Microsoft Announces Strong Results Driven By Windows 2000 Professional and Windows Me

REDMOND, Wash., Oct. 18, 2000 — Microsoft Corp. today announced income before accounting change of $2.58 billion for the quarter ended Sept. 30, an 18 percent increase over the $2.19 billion reported last year. Revenue totaled $5.80 billion and diluted earnings per share before accounting change were $0.46. Diluted earnings per share for the Sept. 2000 quarter were $0.40 after including the required adoption of Statement of Financial Accounting Standards No. 133 (SFAS 133),
Accounting for Derivative Instruments and Hedging Activities.

“Results were solid across all businesses, led by accelerating deployments of Windows® 2000 Professional in the business sector and Windows Me in the consumer arena. We also continued to make great progress with our server products, proving our ability to deliver mission-critical solutions to customers such as Lycos, FreeMarkets, RadioShack, The Home Shopping Network and GMAC,”
said John Connors, chief financial officer at Microsoft.
“While we remain guarded about worldwide economic conditions, we are extremely enthusiastic about our Windows 2000 generation of server products.”

At Microsoft’s Enterprise 2000 launch on Sept. 26, Microsoft President and Chief Executive Officer Steve Ballmer, along with leading enterprise partners and customers such as Compaq Computer Corp., Intel, Dell, Hewlett-Packard, Unisys, Andersen Consulting and IBM, outlined a new generation of industry-standard hardware, software and consulting services to build and run today’s most demanding enterprise applications. At the event, Microsoft demonstrated cutting-edge solutions addressing the emerging opportunities presented by the new digital economy and announced eight new server applications, including Microsoft® SQL Server™
2000 and Exchange 2000 Server. Microsoft also launched Windows 2000 Datacenter Server, the most powerful server operating system ever offered by the company. These products, comprising the .NET Enterprise Server family, provide a rich set of building blocks for quickly building, deploying and managing integrated, Web-based solutions.

“We are breaking new ground with the Windows 2000 platform and the .NET Enterprise Server family,”
Ballmer said.
“Microsoft is creating end-to-end solutions for partners and customers to win in a changing industry, where business agility and the use of information technology to drive revenue and profit growth have become critical.”

In early October, SQL Server 2000 achieved a record-breaking TPC-C benchmark, delivering 505,302.77 transactions per minute (tpmC) on a 24-node Compaq ProLiant 8500 cluster of servers running Windows 2000 Advanced Server. This result represents the best-ever published TPC-C performance number, and at a price/performance ratio of $20.68/tpmC, is a third lower than the closest competitor.

On Sept. 14, Microsoft announced the availability of Microsoft Windows Millennium Edition (Windows Me), the new operating system for home PC users. Windows Me delivers exciting technology advancements in the areas of digital media, home networking, gaming, online experience and PC health.

During the quarter, MSN® , the Web’s largest network with more than 210 million unique users worldwide, announced several key relationships with industry leaders. MSN and Sprint PCS announced an alliance to bring MSN Mobile services and content, such as the MSN Hotmail® Web-based e-mail service, the MSN Messenger Service, the MSN MoneyCentral™
personal finance online service, MSNBC.com and Expedia, Inc. to Internet-ready phones. MSN and Compaq Computer Corp. announced the availability of the Compaq iPaq Home Internet Appliance, the first MSN Companion device. MSN Companions are a convenient and affordable way for users to get connected to the Internet. Also, MSN and RadioShack announced MSN High Speed broadband Internet access via DSL or satellite available through the 5,600 Microsoft Internet Centers at RadioShack company-owned and dealer stores.

This press release contains statements that are forward-looking. These statements are based on current expectations that are subject to risks and uncertainties. Actual results will vary because of factors such as PC shipment growth; technological shifts; customer demand; competitive products and pricing; product mix; product ship schedules; life cycles; terms and conditions; litigation; and other issues discussed in the company’s Form 10-K and other SEC filings.

Founded in 1975, Microsoft (Nasdaq
“MSFT”
) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software – any time, any place and on any device.

Microsoft, Windows, MSN, Hotmail, and MoneyCentral, are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries. Expedia and Expedia.com are either registered trademarks or trademarks of Expedia Inc. in the U.S. and/or other countries.

The names of actual companies and products mentioned herein may be the trademarks of their respective owners.

For more information, financial analysts only:

Carla Lewis, senior director, Investor Relations (425) 936-3703

For more information, press only:

Caroline Boren, Waggener Edstrom, (425) 637-9097, carolineb@wagged.com

Katy Fonner, Waggener Edstrom, (503) 443-7000, kfonner@wagged.com

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass/ on Microsoft’s corporate information pages. Shareholder and financial information as well as today’s 2:30 p.m. PDT conference call with investors and analysts is available at http://www.microsoft.com/msft/ .

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