want to fast forward, as I begin to fast forward, the bar at the bottom shows you how far I am. So I can actually see where I am. And, of course, because we're recording at all times, I can always rewind the actual show. (Inaudible.) So, I think relative to television the trends in the last few years have been phenomenal.

MR. GUGGENHEIMER: Let's go into another form of entertainment that I think is pretty personal today, but still has a lot of room to grow, and that's CD. Today, we all have our own neat personal music tapes that we like. But, how we can organize that, and how we can -- (inaudible) -- now there's technology out on the Web and on PCs that allow us to take CDs, put them into the PC, have all the music or songs that they've been catalogued for, download songs from the Internet, and create our own personal play list. So, here, for example, is my personal play list. I can do it by song, I can do it by artist. I can create, for example, party tape or the equivalent to the party tape. And if I want to, I can play my play list. If the music doesn't fit everybody, I can skip over to the next song. This I think fits much more with the crowd here, maybe not. At any rate, the beauty is that I have the ability to -- (inaudible) -- the stuff that I want. The way that I want it. In the order that I want it. A different play list if I want it -- (inaudible) -- and now that I've got it, how do I get it with me wherever I am? That's the next question.

Well, first let's start in the home. A lot of us today in our homes have the existing stereo systems, boom boxes out in the garage, whatever. Well, this device is called a sonic box. And what it does is it allows us to provide basically a wireless connection between the PC and any receiver. And basically from this, we can take that same play list and make it available. So now that we're playing it, you can see now we're actually getting the songs coming off the receiver over here. And it's really nice to be able to take our music and make it available anywhere in the home. The play lists, if we wanted to we could do Internet radio in the same way, so the same way that I have this, I could go out and get music from the Internet and make it available on any receiver.

So, I think it's interesting to think about the fact that in the future, our stereos could basically have another input, and it's from either the computer or the Internet, or wherever you want to call it, but it's our play list.

Now, what about taking music with me outside of the home. Well, there's a whole set of basically new personal devices that allow me to take the music --

MR. GATES: That's the Rio.

MR. GUGGENHEIMER: This is the Rio, and we have several of them up here. We have a Sony, we have a -- (inaudible) -- and all of these devices are actually going to support Windows Media Technology format, some people say format, Windows Media Technology, MP3, what's the difference? Very simply that I can get CD level quality on these devices in half the space. Twice as much music in the same space at the same quality as I can with MP3. So that's why the formats for the way you do this are very important.

Now, if I want, again, keeping with some of the things you've seen earlier, if I want to take it on the pocket or the palm-sized PC that we've seen earlier, again, we have the same basic device. If I hit play --

MR. GATES: One of the applications in that handheld PC is MP3 or Windows Media Format.

MR. GUGGENHEIMER: That's right. It's available here now. Tomorrow it's going to be announced to be available on a variety of the devices that are out there, almost all of the palm-sized PCs and on the pocket PCs coming out.

So, again, we've taken the notion of music, made it more personal, allowed a play list, and then made it available wherever we go. Ultimately, the next step is actually the Windows CE automobile that we saw earlier, drive into the garage, downloading the playlist there, and off we go.

So, one last thing while we're in the creative space. One thing I want to spend a little time on is actually creating our own images. Earlier you saw how digital photographs are becoming a part of the things that we keep and make available whether on devices that we take with us or put them up on the Internet and make them available to the family.

The next trend, I think, is all around movies, home movies. A lot of us take home videos today. We have tapes floating around the house. This is the next version of Consumer Windows, and what this is, is an early version of an application called Windows Media. And what this allows me to do is take and create my own home movies and edit them basically like a little studio.

MR. GATES: This is going to be built-in in the next version of Windows.

MR. GUGGENHEIMER: So, if I go into the Hawaiian set of videos what I have is a videotape that I took when I was in Hawaii. As you know, when you take a video, you don't tape 30 minutes straight, you tape two minutes of this, and two minutes of that. Well, the guys in Microsoft Research have come up with technology that allows you to see when basically the setting of the frame style has changed, and it breaks it up into logical clips for us.

So, now I can take scenes, for example, and arrange them in any order that I want to. So, we'll go down here, I'm going to basically create a little video for my mother, the children's grandparents. So here's a couple of scenes from Hawaii. I'm going to some tapes of our daughter here and I'm going to pull up -- (inaudible) -- and one thing that's important to notice, when we do this capturing, digital camera comes in directly -- (inaudible) -- so, again, where hard drives are today, it's very easy to store our entire list.

Now, since this is going to go to grandma, I basically went out to PowerPoint and created a slide, picked out the font, and now I've created my own little home movie, I go to play. We're all set to go. So, it's Hawaii, away we go, we could send this off.

Now, I have the distinct feeling that since it's going to my mother, she prefers to see the children first. So, if I want to do a little editing, as simple as that, it's ready to go.

Now, how does she get access? Well, we have a publish button here that basically will publish it out to the Web. I can create a link off that family community. So, we've gone from basically making traditional media, or traditional entertainment a little bit more personal, a little bit more portable for ourselves, and then moving into creating our own stuff and making that available as well.

MR. GATES: That's great. Thanks.

(Applause.)

MR. GATES: We've seen information communication between entertainment, what about making all the devices work together? What about all those mundane things , like controlling the temperature in your house, security, or authorization? You've got passwords. You've got keys. People talk about smart cards; why can't we get all those things working together and get all the notifications. If I leave the house I want certain things to happen, make it all plug and play together. Well, that's our next scenario, and it involves having a home network. These home networks are at a fairly early stage, but using the AC power, or using the phone lines, or using the wireless capabilities we see that Internet protocol type networks are going to be pervasive.

We'll be able to hook up simply a camera, and it will be on the network and you'll see it from any screen, you'll be able to hook up your speakers. The speeds will be very, very high, so it won't just be sending Web pages around, it will also be sending audio and video without compromising quality. The PC will be sort of a central control station, letting you see all those different things that are going on, and underlying this several of the scenarios we've shown here is this new protocol based on an Internet extension called universal plug and play.

So let's look at what we can see about how the integrated home is going to come together.

MR. GUGGENHEIMER: We've seen a bunch of technologies around the platforms that support all of the Internet capabilities, like personal content. The last thing that really hooks this all together is something called Universal Plug and Play. It allows us to take all these devices, connect them together in the home, and really pull in the rest of the things we haven't really thought much about, all of our devices, our microwaves and things that we don't really think that much about, our lighting, our security. And what we can do is we can actually have central control over all of these things. So here at the booth at our trade show here, in our booth we've actually built a home here at the booth. And what we've done is we've wired the whole thing together.

So this is basically a view of my home, there are six rooms in the home out on the booth, and I can see what's going on. Here I can see the security camera at the entry, I have a few personalized things in here. We can see the media, we can see what's on television, what videos and music we've stored on our home server, we can look at the environment, how is the lighting in any particular room, what's the temperature set at. Security again, we can arm the system, we can dial 911 immediately, we can look at the back of house, which devices are plugged in or online or connected, and which of them are talking to each other so they can work better together.

Now, the cool thing about this is it all becomes very seamless, things that we do on a daily basis that we don't even think about become a lot easier. Now, it's a little hard to show all that from here. I encourage people to go to the booth, but as a substitute what we'd like to do for a second is we're actually going to take a satellite trip out to the Microsoft Home in Redmond. We have a home there that we use for working with consumers, trying to understand how they use technology in their everyday lives. And what I'd like to do is introduce Stacy Elliot, she is going to represent Microsoft now. And what her job is to help people understand what all of this technology stuff means, to provide very consumer oriented messaging and discussions around how this all works.

So with that, let me hand it off to Stacy.

MS. ELLIOT: Hi, Bill. Hi, Steve. It's great to see you guys.

You know, in my role -- (inaudible) -- and I can't think of a better place to do that than here at our new Microsoft home. This home is equipped with all the technologies that are going to make those mundane things a little bit easier. So I'm going to take you on a little tour of the home. And, listen, I'm no technology expert and this is very simple for me to understand. This new technology is going to be available in the very near future.

So we're going to start here at the front door, and what we have here is an -- (inaudible) -- so I'm going to walk up to the door, and it's going to recognize my iris here. And as it's doing that, it's going to let me in by saying that I'm welcome into the home. The door is unlocked, and we're going to go ahead and go on in.

Now, I'm heading through the foyer in our new home, into the family room. And I'm going to stop right here in the family room. We have a light switch here, but it's also what I like to think of as a light switch with a lot of friends around the house. Now, this -- (inaudible) -- you can control all kinds of things around the house, these devices all know each other, they're all friends, and they're talking together -- (inaudible) -- where I can control all kinds of things.

Now, Bill has talked about controlling the environment, like temperature, the lighting in the room, I can do that from here, and I can also play a CD or watch TV. But, on this main screen, this is really the fun part, where I have three programs that I like to -- (inaudible) -- and all those things are starting to happen. And I'm going to head on into the family room, and you can see now that the TV is on, and of course it's set to my favorite station. And what's great about the system is it's very similar to the light switch, which allows me to control things all over the house. And so I can go through these same action buttons here, and if I want to do something else besides watch Web TV, I can select another situation or scenario that I see programmed here, maybe I want to play some music. And what happens is the TV goes off, the CD player comes on, and we're listening to music. Now, I can also control the CD player from here by going to that media tab and checking that and -- (inaudible) -- and then I can pause it if I want to, right here from this very simple remote control.

I don't know if you guys heard that, but there's somebody at the front door. And you know what, we can check that from here, we go up to our security tap and see who's out there. And I click on front door, and you know what, the pizza guy is here. I'm sorry you guys, I ordered a pizza, so need to do a non-technology thing and actually go answer the door and pay him. So I think that I've given you guys a quick tour and a quick example of how all of those kinds of devices in the very near future will start to work together in a smart way.

You guys have a great time in Vegas.

MR. GATES: Thanks. Super.

(Applause.)

MR. GATES: I actually live in a home like that, and it really works. It's a lot of fun to be able to call up, control the lights, control any shows you want to watch, or call up any photo album. And one of the elements of this conversion is that you're going to have more than just devices and software, because you'll be connected to the outside world through an Internet connected. You'll actually have services that update your software, or provide you with information. And so the boundary between what is the platform and what is a service will be much less than it is today. We've already seen that a little bit with something like satellite TV, cable TV, or the cellular phone. You're seeing it now also with the online services and communications capabilities. So the services are one of the things that bind all these different devices together.

So with WebTV for example, we've always kept the software up to date, because every time somebody dials in, we're in control of that software, and we make sure they've got the latest. That's a feature we're just now building into the PC with the capability we call Windows Updates. So even without thinking about it, if there's a patch, a driver, anything like that it will just show up on the PC without any intervention on the part of the user. Also things like all these notification services, where you want to be told if there's a special price on something, or if a friend is interested in doing something. Those will fit into this service category. So Hotmail, our password authentication service to make sure you know who's there, those things fit in as well. Bill paying will be a great service in this environment. And, in fact, consumers who were surveyed say that's one of the things that they'd really like to start taking advantage of right away.

Now, in order to get these services going we're going to need partners, partners who can come in and do the installation, partners who really believe in this model of consumer electronics. We've partnered up recently with a couple of leaders in this, Radio Shack has had this as a key to their strategy for a couple of years now, and it's really driving forward. And we've also with our MSN, partnered up with Best Buy as well. So people like that, that are really going to get this out to the masses, to make sure that it's a simple installation, and the promotion, making sure people see what they can do in this new world that's there. It's not like that's going to happen without them doing their part.

So now we come, finally, having talked about the scenarios, and what's convergence is not, to say what it really is. It's a revolution in consumer electronics. The change in not only the devices themselves, but how we think about them, how we use them. They're all digital, digital music, digital video, and there's great software bringing richness and connectivity to every device. The standards are pretty clear. There will have to continue to be evolution. Things like universal plug and play will get richer, so that even if you, say, are outside the home you'll be able to see all the services that are out there, that you might want to connect to. So these services really span all the different scenarios, communication, entertainment, and everyday tasks.

So the bottom line I think is pretty straightforward. For the people at this show, it's an era of great opportunity, a whole new generation of products, and we look forward to partnerships with lots and lots of the great companies here, because the next five years are really going to be incredible.

Thank you.

(Applause and end of event.)