MR. GATES: Good morning. Welcome to the unveiling of Windows XP. Windows is not just a key product for Microsoft. It's not just the most successful software product of all time. It's also the tool that literally hundreds of millions of people use every day to get their work done. These users are passionate about Windows as a tool. They're constantly giving us their feedback about what they like and what they don't like. And the Windows team is dedicated to bringing a new version that pushed the frontiers, that simplified the things that have been hard, and surprise people by letting them do things with their PC that they've never done before.

Today, the primary activities on the PC are productivity applications like Microsoft Office, and running the browser, getting Web screens from individual Web sites. These applications provide immense benefits in their current form. And the PC with Windows is unbelievably popular. It's a standard tool on the desktop of knowledge workers, and in homes we've reached heights that many predicted would never be possible.

In the United States, 58 percent of homes have a PC, and that number continues to go up. In Europe, there's quite a difference from country to country, but overall 26 percent of homes have PCs today. Over time, we expect that that will reach the same level as the U.S. as the U.S. pushes the number up to new heights. In Asia, the number is much lower. And there, again, the future is really in front of us in terms of the bulk of the use of the PC and Windows.

As we look at these homes in the U.S., 21 percent are really pushing things in an aggressive way. They have more than one PC, and so not only do they want to use those PCs, they want them to work together in some exciting ways.

Windows is the foundation for an unbelievable industry. Windows is what ushered in low cost computing. The idea of being able to buy totally compatible machines from different manufacturers, and yet having the rich graphical applications. Microsoft R&D investment in Windows has continued to go up. We see it as so central, and we see so many opportunities to extend Windows.

We see the PC with Windows being something that's always on, and so you'd be able to turn to it and get simple pieces of information, making it so that the system is easy to work with as an "always on" device, that was a key goal for this next version of Windows. We see the use of digital media exploding. The fact is that music, when it's in analog form, is hard to work with. It's hard to organize, hard to move between different devices, hard to have a playlist that reflects your particular interests, and the digital music revolution is changing that -- with Windows at the center. This digital media revolution extends also now to these incredible digital cameras, cameras that will connect up and be essentially peripherals to the PC. So we need to make it easy to use all these breakthrough devices, from PDAs to cameras to scanners, together with the PC for new applications. The PC is becoming the key device for communications. In fact, real time communication with instant messaging is a breakthrough application. But we're extending that now with voice, with sharing applications, with working together. And literally the majority of calls that are voice to voice today can be improved by having the screens, the Windows screens at both ends connected so that you can use those and collaborate together.

We're also driving the XML standard in everything we do. It's having a profound effect on Windows, on Office, on all Microsoft products. This is the new standard for how data is exchanged. And so the Web services, those are the Web sites that offer up XML will allow the Windows user to see data from many different Web sites, and compare and annotate that data. So it's a step beyond simply seeing a screen coming from individual Web sites.

So these are just a few of the ways that Windows is extending. The richness of the hardware advances, both within the PC itself, and the new peripherals, the new uses of the Internet, all of those demand that Windows step up and, again, be the center of those different activities.

So, when we started the Windows XP project, which was code named Whistler, we had a vision. The vision was to take the experiences people have today and make them better. And it's fair to say there are things that Windows users get frustrated about. People love their Windows machine more than anything else, but boy can they tell us things that they'd like to see us improve. Things like making it easy to add a new device, making it easy to share information between two Windows PCs, making it easy to deal with problem or keeping the software up to date.

The experiences, though, also enter these new realms, like dealing with photos, dealing with music, and we wanted to make those not only simple, but not just on the PC but end to end. If I want to take those photos and publish them out to the Web, can we make that simple? If I want to do that real-time communication, not just with a PC device but with a PDA, can we make that simple? So the whole philosophy around .NET is embracing all the different devices, and the Web services to create the end to end experience.

Another big milestone here is the use of the Windows kernel, the Windows engine that we pioneered with the original Windows NT product. Remember, that was written from scratch for incredible reliability and richness, and we are now in a position to use that engine across the entire Windows product line, bringing to consumers or to any user who hasn't moved up to Windows 2000, the richness and reliability that that design has built in, the security, the robustness, and the richness.

So the philosophy in this vision really comes from listening to users, taking all that feedback we get from product support, from engineers visiting people's homes, from sitting down with customers again and again and seeing what is it that they want us to add or to improve. A great example of this, and you're going to see this in action, really quite amazing, is Remote Assistance.

Today, if your Windows PC does something you don't expect, and you call someone up, you end up describing to them what you're seeing on your screen, and they tell you. You're like a robot entering in commands to try to help them understand what went on. Well, the fact is, with the Internet connecting your PC to that person who is trying to help you, there must be a better way. And, in fact, we built this capability into Windows XP called remote assistance. This alone will save millions of hours of people's time helping them get their most out of the Windows experience.

Another great example is what we call fast user switching. When we watched people with a PC in the homes that have multiple users, we could see that the effort to shut down applications, turn things over to the other user, have them come in and do something and then come back and recreate what was going on, that was a major source of frustration. And we knew we had a technology that could avoid that, where we could literally let people switch, and always come back to exactly where they'd been, and so we built this into Windows XP. It's a standard feature that, certainly in the home environment, will be incredibly important, letting people use their different applications. This is a major Windows release, certainly the most important Windows release since Windows 95. Today is the unveiling, we're not going to be able to go through all the great things we've done, but we do want you to get a sense of our excitement and see some of the key things that will make this a breakthrough introduction. Now, Jim Allchin, who runs the Windows group, has been dying to show you the work that he and his team have been doing. Let me ask Jim out now, and he's going to let us see Windows XP in action.

(Applause.)

MR. ALLCHIN: Windows XP is a system that I've always wanted to build. It's the system that my mom deserves, and trust me, she talks to me a lot about the things she really wants in Windows. It's the system that she needs, not only deserves, because I'd like to reduce those phone calls. It's also the system for all business users. Although we made great progress in Windows 2000, we take the next step in Windows XP.

Now, today I'm going to spend a little bit of time showing you the new look, and new design philosophy, and I think you're going to see it's like going from black and white to color. Then I'm going to spend time on the four experiences that we're sharing with you today, the photo experience, the music experience, the video experience, and the Remote Assistance one that Bill just mentioned.

There's incredible buzz about this product. We've been inviting partners in, and of course lots of users, and when I look in their eyes at the excitement with what I'm about to show you in just a minute, it is really amazing and I know that it's not just an upgrade, it allows people to change their lifestyle, it's almost a lifestyle upgrade.

Well, enough about that, let's get started here. I have a laptop here, my laptop, it's my home laptop. And on it is a pre-release version, pre-beta 2 of Windows XP. And although we've got a few months to go before we release the product, I think you'll be very surprised at how far we are. So we would like to introduce you, and welcome you to Windows XP. Just push the button right there. Nice and clean isn't it? Let me sit down here and start the demo.

Bill.

MR. GATES: Take it away, Jim.

MR. ALLCHIN: What you're looking at is what we call the welcome screen. And the first thing you should see is there are multiple users on this PC. Before, that was really hard to do, because you didn't get the opportunity to keep your own personalized documents, your personalized Web pages, but we've got even beyond that in Windows XP.

If you notice on the screen it's Catherine's, who is my wife, account. It shows that she's running programs. It also shows that I'm running programs. That's because Windows XP is based on the enhanced Windows 2000 reliable infrastructure, so we can do this type of design. So it's pretty obvious, pretty inviting, pretty fresh. Let me open the door and come on in to my particular session.

As you can see, at the top here is the new music player, again, it looks very, very clean, fresh. It's actually playing some music that I recorded this last weekend. Let me stop this for the moment, because I'm going to come back and spend a lot longer on the music experience in just a minute. Let me bring down the Internet Explorer. And the first thing you should notice on this desktop is the lack of clutter. It's very clean, very enticing. One of the things that we've spent a great deal of time on is to reduce clutter, and to streamline the system. When I mentioned the new design philosophy earlier what I was talking about is that we tried to understand what the experiences are that people want, and then help them step by step through the system.

So let me bring up the new Start Menu and show you that it's quiet different. Here it's very obviously reinforced who's particularly using this machine right now. And then we highlighted here two tasks that are always there that users can find very quickly, Internet and email, sometimes they would get lost and not know which particular program to use. This makes it very easy. Beneath those two tasks are the five programs that the system is intelligently understood that you have use and it highlights those so they're easy to find.

On the right are system locations for your documents, as well as other important areas within the system. While I mention that the desktop is uncluttered, of course, you can put anything on the desktop you want, it's your choice, let me show you another way that we make the system very smart. One of the problems that we've heard about is that people sometimes have Web pages or a lot of other different screens up, and they may be in a situation where there are a lot of windows on the screen. So if you'll notice along the bottom it's becoming harder and harder to read. So I'm just going to continue simulating as if I've got more and more Windows. And watch what Windows XP does. Down at the bottom it's automatically understood that those are common Windows and has grouped them. And I can pull it up and select any of them that I wanted to get to, or I can just close them all at one time, and they're all gone. Again, incredible intelligence for trying to understand how to make the system simpler.

Let me show you some other task orientations, or the step-by-step design, that we have in the system. I brought up a very important folder in my system, it's called My Pictures, and you can see on the left we've made it very obvious what tasks are available for My Pictures, or if I select one of the pictures you can see that there are now file tasks related to this particular item that I've selected. It's not just pictures, though. Let me look in My Music. So as you can see again here are music tasks, and if I select one of the particular folders it lists a series of folder tasks that are available there. It's very easy to find.

Perhaps the most visible improvement in terms of the system, in terms of task orientation, is what we've done to Control Panel. We found that many people would get lost in the Control Panel, and not be able to change their system the way they wanted it. So here we've made it very easy, you just pick a category and say, change the desktop background, yes, that's what I want to change. And then I can just go down and pick the particular item that I want to change to, say this one, and I can just change to it very easily. I didn't have to search around or hunt around to try to understand how to do that.

Now, I mentioned that we have improved the system so it's a family PC. Suppose you want to make a new account for your child. So I just bring up new account and say, pick a task. Well, I want to create a new account. So I pick one. Suppose you have a daughter called Megan, I just type the name. And then I get a choice of whether I want to have her be a computer administrator, a standard or a limited. If your children are like my children, it's limited. So I just create the account, and there you see it picked a picture randomly, and selected it. Megan is ready to go. Of course, you can go in and customize it, and put the picture -- have a lot of fun there and put the picture of your daughter right there. So if I stop this, and I go back out to the welcome screen, you'll see that Megan is there just ready to go.

MR. ALLCHIN: Now, let me go into Catherine. The whole time I was doing the earlier demo, Catherine had three programs running, Outlook Express, she was on the Internet, and she was playing pinball, and I don't know why she was playing pinball. But let me go back to that welcome screen. Do you see how fast this is? By the way, did I say it was fast? We've made great improvements for the environment that you always have your machine on, just come up to it, touch it, and it's alive, and it can do the things that you want to get done, whether it be play or work.

My mom recently called me up and said, I want to buy a digital camera because she'd seen a picture that my brother had taken, and of course it was incredible. And I talked her out of it. I talked her out of it because I knew the phone calls I was going to get. She was going to end up not being able to understand how to connect the camera, she was not going to be able to understand where in the system the pictures might be stored. She wouldn't know how to print them. And my worst fear was that she wouldn't know how to back them up in some way, because they're obviously bigger than a regular floppy, and she wouldn't understand a recordable CD.

Okay, so, I want to show you how great the experience can be in Windows XP. I have a camera here, and I'm just going to plug it in in the back of my laptop, and turn the camera on, and you'll see that the system has quickly figured out that this is a camera, nothing big news there, but it's brought up a step by step system to help me through acquiring the pictures and putting them on the system. So, I just hit next, and it showed me all the pictures that are on the camera. I haven't even transferred them in yet, but it showed me all the pictures. And I can select a picture here, and I can see that it really needs to be rotated, to be fixed, and maybe this picture of our cat, maybe I don't want that one, and I hit next, and I'm ready to go into just name them Jim Demo Pictures.

I want you to notice right beneath here that right now, I could copy these up to a Web service, automatically, I could start sharing them. Right now, I'm not going to. We'll come back to that in just a minute. I'm going to say next, and it's in the middle of acquiring the pictures, to a particular place, but what's so great about Windows XP is that I don't have to search around and worry about what might happen. I just hit finish, and there they are, my pictures are in the system, and they're in a position where I know exactly where they are.

This is a new visualization that we have, this is called Filmstrip mode, and I can walk through and show any of these pictures, if I want, in this mode. I keep this one of the sun because we live in Seattle, and I'm from Florida, and I like to get reminded of that occasionally, that there is sun. And we've got it today here. And here's another view, it's called thumbnail, and just to give you an idea, again, of the speed, if I come up, this is from a trip we took last summer, I don't know if you've, on your computers today, tried to do thumbnails, but check out the speed again. It's pretty impressive.

So, let me go back to the pictures I just loaded. And so, what might my mom want to do? Well, she might want to take this picture, select it, and email it. But if you notice, it's 700k. This is minutes and minutes on the typical telephone line.

Let me just bring up and email it though. What happens is, Windows XP understands that it can automatically optimize this for about the same quality. And if I continued on here, and emailed it, it would only be about 20k, an incredible improvement. So it's down into seconds.

Maybe I want to view it as a slide show, so I can just quickly bring that up, and the system will automatically walk through the slide shows. It could be doing it to a TV or the screen here.

Printing, it's a task that before was complicated, now we make it step by step simple. Again, it shows the pictures that I might want to print. Let me just say I love them all, I select them, I say next, I pick the printer I want. I say next, and then the system now gives you the ability to do layout. So I can start with a very large picture, a five by seven, four by five, four by six, I'm sorry, full print, or just do a contact sheet, very, very easy. My mom could print with this.

So, one of the last things that I really, really worried about with her was, what if she lost the pictures, then I would get this awful phone call saying, help. We've made it very easy. All she has to do is select the pictures, go over to copy them, and in Windows XP, we have native support for CD recordable devices. I don't have one on my particular laptop, but if I selected copy, it would just show up -- it should just say copy, and it will all be saved, very, very simply. So, with Windows XP, I'll be getting my mom that digital camera that she just asked me about recently.

I'm definitely into music, big time. I'm a musician, I like to customize music, the way it's played, and everything about it. Windows XP we've really improved that experience, as well. This is a Louis Miguel CD, the type of music that I like to listen to, and I'm going to just bring it up. And if you notice there it says Open My Eyes, that's the song that I wrote. And now it's automatically gone to the Internet and picked up the title track. We'll blow it up so you can see what it really looks like.

This is a brand new look, but you know what, I said I'd like to customize it. So let me start customizing it. These tasks are great, very step by step. Let me hide those. Let me slim it down. I'm ready to go, ready to crank some code. Very friendly controls here, very intuitive. If I want to get back I can just hover there and I'm back to where I was. Let me open this, so you can see the tasks that can be performed. It's very easy, 90 percent of home PC users use their PC to play CDs. So okay, that's pretty cool, a lot of customization, a cool new look. Let me move to the next thing that I wanted to do -- let's suppose I want to copy the information on that CD into the system. So let me just select a tune here, let me stop this one, and I just say copy, and if you notice here, it's away copying.

Now, what's really innovative about Windows XP is that we have a new format that let's you do CD quality at half the size of an MP3. So although the player will play MP3s, the cool thing is you get two hours of music instead of just one hour, wand that's super important for other types of devices that can't hold as much as a PC. Even if you did have a PC, if you've got gigabytes and gigabytes like me, space is something that's important. By the way, the whole time it was copying, I could have been getting information about the artist, maybe information about how to purchase another track from him. And it's very easy, because the system automatically went out on the Internet, pulled that information down, and now I'll have it whether I'm offline or online.

Well, you know, I like to run. And I think one of the things I like to do is I like to vary the type of music whenever I go for a run. So let's suppose I'm in the blues mood. So let me just search the library for all the items, and I literally have gigabytes and gigabytes of music on my machine here. And it quickly searched it, and I'm there sitting with about 13 items of blues. And let's suppose I want to go for my run, let me pop the camera up, and I've got a Hip Zip here, which is a device that just clicks on your belt. It's a very cool looking guy. Let me pop this in. And let me just start it up. And because the task I want to do is I want to copy this CD over to the device, the system is automatically sensing it.

And as you can see over here on the left, I have the whole list of all the items that I did a search for. So they're ready to be copied off. I'm not going to search for all of them. But, let's just suppose I want to do Blues Before Sunrise, I hit copy, and away it goes. It's copying right now to the hip zip, by the time this is done, I can grab my water, get on my clothes, and I'd be off, and I'd be running. Again, enhancing the experience. And it's all done. Remember, two hours instead of one hour. It's an amazing innovation called WMA.

I think what I want to do now is show you just how important music is, and I want to go back to the music area. And I've go all this great music that I've either downloaded, or that I've copied on myself. And remember, we have digital rights management in the product. And let me drop into one of my favorite artists, Eric Johnson. You can see we've got the album marked, and we've automatically copied down. I can drop into here, I can pick a few tracks that I want to play, highlight them, and right here I can play them, I can add them to the play list that I just made, I can burn or copy to an audio CD. And this is another place where Windows XP is quite innovative. We can now copy 700 percent faster than any other music player to a recordable CD. So you can get your music on your CD lots faster.

But, just like in the photo experience. We've also integrated in Web services. And so right over here I can shop for music online. So we've taken it from the original media, we've been able to manage it, play it, enjoy it. We've been able to copy it to other devices. We've been able to shop for more. We've taken it from, if you will, end to end.

So that's what I was going to show you on music. Let me switch back to the player, and move to another experience. It's the video experience. And the video experience is the one that's super important to me, because similar to photos it lets you capture the things that are going on in your life.

So, let me go down to my home movies, and permit me while I show you a little of my son learning to vacuum.

(Video shown.)

MR. ALLCHIN: He's one-and-a-half, and he's going to be a work guy just like I am. So, this is something that you could sort of do before. But we've taken it one step farther. Just like I could copy to the Hip Zip, imagine the innovation if instead of having your wallet pictures, imagine that you could carry around your video with you. So when grandma asks, what is little Johnny or Megan up to, you could show them like this.

(Video shown.)

MR. ALLCHIN: I hope you can see that, because it's incredible. Again, it's a lifestyle changing piece of technology. We added a little music through this, we sort of did a best of, and it was trivial to do in Movie Maker, which is part of Windows XP. So, that's all I'm going to show you in the home movies.

I want to show you another set of innovation though in the video space, and that's the DVD. So let me open the drive, pop out my Louis Miguel. Now what I want to do is, I want to put in a DVD, and I'm going to put in the Fifth Element, if I don't drop it, which is a Bruce Willis movie. I never thought I would like it, but I do. So, in just a second, the DVD will start, and the first thing you'll notice is that it happens within the media player.

(Video shown.)

MR. ALLCHIN: So, this is an innovation because it makes it simpler. If you were used to the controls before, you've got very familiar controls now. Let me switch to the menu. Now, what may not be obvious to you is, we've already gone out on the Internet and collected the information about his particular DVD. We've brought down what's called metadata, so we've got it just like we did with music, we've made it very, very simple.

Let me switch down here to scenes, because there's a scene that I can't wait to show you. And, as you can see, I can go through the typical search for scenes, and each DVD is separate, is different. But we've innovated because just like with tracks, we've now added the ability to search for scenes. And this scene I love, and it's so easy to just pick it, and start it. Let me close this. Yes, it looks good, but everybody only watches DVDs full screen.

(Video shown.)

MR. ALLCHIN: Stunning quality, absolutely stunning quality. These devices are so easy to carry around, and watch movies. And I should mention that what's on PC screens today, the quality is much higher than what you get in typical TV, so the images are just breathtaking. I'm going to watch this tonight, no question. But not now.

So, let me stop this. I've shown you the photo experience, the music experience, and the video experience. The last experience is the remote assistance, or a way to get help. You notice this unread email message has been bugging me since I started. Let me just jump back here and bring up email, and see what's up here.

Well, here's the unread message, and it's from Bill. Bill, maybe you should come back out here, and help me through this. I'm going to open his email that he sent me, and it says, can you help me to get my bridge game running. Now, what's happened is, he's a user that needs some help. He sent a piece of mail to me, but he's included some magic to me, a way for me to connect back to him, and help him. So let me just go ahead and select it. And let minimize this. So right now, it's a way trying to connect to his computer remotely. It may take a second. And eventually Bill will see a pop up on his screen, and Bill's is on your right, and I'm on the left. And if Bill allows me, which is what he's being asked for, I can do something that is magic. I can now look at his screen. I have the ability to chat with him, or have a voice conversation.

So, what's up, Bill?

MR. GATES: I need to run this bridge program.

MR. ALLCHIN: I need to run the bridge program. Well, we've done great compatibility in Windows XP, but there is a little trick that I haven't shown Bill yet. So let me do the following. Let me try to take control of his machine. So I can get permission, and Bill just let me take control. And right now I have the ability to go to his screen, and remotely, think about this through the Internet, go to his bridge game and show this really cool capability, which is I can just select it to run in a particular compatibility mode, like Windows 95 through Windows 2000. I say, okay, and then just to test it, I can remotely start it just like that, and the bridge game seems to be up and running. Very, very easy to do.

Now, you can continue on having a dialogue, I could release control, and Bill could say, thanks Jim, and then we could say, okay, and I can disconnect and be gone.

Have you ever needed help with a PC? Have you ever wanted to give help to somebody. Think about it. Think about the power of what this experience is going to be able to offer. So I hope you've seen why I'm excited and why this is the release that I've always wanted to be a part of. I've given you a good view of how the new design focus is. I've walked you through four of the enabling experiences. There's obviously more that we're going to be doing. The first one that I showed you dealt with photos, the second music, the third videos, and the fourth with this help.

I mentioned the partners a little bit earlier, and I think you should hear some of the things they have to say.

Bill, thank you very much.

MR. GATES: Thanks, Jim. Great job.

(Applause.)

MR. GATES: Well, throughout the history of Windows the success has come by creating opportunities for others. Whether it's the various people in the hardware industry, or the software industry, whether it was the original version of Windows, to Windows 95, to what we're doing here. And we've really gotten amazing, amazing backing for this product. Let's first hear from Intel, of course they're working on Pentium IV. The chips they're doing are fantastic, and in fact the performance of those chips will be shown because of special work that we've done in this new version of Windows. So let's hear from Craig Barrett.

(Video shown.)

MR. GATES: So Intel is obviously key in all the big initiatives we've taken. Also key have been the PC manufacturers themselves. The two leaders in the home market are HP and Compaq. And so they've been two of the most critical partners, and we're thrilled with what they're doing with the new product as well. Let's hear from Carly Fiorina, and Michael Capellas.

(Video shown.)

MR. GATES: Well, next, let's hear from the people who sell computers to consumers. Here in the United States, the majority of all home PCs are sold through Best Buy and Circuit City. These are key partners we work with on marketing programs, and how they position these new experiences. Let's hear what they're going to do with Windows XP.

(Video shown.)

MR. GATES: I've got on last video that may in some ways be the one that's most surprising, and this is a video from Meg Whitman of eBay, we've been talking about how PC applications are reaching out to Web services, creating an experience that used to be a local application. But that's also happening in the other direction, Web sites that are very rich are now realizing they want to take XML and the platform we've built and actually run code on the PC to help the user, to notify them about what's going on, and let them build the things they want to do.

And so one of our key partners in this is eBay, they've been very involved in where we're going with Windows. Let's hear from Meg Whitman.

(Video shown.)

MR. GATES: The Windows XP, what you saw today, is, of course, beta code. And this quarter we will be shipping our beta two release. That's a key milestone in the release process. The feedback we get from users will be very critical there. We do expect to release the final product in the second half of this year. So we want to thank you for coming to the unveiling of Windows XP.