Silicon Valley Speaker Series: Ben Waldman, vice president, Microsoft Mobile Devices Division

Remarks by Ben Waldman
Vice President, Mobile Devices Division
Microsoft Corporation
Silicon Valley Speaker Series
Mountain View, Calif., August 8, 2000

BEN WALDMAN: I’d like to second Jon’s welcome to you all to our first talk at the Microsoft Speakers Series. As Jon said, the goal of this series is to bring together members of the Silicon Valley Community to discuss, debate issues that are of interest to us all. There are speakers from Microsoft here, we have industry analysts, we’ll have some other companies, so you can really ask questions of your competitors. I think we can all agree that the computer industry — between hardware and software — is a pretty competitive place to be in, even more now than ever before. But I think if you look beyond the rivalries and alliances and all that sort of thing, there is a lot that unites us, no matter what company we work for. Maybe the biggest thing that unites us all is our motivation, our reason for doing what we do, for getting up in the morning and going to work. And I think that motivation is that we think we can make a difference, because we can change peoples lives. That if we work hard enough and if we’re smart enough, we can enable people to do things they’ve never done before, enable people to do things more quickly, more easily, maybe with a bit more fun. That’s certainly my motivation and the motivation of the people that I work with.

This year is Microsoft’s 25th anniversary. The company was founded in 1975, and for 24 years until last year, the reason that we got up every morning — our motivation — was to put a computer on every desk and in every home. And the reason we wanted to do that is we saw the personal computer as an empowering tool that enabled people to do things far beyond what they could have done. Whether they were individuals or families or businesses, the personal computer enabled people to do things that they’d never done before. And this vision has lasted for over 24 years, through Ford and Carter and Reagan one and two, and Bush and Clinton I guess, and through bell bottoms and Izod shirts and cargo pants, and — I’ll stop the stupid analogies — and for 24 years that was the vision of the company, unchanged. And then last year all of a sudden for the first time in the history of the company, the vision of the company changed. We recognized that although the personal computer was still going to be an important tool that people would use to communicate with each other, and access information, and continues to be important because of its flexibility and adaptability, we also saw that people were going to start using a wide variety of devices to access the Internet, to access information, to communicate with each other, and we knew then that we had to expand our vision of empowering people beyond that of the personal computer, and we expanded it by empowering people through great software anytime, anywhere and on any device.

My first device that I got was an Apple Newton when they first came out. I got the Newton, I got the developers kit, it was really fun to play around with, and it had some really great ideas inside of the Newton. And then as soon as the first Palm Pilot came out I got one of those. Great, I could do my calendar, do my schedule on this device, and I think if anyone had told me at the time that in just four years in the year 2000 you’d be able to take a device, a Pocket PC, and browse the complete Internet in full color, and at the same time listen to all sorts of digital music, I probably would have thought they were crazy. But in fact, that’s where we are today. Those are the kinds of things you can do on a Pocket PC — access the Internet, listen to music, read an electronic book, play games, and here we are today. And the question is where are we going forward? What’s the next step, and I guess that’s officially the topic of this talk. If you think of the biggest technological changes in the past decade, things that have had the biggest impact on our lives, certainly the biggest thing that would be on the list is the rise of the Internet, which has changed the way we communicate, how we access information. I think also the rise of the mobile phone, which has untethered us from our desks, whether our desks are in the home or at work, so we could communicate with people wherever we are, no matter where we are.

So now we are seeing these two things come together — these two great trends coming together. And it’s at the confluence of these two trends where we see the future of mobile devices. In short, we see the future of mobile devices as an extension of wireless capabilities and all the other capabilities that this will enable them to have. We have statistics. We’ve seen the huge number of cell phones being sold. 300 million phones sold last year, 500 million phones supposed to be sold this year, with the number of Internet capable phones outselling computers. The phone will be the primary access device instead of the personal computer accessing the Internet. Handsets are getting more capable. We are adding wireless capabilities to notebooks, PDAs, and smart phones. People are really beginning to depend on email and on the Web, not only in business but in personal communication as well.

The increase in wireless bandwith brings a lot of promise to all sorts of richer scenarios. Today in the United States we only have data rates of about 9,600 bits or up to 200 with CDPD which is about a third to a sixth of the rates of a 56K modem at home. In Japan though today we have wireless going out at 64 kilobits per second and in Europe with GPRS, they’ll be up to about half that later this year. So these speeds are increasing — we’re going to be able to do all sorts of new and exciting, interesting things. But the networks are all going to be phone centric. It’s useful not only to enable better data communication because it will enable a scenario where devices are always on — our mobile devices or our PDAs or our cell phones are always connected to the network just as our personal computers are always connected today, but you won’t have to make a phone call explicitly from your PDA or your phone to the network, you’ll just always be connected.

Carriers are seeing this, the network operators are seeing this, they’re making huge investments to make their voice networks cover data, and unfortunately for us here in the United States, it appears that Europe and Japan are leading in this area, and we are, by estimates, 5 years behind what’s going on in Europe and in Japan.

So the future looks great and there seems to be many promises. Unfortunately a lot of things have to come together in order to make these promises a reality, in order to enable us to do all these great things that we are talking about. If you think of communications for example, the situation that we live in today is absurd in so many ways. If I want to contact one of you I don’t just have to think about contacting you, I have to think do I phone? do I send you an email? do I send you an instant message? do I page? do I send you an SMS? I have to think about how I want to contact you and not just think about contacting you in the way I want. I have to decide how I want to contact you if I want to get the information. And on the other side, when you receive information you have to check your voicemail, your email, your instant messaging, and basically you are forced to look at whatever way I sent you the information as opposed to how you want to look at the information.

Now unified messaging and the universal inbox is making a lot of that better — there is only one place for you to go to get information, but the problem is broader than that because at different times of the day there are different roles that you may be playing: you may want to receive information in different ways. If you are sitting in a meeting, you may not want your phone to ring — it’s kind of rude to have someone call you on the phone unless it’s a family emergency — and you probably do want to get a message on the phone. But for everyone else you only want to get a message appearing on your pager or on an SMS on your phone.

On the other hand, if you are driving home in your car you probably want to get your messages on the phone. It’s easier to listen to information on the phone if it’s legal. I guess in some states it’s not — than reading information on a screen, which is even more prone to get you in an accident.

So a lot of things have to come together to enable this grand vision that all of us have and all of us talk about. We have to combine location information with people’s calendars — what roles are they playing in the day?– Are they acting as a businessperson or are they acting as a parent? So when you speak about the future of mobile devices it’s not enough to just talk about devices, because in order for people to get the maximum out of their devices, those devices are going to have to work well with servers to manage the different devices that people have and get information to them, and also the applications and services that people are building on top of those servers.

So we need three pieces to come together: the sources and the devices themselves. When you think about the sources of content and data its obviously both data that is on the Internet — mail, news, weather, information — as well as information inside the corporate file – email information, calendar information as well as various sorts of database information which is inside of the corporate firewall. .

The box that I put in the middle is the biggest box on purpose, because it represents the network operator, the carrier. The existence of the network operator, the existence of the carrier is what makes the wireless industry so incredibly different than anything we’ve ever seen before in the personal computer industry. In the personal computer industry you have Microsoft or Apple or Red Hat providing an operating system, Intel or Compaq or Sony building a computer and then they go to customers. We have those two people in the wireless industry as well doing software and doing hardware, but you have this third player. You have this carrier, which is a very important position, a very powerful position. It’s not the end user who buys the handsets from the handset manufacturer; it’s the carrier who buys them from the handset manufacturer. It’s the carrier who buys the telecommunications equipment with which they build their network and it’s the carrier that controls the relationship with the end user and it’s the carrier that kind of controls the data that is flowing from the data sources out to the devices.

So when we at Microsoft think about solving problems and enabling people to do things they couldn’t do before, we not only think about the end user enabling these communication scenarios we’ve outlined, but we also think about what we can do for carriers and how we can make their business better and more successful.

And of course, on the right hand side we have devices, which I’ll spend time talking about today.

So these three different pieces really have to come together to enable us to make the best use of our devices. And one reason we think Microsoft has a very important role to play in this space is that we are the only company that has offerings in those three areas. If you look at the sources of content and data, we have a number of Internet services available today. We have MSN, MSN Mobile, Web TV services, MSNBC, bCentral. If you look inside of the corporate firewall, we have information stored inside of Siebel server, inside of Exchange server, inside of Office documents. And for the carrier, we spent the last year and a half making a number of strategic acquisitions that we think are important in helping us deliver on this vision that I’ve been talking about. We acquired a company called Sendit in Sweden, and Sendit does a consumer email product which can be hosted by carriers which deliver email via SMS to mobile phones. And we learned a lot about carrier grade email products. There’s a company named Entropic in Britain that we acquired. They do speech recognition and speech synthesis, and that’s important, because you will always have phones out there which are not Internet capable and so using speech we can deliver some of these capabilities to those devices.

We formed a number of joint ventures to enable wireless access to information with Qualcomm, with Mobimagicin Japan. And we also have a product internally called the Microsoft Commercial Internet System, which enables carriers to build portals and electronic commerce services. These are some acquisitions we’ve made outside but we’re spending a ton of work inside in order to build our solutions for mobility. It all begins with Windows 2000, which we architected as we’ve spoken many times before – reliability manageability and scalability. On top of Windows 2000, we’ll be delivering Exchange 2000 this fall. Exchange has also been rearchitected for scalability and reliability to service not tens of thousands but millions of mailboxes at the same time. We’ve used a lot of the experience we learned from Hotmail and the Microsoft Commercial Internet Team to beef up Exchange in that area.

Another thing we did with Exchange 2000 was to put Web protocols throughout the entire product. We expanded Exchange’s store to something called Web Store which means that any piece of information out of an Exchange store is accessible via human readable URL or an XML schema. By combining the Web server and the messenger server, we think we’ve built a great foundation for building collaborative messaging applications.

The third thing we did with Exchange was add what we call anytime, anywhere capabilities into the product, incorporating video conferencing into the product, voicemails into the product. But beyond Exchange and beyond Windows 2000 we’ve also been working on a product which we’ve code named Airstream. And Airstream is a carrier and enterprise capable platform for wirelessly enabling applications, and also for managing a number of different devices that people may have on the network, solving problems of personalization, also solving problems of security, enabling mobile handsets to get to data behind a corporate firewall in a secure manner.

The most important part of our work on Airstream is that Airstream is a platform, on which others can build, providing tools that other people can use to enable existing applications or create new wireless application going forward.

So that’s what we’ve been doing on the content and server side. I’d like to spend the rest of my time talking about what we are doing on the device space. When we thought about what we needed to do in the device space we got around and talked to a large amount of customers. What is your ideal device? What kind of device do you want to use? What fits your needs the best? And the funny thing is, we’ve gotten a different answer from virtually every person we’ve asked. And everyone is so vehement about their answer.
“This is what you should build. This is the device that people really want.”
And it’s almost humorous, because everyone speaks with that same passion about different sorts of devices. Nobody can agree on what they need and I think the answer and conclusions that one can draw from that are clear. The right answer is that there is no right answer. People are going to need different sorts of devices depending on what their needs are, depending on geography even. In Japan, they place the highest priority on the smallest phone possible. On cultural differences and on business needs.

There really is no right answer on what the ideal device is and so we think we need to focus on providing solutions for a broad set of devices. Another thing that is really important, especially since we are going to focus on a broad set of devices, is to create a user experience that is optimized for each of those devices. Nobody wants the desktop version of Windows shrunk down into a PDA. No one wants the user interface of a PDA shrunk down into the size of a mobile phone. Everyone wants the user experience optimized for those devices. Jon mentioned before that before I ran this division I headed Microsoft’s Macintosh division and I started doing that in about January of 1997, and when I started doing that, a lot of our Mac customers hated us — they’d run up to us and shout at us at various conferences, at MacWorld and such. And they were furious for a couple of reasons: first they felt that they were getting the same product that the Windows customers were getting and they didn’t want that. They wanted a product that was optimized for the Macintosh. So what we did was make a big effort to understand the unique needs of Macintosh customers and then go ahead and deliver those products customized for the Macintosh and built ground up for the Macintosh. And so we delivered Office 98 and we delivered IE5 last March. We’re about to offer Office 2001 this Fall. And the funny thing was I remember when we were first starting our effort I told people in our group I’ll know if were are successful if people run up to us and buy us a drink and give us a hug at a conference and people looked at me like I was crazy, but I swear to you that is exactly what happened when we shipped this product, because Mac users are very, very passionate. They can either hate you or they can really, really like you. Its better to be really liked than to be really hated I can certainly tell you that.

And that’s the kind of experience we are trying to bring to the device space, to the mobile space, a user interface optimized for each kind of device. Another thing that we think is important in the device space is support for Internet standards. We think if we have to create a set of parallel standards for devices instead of relying on Internet standards that have been developed by many companies working together that is going to slow the adoption of wireless communication. If you look around the world the place where there has been the biggest success in providing wireless data services has been in Japan, with its i-Mode service which I think has more than 9 million users which is of course built on HTML standards. Our efforts at Microsoft have been strong focused on building products around accepted industry standards.

The last thing I would say, an important tenent and I think this follows some of the last ones, is that it is important to focus on solutions and not just technology. No one gets up every morning and says
“Gee I wish I had Windows in my phone.”
Maybe Bill does (laughs), but actually the truth is developers do too, because developers have a platform, they have the tools that they are used to in a platform. But people think about what they are trying to get done during the day, that they are trying to communicate with someone else, they are trying to find some information, they are trying to buy something. And we have to understand what people are trying to do and enable them to do those things, if they couldn’t do them before or if they could do them before help them to do them more quickly or more easily and with a bit more fun, and that’s been our philosophy driving our work in the device space, now and going forward.

So if you take these basic philosophical ideals and apply them to our products, we have a product strategy where we are focusing on three different device families: our personal digital assistant, the Pocket PC, wirelessly enabling these devices and making them great citizens in a wireless world. Second, our software for feature phones. A feature phone is an Internet enabled version of the phone you have today. It can connect to the network and show data on a small screen and so it’s kind of hard to read. And of course if its not connected to the network, in an airplane for example or in a train underground, then the device is pretty useless as a data device. There is no local storage and all the knowledge sits above on the server and you can’t get any of that knowledge if you can’t connect to the server.

And some people say, well that’s great; they’ll want to use a PDA. Some people say no, they’d rather have a feature phone. Some people say they’d like to have both together. They’ll carry PDA when they have very data centric needs and the phone for voice needs and have those devices talk to each other. And others say they don’t want to carry around two devices they want one device. And so to satisfy the needs of those people, we are trying to combine the best from the PDA, the best from the phone and create what we call the smart phone, which is code named Stinger at Microsoft.– And when you combine two products you always have a challenge. You are either going to have a product that nobody likes or, if you are successful, you create a product that does bring the best of both things together and hits that sweet spot and that’s where we are trying to go with our Stinger product. We have demos for you of these products, probably the biggest demo we’ve ever done today, here, in Mountain View.

Throughout these product lines though, even though we have optimized the user experience for each sort of device, there are some things that we think are important to bring to all these devices. And first would be access to email, calendar and contact information, email and PIM information we call that Mobile Outlook. And when you have richer devices, say like a PDA or a smart phone with storage, they can of course synchronize with the data you have up on the servers, and you can use them when you are offline, like when you are in an airplane or something, although its going to be interesting challenge to sit in the plane and be using your phone and explain to the flight attendant,
“no, it’s really not a phone”
. I was talking to Paul Jacobs at Qualcomm. They built a phone a few years back that did this, and they actually solved the problem by — on the top of the screen when the phone wasn’t working, there is a line of text that says
“Phone Is Off.”
And I’m not sure how well that worked, so that’s one of the problems that we will have to solve going forward. So we want people to have access to this kind of information whether it’s corporate information or if they have information stored on the Internet — enable them to access this information securely and to solve problems securely and also secure Web access, where people can do e-commerce without fear of being compromised. And again, as I mentioned earlier, we can never view our devices as alone. Our devices work as part of a much broader picture of our end-to-end strategy for providing wireless solution to our customers.

And so when we think of our work on devices and our mission on devices it is really to be the clients that are tightly connected to our server offerings and our content offerings and providing great end to end solutions.

So we shipped this thing called a Pocket PC in April, and sales have been pretty good for us so far, and it turns out that every single unit that has been manufactured has been sold and they are pretty hard to find. I want to thank all of you who have gone out and purchased a Pocket PC and apologize to all of you who have tried to go out and purchase a Pocket PC and were not able to get one. It’s really flattering for us to see the Pocket PC go on sale for $1,500 on eBay as it did three weeks ago, but we’d much rather sell 3 of them for $500 each. So we’ve been pretty happy with the successes of the product, and this is a product where were really optimized the user interface rather than shrinking down Windows for this device. People that have used the device and are familiar with the device know that the Start menu is in the upper left corner of the screen, which is kind of weird because it is usually in the lower left, and why did we do that? Because on a device like that the human eye naturally goes to the upper left corner of the device. One of the other things we did with Pocket PC was put the menu at the bottom of the screen rather than at the top of the screen where it normally is on a Windows application. If you have a menu at the top of the screen, then your hand is covering the entire screen and you can’t see anything. That’s why we put it on the bottom of the screen, that’s an innovation that appeared first in the Pocket PC, and maybe we will start seeing it some other places as well.

We set up our own store for people to be able to buy accessories for the Pocket PC, which is called, which we paid an absurd amount of money to get, but anyway, so we had our three month sales hit which we reached in a few days. We launched the product in Japan too. And this is a product, which is wirelessly enabled today. People talked about wireless in the future and wireless tomorrow and adding wireless to their devices and the Pocket PC is a wireless product today in so many ways. Whether you are on a local area network or a wide area network, or on your cell phone as well. These digital phone cards which you can plug into your pocket PC — you can connect any cell phone to these digital phone cards — you combine your Pocket PC and your cell phone, and you are on the Internet wirelessly, and because we have a real Web browser in there, an HTML browser you can access any Web site, just by connecting your cell phone to your Pocket PC. Of course, if your cell phone has an infrared connector you don’t even need a wire and they work too.

This Fall we are going to see wide area solutions for the Pocket PC that don’t require a phone, so there will be an AT & T CDPD card for example, that will plug into the jacket in which you can place a Compaq iPaq. And we just announced a deal with Aether in June at the PC Expo where they will provide a Compaq iPaq and the AT & T CDPD card providing you unlimited data access for $40 dollars a month. So we are excited to see that. So there will be wireless modems available for the HP Pocket PC as well from Novatel. When you think about personal area networks as well, we’ve been working very closely with companies using Bluetooth solutions, Bluetooth cards that we can plug into the existing Pocket PCs. And that’s just the United States. In Japan we are going to have a compact flash card for their PHS network, which is faster than most of our computers at home unless we have DSL and I hope you do. And they’re going to be streaming videos to Pocket PCs with that.

In Europe, we expect to see integrated devices, which integrate devices with radios on the inside of Pocket PCs in a one-body solution where you can go and browse the Internet wirelessly. I’m pretty excited about Pocket PC, and I guest I can go ahead and tell you about it but I guess it’s a lot more interesting to show it to you, and so with that I’d like to invite Phil Holden, Director of Marketing in our Mobile Devices Division to come and show you some stuff on Pocket PC.

PHIL HOLDEN: Thank you Ben.

Let me take a few minutes for a very brief overview, and then we’ll get into the new stuff to show you. And as you can see, this product has been very optimized for an Outlook user. In Outlook today we can see our schedule, a bunch of messages, a bunch of tasks. This is totally customizable. You’ll notice we have a very cute young Luke. So you can put your family here. This is not my child. I borrowed a child for the demo. So that’s the main sort of interface here. You’ll notice the flat looking field, real Web like. You have a calendar, basic stuff, agenda view; I can look at a complete year. That’s pretty interesting but that’s standard. You can go to maybe the contact database. Pretty full, database, some 1,100 records here. So, you’re never going to run out of space. I have the ability to search; I’m going to search on the A. It’s going to bring up both first name and last name. These are the contacts here, all of their details here, and basic information, that’s obviously a personal contact. But if I look up here — Scott — there’s a wealth of information, so for those of you who have work information and home information — mobile email names, mobile phone numbers — so it’s very rich in terms of its database. Email is obviously key. This has been designed to be a great Outlook companion. There’s a bunch of CNET news here, let’s go maybe to the top here, — there’s a message from Kerri. There was a lot of feedback from our customers during the design process. You don’t just want the email header. You want the full text and the ability to take action. If someone sends you a Word document, you want the ability to view that. You notice you’ve got some images here. Here you have a house in Seattle. Slightly cheaper than you folks down here, I must admit, but don’t leave; otherwise, the prices go up. Here we have Excel spreadsheets. So you have full functionality. You can do your Excel calculations and so forth.

What we’re actually doing here is working on the fly. The key factor in mobility, especially as broadband networks happen, is the ability to work offline and online, to be productive when I actually have some spare time, like waiting in an airport lounge. Clearly the Web is one of the most important attributes, and here in Explorer is a very functional browser — Jscript, SSL for security, full XML support and that proves really really important when we talk about .NET. Maybe let’s check out MSN Mobile. I am now live. It’s actually got a little antenna. This is a Compaq iPaq, it’s shipping on the market today. I’m using the Sierra wireless modem. Service is approximately $40 bucks a month, all I can eat wireless access. So I am now live on the Web. Obviously news information. Clearly, you want to do something useful so maybe I can check flight details. I’m going to browse, see if I can get some flight information. Select the carrier, flight number. Hopefully we’ll get some flight information. Flight cancelled (laughter).

Here’s a Web page that I spend a lot of time on. If you’ve noticed I have a slightly odd accent. BBC Home page. And now you start to see the full capability of the rich graphics, the ability to go up and get not only text information but also graphics information. We’re actually bringing down the text so you can read the story, and then we’re bringing down the images. We do not want to waste precious time moving down the images. And then, one of the most important factors from a Web standpoint is e-commerce. I’m sure maybe some of you have spent some time at Amazon or ebay and got full support. Let’s go to the books area, maybe go find new book. I’m a few weeks behind but I’m actually going to buy the Harry Potter book. I’m just going to type a password that will quickly change after this demo. There it is, one click.

One of the interesting things with this device, because it is so mobile, is the ability to actually listen to music. I’m sure a number of you have spent some time, maybe on some Web sites like Napster. Here I’m actually using Windows Media, which has a number of benefits. Not only is it secure but its also half the size. The ability to listen to music, what I want to play maybe. For most of us, music is not a primary task; you tend to do it while you are doing other things. So maybe you want to start a new message session. Notice we listen to the music in the background. So we would have a bunch of really practical useful wireless applications. This is obviously a user interface application. But people actually use line of business applications.

There you go. With that, I’ll turn it back to Ben.

MR. WALDMAN: Thanks Phil. You know, one of the really fun parts of my job is having this Pocket PC with me and using it in front of people. And people say to me
“What is that?”
I can show them what I do on there, what Phil showed us, and they say,
“I didn’t know a device could do that. I thought you could just do your calendar and your mail contacts.”
And its something that gets people really excited and that’s even before we added wireless capabilities to these devices.

I talked earlier about focusing on three different form factors. The wireless PDA, then the feature phone then the smart phone. So in the feature phone space we have a product, which is called Microsoft Mobile Explorer. This is a product, which is operating system independent; it sits on top of different phone operating systems, and most importantly offers rendering in both HTML and WML. So it supports both WAP content and HTML. We’re very big fans, big supporters of Web standards. I think that by supporting HTML inside our microbrowser, we enable users to get to a much broader set of content out there. Obviously, it positions us well for the Japanese market. Going forward as we see a convergence between WAP standards and other Internet standards, I think it will put us and our customers in a very powerful and important position going forward.

Another key attribute of our microbrowser is enabling key content to corporate email or PIM data while connected. And we have a number of partners with whom we’re working. One of our best partners is Sony. Sony has chosen Microsoft Mobile Explorer as the foundation for its feature phones. There’s a phone right now in Europe called the D5 which is just getting rave reviews, in fact they’re having as hard a time keeping them in the stores as we are having with the Pocket PCs here in the United States. And so we are very excited to be working closely with Sony and they have that product available. We can’t demo that for you today because it only works on European networks, not US networks.

We’ve also announced our relationship with Ericcson which will soon be using Microsoft Mobile Explorer software in its future phones going forward; Last month in June actually we announced a new partnership with Samsung using both our feature phone and smart phone software for future products. And a recent milestone for us is 1 million users in Korea are using Microsoft Mobile Explorer on phones with the carrier KT Freetel, another close partner of ours.

So, where some people will want to use a PDA and some will want to use a phone and ultimately it really depends on what sort of things people want to do. You have people that are very voice sensitive. They say,

well I really want to optimize for a small device. I really don’t care if the screen is too small, I rarely look at data, I rarely check email so it’s important to me to have a small phone. You may have other people on the other hand who are very data sensitive, I want a big screen I want it to be very easy for me to enter information and to see information so I’d really like to have a PDA. And some people will carry both of them and use the phone to get onto the Internet while they use the PDA.

Another area that we are focusing on is trying to deliver the best of both worlds, and that’s what we are trying to do with the Stinger smart phone. With the smart phone, with the software, first of all we are trying to create a device, which is a phone, primarily with no compromises. If it doesn’t work as good as a normal phone, nobody is going to use it. At the same time we want to provide a screen that’s large enough to actually do some interesting things, where they can read significant amounts of email, where they can actually browse the Web. You have to make a device that’s easy to configure and easy to set up. Of course, we have to prepare a user experience, which is optimized, for this sort of device. Think of the way you use a cell phone today. Most of the time you use one hand, you press the numbers and they give you some sort of tactile feedback. It’s very different from how you use a PDA. With a PDA you take out a stylus and start using a stylus to write on the screen. The question is: what are we going to do with a phone? With the phone, people really do want to have one-handed input, and if we force them to use the device as a PDA and take out a stylus and start writing on the screen, that’s not exactly what people are going to want, and that’s not a device that is going to be successful. Instead of telling people how we think they should use a device, by doing research we are trying to understand how they want to use that device and we settled on one-handed input as the basis for entry for our Stinger device. We want to enable a whole range of scenarios from this device, all sorts of corporate information on the Internet, on the intranet, playing games of course, unified messaging, respond to an email with a voice call, enable those sorts of scenarios. And of course enable electronic commerce once we know where people’s location is or once the servers know where the location is. All sorts of different things that become possible especially with a Bluetooth radio on these devices. So, we’ve been working of this device for quite a while for I would say maybe a year or two at Microsoft. About two months ago we announced a partnership with Samsung where they announced they will be using the software as their foundation for their future smart phone efforts where they will be shipping these phones commercially next year. But we thought it would be fun instead of waiting for next year but to give you a demo of the product we have today, the smart phone, and for that I will bring Phil up on stage.

PHIL HOLDEN: So what I have here gentlemen and ladies is very early hardware actually built by a number of engineers in our labs. Now you notice a very similar screen. What we’ve basically done is take a lot of the components you saw in the Pocket PC – the calendar and contacts, a lot of the browser functionalities. And we wanted to find a rich browser, something that does support secure transactions XML and JScript and try to move it across in this phone platform. At the same time we really, really have to optimize for the phone usage. What I’ve got here, this is our basic working model.

A relatively small phone and you’ve got a large graphical screen with small keys. We’re working with the hardware manufactures to basically design these. This particular one is color; we are also working very much with a black and white flavor as well. Let me go back here and this will actually work over the MSN Network. Lets maybe see if I can find some other Websites to hit. This is live. Remember my favorite Web site here, it just improved the same type of experience from other phones. Again bringing down all the text as it comes down. So, that’s the basic capability. Lets go to the home page here where we have the ability to provide the carriers the ability to customize their home screen and one thing that is really important is to have these folks their own type of brand awareness here.

And this is just some basic customization screens that we’ve here built up this is demo ware at the moment. I think maybe go to programs, maybe go to my contact database, now to Chu who is not expecting a phone call but he is actually one of the development managers on the project and now as you can see. We give you the ability to sort of integrate that pinpoint that functionality with voice capability, the ability to really do some smart things in terms of caller ID and the ability to integrate your calendar with your phone. For example, if you are in a meeting one of the most annoying things is someone else taking a phone call. Well, if you are in that meeting, you have access to your calendar and from the technology standpoint you can say, ‘Hey, I’m in a meeting. Don’t bother me,’ and put the phone into an off mode or vibrate mode. Anyway, I’ll be around a little bit later on to show you more of this phone technology and I will toss it back over to Ben.

BEN WALDMAN: So, if you look at this thing it’s really not much bigger than the phones you carry today. But the screen on here is so large that you can read email on it. You can really browse the Web on here and that is something that is something new and I think cool. Pretty cool. So, those are the three devices that we are working on. And I mentioned we are working on the device phase and service phase and also the content as well. The important thing here is not that we just have assets and are bringing value in each of these three different spaces. I think what is unique about Microsoft here is the way we are going to integrate these things together. Extend. Connect. And Innovate.

Where we can extend information from MSN or from Exchange or from a million mailboxes running Microsoft software to the carriers and enable the carriers to have access to this information and build on top of these products. We want to connect information from one end here to multiple ends here. You get information not only on one device but on multiple devices depending on where you are and what devices you have on and who the information is from and what sort of rules you have set up for your content. And of course we think when we do this it will create the same sort of virtuous cycle that we had for Windows and Windows applications where the application developers would tell the operating system. ‘Well, if you could just add these features to the operating system it would be applications,’ and then they would add them to the applications. And the operating guys told the application guys, ‘Well, we put in these great new things in the operating systems’ and they tell all the application vendors in the whole world about the ISPs — how they can make their applications better — so we hope this kind of synergy and virtuous cycle will appear in the wireless space as we have content built on top of servers which is supplying data to devices. And again, we think that this is someplace where we think no one else is doing this in the industry. In fact, even in the device place we are unique as well. You’ll see some people building new software for feature phones, you’ll see some people doing software for PDAs and some people doing software for smart phones. Microsoft is the only company in the industry doing software across all three device families. So, when I talk to customers about this sometimes, we talk about values that we can add, be integrating systems. The question that immediately comes up is: does it all have to be in all Microsoft solution? Do we have to have content in Microsoft, servers in Microsoft, devices in Microsoft? I personally think that would be great, but not everyone does and so, because we are supporting standards in all of these areas, these products are talking to each other via standard protocols, you can replace any Microsoft component here with components from other companies. Instead of Exchange you could have Lotus Notes, instead of data from SQL server you can have Oracle data, instead of a Pocket PC you could have a Palm device. So, different sorts of devices of Microsoft and non-Mircosoft will work together, but we think at Microsoft we will add a lot of value by making our solutions tightly integrated, by introducing products, for example, at the same time so that the devices take advantages of the capabilities of the services built upon what we have available on our platforms. And, that’s certainly an area of focus for us and a place where we think we can differentiate from other people. I mentioned earlier how the space was different from other PC space because of the role of carriers. And other reason why this is a different area of business for us the kind of partnerships we are having and the partnerships we are forming with people We want to create this platform for mobile servers. We’re working very closely with carriers. We’re currently trialing Airstream and a number of network carriers getting their feedback and using this feedback to design our product.

We’re exploring news business models with them as well seeing how we can take shared risks and enjoy share of awards. We’re also creating these organizations that are called Mobility Solutions Centers around in the US, in Europe, one in Japan and one in Asia. The idea is that we are going to have people in them working directly with carriers and with corporate customers to design custom solutions for them. It could be a matter of going and giving them the software and saying you go and do something with it, but we’re going to be working with them to understand their needs and have Microsoft employees working with them to create custom applications services which are built upon Microsoft products to help them differentiate their offerings from those of our competitors. It’s pretty new for us.

We have many, many deep relationships in place with network operators all over the world. Now, I won’t go through and read this list but as you can see, it’s quite a long list there. And, we’re also have a number of joint ventures with Wireless Knowledge, Qualcomm, joint venture with Ericsson, and Mobimagic which is a joint venture we have with NTT in Japan. All of which are designed to think about how we can provide access to wireless corporate information wirelessly.

So, as I mentioned earlier we have products and services that span all three areas. And the way to compare this is I’ve put on some of our competitors and as you can see many of them have offerings in the content area or the server area or the device area, or sometimes in two areas in the case of IBM and Oracle. We believe that Microsoft is the only company that has assets that span all three of these areas. And we think by integrating these assets, we can really deliver some unique value to our customers.

So, when you think about this, what you think about this is great, great mobility. We can deliver these great solutions to customers. We can make these great scenarios. We’ve been thinking about making it happen. How people use these devices to communicate with anyone and act on information. And that’s a great vision. But at Microsoft we actually have a broader vision. We think that we can do work to change the nature of the Internet itself, and make the Internet itself a much richer place.

When you think about it, today I talked earlier about how we’re so excited about the personal computer being a tool which empowered people to enable them to do things they could never do with a mainframe. If you think about the Internet, in many ways it’s very similar to what the landscape looked back in the mainframe era. You have data stored of in central servers, which are accessible through persons who are guarding that data. The processing occurs up on the server in a matter very similar to time sharing as it occurred in the past. Worst thing of all is all these servers don’t event talk with each other. Your calendar running on one server, someone’s calendar running on a different sort of service, those things can’t even communicate with each other through a common language and speak because there is no notion of what a calendar is. They have no rich standard way to communicate with each other. What’s happening on the browser side, the client’s side, the browsers are almost like dumb terminals. We’re able to look at pictures as they come down, but there is no understanding of the data actually means. We’re just bringing the data. No knowledge that a phone number is a phone number. An address is an address.

And while we can view information, it’s very difficult to edit information, analyze information or manipulate information that’s on the Internet. It’s a lot harder to do that than information that is stored locally. If you think about how personalization is working, typically it involves entering the same information on many, many Web sites all over the world that really have no idea of where they will be giving that information who they’re going to be sending it to if the company goes bankrupt or that sort of thing.

And we think that we can make the Internet a lot better. We can take it to the next level with our .NET initiate. The .NET initiative, which we first announced at Forum 2000 in June at Microsoft, is geared to make the Internet better, taking it to the next level enabling computers, devices, and services to work together. To deliver broad, rich solutions, right now the only point that’s common when you have different services working together, the only point that’s common is the end user. We have to figure out how to integrate all those things together. If we can have these services talking to each other and talking to the right devices and working together, we can create a much better experience for the end user.

The key part of this is the support from XML and Internet standards. XML is a standard way in which we can describe data. And once you understand how to describe data, the services can all begin talking to one another and working with each other. Data will be edited and distributed and shared by different services. Finally, we think that with our work in this space we can deliver value not only for consumers but for businesses and developers as well. Providing some services ourselves and by providing a platform where others can build other services as well. There’s a lot I could say about Microsoft .NET, but that’s another topic for another session and a future talk.

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