Steve Ballmer Speech Transcript – Pocket PC 2002 Launch

ANNOUNCER: Ladies and gentlemen, please welcome the CEO of Microsoft, Steve Ballmer.

(Applause.)

STEVE BALLMER: Well, thanks. It’s a real privilege and pleasure to have a chance to be here with you today. We had to really think hard about this launch event, and we’ve got a lot of excitement for the product, but it’s really the first event we’ve done since the tragedy of Sept. 11, and frankly a little reflection on our part even as to how to go forward, whether to go forward. Our company’s been very active in trying to help in the small ways we can. Our customers move on and get back to business. There’s nobody really who will be able to help the families of people who were lost. We’ve been trying to do our best, so to at least help the businesses get back engaged, to get up and running at the Pentagon, back in the financial centers. There’s been a lot of work to do. We’ve been involved with the Red Cross helping them with their Web site and a variety of other projects, which are very important today and which will continue I think for the next certainly several weeks and months and which are very, very important to us.

With that said, there’s been a real push I think from President Bush that people get back to business and not let the tragedy of September 11th continue to affect everything we do every day. We need to be mindful, but we need to get on with business. So today we will go ahead and launch the Pocket PC 2002, which we think frankly is one of the most exciting product releases that we’ve had in a while and certainly it’s my great pleasure to be the person who gets a chance to set it up for you and really introduce the team that has led and build this exciting device.

It’s certainly clear to us and has been over the last couple or three years that while the PC will continue to play an incredibly significant role in computing and information access that mobile devices will become of increased importance, devices that fit in your pocket. People have laptops. Next year we’ll be introducing the new tablet form factor, PC, laptop type device, but there are times, there are places, there are venues where you really want something that just fits in your pocket, lets you get a quick look at information, communicate quickly with somebody. If you want to share a picture of your kids or a video of your kids with a friend, you want to have a little music with you and you don’t want the full device, you want something that fits right here that you can carry conveniently and manipulate very, very simply. And whether it’s for accessing information, for communication, for entertainment, for enjoyment, there’s a real role for that category and class of device.

And as we’ve evolved our basic mission statement from a computer on every desk and in every home to information any time, any place on any device, we’ve made a serious and really now fairly sustained over a number of years set of investments in mobile devices.

We’ve thought a lot about the problem. We’ve learned a lot about the problem. And we’re really bringing much of our very, very best software talent, product thinkers, product conceptualizers to the mobile space. And we think there’s a clear trend going on.

Mobile devices — handheld, I should say, devices really started out pretty much as single-function devices. My nine- and six-year olds think that the mission critical handheld device is the gaming machine. There are people who carry cellular phones and have them constantly plugged to their ear. The pocket organizer has certainly been a category that developed rapidly. Handheld music systems playing MP3s and other forms of music and messaging systems, pagers, devices like the Blackberry from RIM; all of these devices have been very good at doing one thing or another, and we really see the future for these mobile devices as being a single integrated device that fits in my pocket, that is my phone, that is my PDA, that is my music player, that lets me play games.

I think there will be, and certainly we’re investing in three critical form factors, physical hardware form factors, but each one of these needs to be a general purpose computing device that can let you be entertained, communicate by voice or other means, access information.

And we think about the future of a device that looks like a cell phone; we’ve announced some work in that area and are busy at work on that.

We believe certainly in a little bigger form factor, the PDA form factor and we’re going to show you our next generation of that product today.

And we’re very gung ho on the future of the PC as a much more mobile device oriented form. We call that the tablet PC, something about this size with an add-on keyboard, with a hard disk that really runs all Windows applications.

For some people one device or another will make more sense. Many people will own more than one of these devices. But each of the form factors has a particular role. All of these machines will have built-in connectivity. All of them will have general purpose platforms that let you run games, that let you access information, that give you connectivity to your PC or to your enterprise network and that let you communicate in a wide variety of ways.

That’s the vision that we’re pursuing. That’s the vision in some senses that we talk about under our .NET platform, a vision of devices and information connected very seamlessly and in a way that’s very simple for the user because the only need to have one device to do a very broad range of functions.

In the context of those form factors and the notion of those form factors having a general purpose nature, you also have to ask the question, what’s going on in terms of connectivity for mobile devices. And here we can actually think about laptops, tablets, as well as cell phones and PDAs, because they’ll all participate in the wireless networking phenomenon. A lot of the discussion in the world is about what’s going on with the wireless phone companies and the new data networks that they’re building up, the so-called 2.5G and 3G networks that we get a chance to read about all the time.

Here’s a forecast for Yankee Group of the total number of subscribers, and that includes phones, that includes laptop users, that includes PDA users, but the total number of users who will be connected to these networks over the course of the next six or seven years, and what you see is very strong growth in 2.5G and 3G networks, which really are data networks.

And you can really think about using a PC or a PDA or a phone to access rich information off the Web, off your corporate network, off of your PC, and you’ll see us and us with partners bring versions of not only the phone, but also the PDA and the tablet to market that really have built-in support for these kinds of networks. In fact, we’re launching today in the UK with O2, which is the wireless division of British Telecom, we’re talking about a PDA device that has a built-in cellular radio and will operate against their GPRS or 2.5G network. So we’re very excited about that.

The other wireless networking phenomenon that I’m very excited about and our company is very excited about is the work that’s going on with 802.11 and with wireless LANs, and this shows by 2005 perhaps 150 million devices that will be connected over very broadband wireless networks. Today, if you come to the Microsoft campus, we have an 802.11 network in place. I can roam around our network anywhere with a device, and I have a high-speed connection to the Internet, to corporate information. I can have that on my Pocket PC. I have that on my laptop PC, no cables, no configuration.

It’s very interesting for the corporate setup, very interesting for the school setup, but also very interesting for public buildings. This building, whether it’s a year or two years or four years from now, this building will have 802.11 connectivity and you will all be able to use it.

As I see people busy scribbling notes, you will be online, high-speed when you’re in a building like this or when you’re in a Starbucks store or when you are in a hotel or a convention center. And in some senses the future of these mobile devices is to have connectivity built in that lets you take advantage of 802.11 when it’s there, because it’s higher speed, but then lets you roam to these GPRS or 2.5G networks when you’re out of range of an 802.11 hub.

So the networking infrastructure that lets us and our industry and our partners do exciting applications for all classes of mobile devices will really expand.

In some senses I think the PC, the laptop, the tablet, those devices, they’re importance in mobility should not be underestimated. Even though we’re here to talk about Pocket PCs today, I actually think that the number one consumer for a while of broadband or of data access, wireless data access will be the PC, but it will be rapidly approached by devices like the Pocket PC 2002.

The other thing that we’ve seen go on in this mobile device market, particularly the pocket devices is a real transformation in the way people think about using the devices. If you go back a year or so ago and you ask companies, “Are there applications other than basic personal information management, contacts, appointments, et cetera that you expect to have people use on top of their pocket-based devices?” you would have had maybe 30 percent say yes.

The forecast from those same people for what they’ll be doing by 2003 is 68 percent say, “Yeah, I think I’m going to have applications other than PIMs.” If you ask them what kinds of applications they’ll have, first of all they think of alerts. If I have a device in my pocket, I want to be notified when something important happens. The stock market, the NASDAQ’s up over 100 points, alert me. If the NASDAQ is down, too common these days, don’t alert me or whatever the case may be. People want to have an ability to describe what information they want to get and be alerted directly to their pocket.

People think about Web access, field service, sales force automation. When I’m out on a day like today, I don’t have hands to carry a lot of things. On my Pocket PC I want all the notes, I want all the contacts and call reports for the customers that I’m going to see during the course of the day; very important kinds of applications.

So the thing I put in my pocket has got to do more for me as a professional, whether I’m working in a small business, whether I’m working for Microsoft, whether I’m an independent practitioner, it’s got to do more for me. It’s got to let me take more information with me and access more information than just my contacts and my appointments, et cetera.

We’ve been at this Pocket PC concept, small computer, palm-sized device category for a while and when we launched our Pocket PC 2000 device a year and a half ago I kind of said some of the same things, but the trend continues. Our early efforts were excellent in terms of the underlying technology and they frankly fell way, way, way, way short in terms of the actual consumer experience. People were saying in ’98, “The Palm Pilot has new rivals, but no competition,” and, “Why does Palm keep beating CE hands down?”

But we didn’t give up; we kept after it, and by ’99 we have the following type quotes: “Handhelds that could use a hand, Microsoft CE operating system doesn’t allow enough design freedom.” That was kind of our version two generation. We still knew we had the right plumbing. We believed very much in the product concept of an integrated general purpose device, but we didn’t quite have it all together.

With Pocket PC 2000, which we introduced now 18 months or so ago, we get quotes like this from the Gartner Group: “Microsoft is certainly down right now, about as far down as they can go.”

And now we get quotes from the same people at Gartner like this: “Palm devices have to get closer to offering what Pocket PC devices can now do.”

The progress that we’ve made in the market, and the progress has come the way all marketplace progress has ever come from our company, we continue after a product concept. If we don’t get it right, we listen hard to customers, we improve the product, we refine, we usually get the plumbing and infrastructure right at the start. It’s taken us on some products, including Windows, a little bit longer to get right the user interface and the user experience, but I think we’ve really, really come just an incredible distance and have, frankly, a fantastic product.

The Pocket PC 2000 was that but the Pocket PC 2002 in some senses is even better, is even stronger a device and that’s what we’re going to show you and talk to you about today.

From a market share position we’ve also come a long way. In the last roughly 18 months we’ve sold two million — two million Pocket PCs. We probably were outsold by the market leader about 8 to 1 at the time of the Pocket PC 2000 launch. Today we’re outsold maybe 1.5 to 1.8 to 1, something in that ratio. And in Europe actually the Pocket PC outsells all Palm OS devices combined in Europe today, which is for us an accomplishment of which we’re particularly proud because the European market has been so active and forward looking as it comes to the use of handheld and wireless type devices.

And we think that momentum will continue with Pocket PC 2002. It’s a device that in some senses feels to me like Windows 3.1 felt to Windows 3.0. 3.0 was a breakthrough but 3.1 was where we really buffed out the edges and really, really, really just fine grain sandpapered the product. It was just exactly what it needed to be.

Now, this version of Pocket PC 2002, and Ben Waldman, who leads the team, is responsible for the development, will have a chance to show you all this, but first of all it’s just a better Pocket PC. We’ve refined the user interface. We’ve made it skinnable so it’s friendlier. We’ve built in better support for video and for music. We’ve built in instant messaging type connectivity to the basic Pocket PC experience. We’ve improved some of the kinds of little things that really people want to see in the Organizer and the spreadsheet, in the way e-mail works. You can synch all your folders, not just a few of your folders with the new support.

We’ve really pushed on this notion of information connectivity and support for the enterprise; better security, VPN capability, direct synchronization of e-mail with an Exchange server. You don’t have to put the PC in the middle. We built in the client for terminal services so you can literally run any PC application or at least view any PC application on the Pocket PC, works so that any virus vendor can add in their capability into the Pocket PC; and I think the richest connectivity support of absolutely any handheld device, whether that’s 802.11 or wide area WAN technologies, Ethernet, infrared, Blue Tooth. I mean, really the Pocket PC 2002 is in some senses I would say a connectivity machine.

It’s a product that I have really high expectations for. Those of you who care about financial stuff, I won’t comment on what that means. People say, “Are you worried about introducing exciting new products like this one and XP and Xbox in a time of economic difficulty?” My answer to that is, “No, I’m excited to introduce these products so they can start helping people improve their lives, improve their productivity,” and that time frankly for these products is now, and I think the excitement and energy of seeing these new products, it will do its fair share to get people intrigued and interested in buying them.

What I thought I’d do now is actually show you some of the Pocket PC devices that are being introduced today. These are all or most of these are now available at retail; you can go buy Pocket PCs.

We have here a showcase of some of the Pocket PC devices that are being announced: A new device from Casio that has built-in dual expansion, CompactFlash and secure digital, USB part in the cradle;

the new Compaq iPAQ, which has been the best selling of these devices. In fact, the revenue on the iPAQ actually has surpassed Palm’s revenue. It’s a higher price point device, even if the units are somewhat lower.

The new HP Jornada, a very nice device, with the traditional HP cover, removable battery and you can get an optional battery pack that makes this thing last 28 hours.

A new OEM for us, very excited to have Toshiba as a partner, and they’ve been always a leader in doing mobile devices; we’re pretty excited about having them on board.

A new device from Intermec, very “ruggedized” for industrial applications;

From Symbol, who’s really a leader in providing a wide range of handheld devices to the retail and distribution and other industries, pretty exciting;

And a new partner of ours, Audiovox. Audiovox is really focusing in on building in support for wireless networks and you’ll see the Audiovox system available soon in some of the Verizon stores and sold in conjunction with, in fact, Verizon wireless services.

Here are two of the new devices that you can see, the Cassiopeia and the new iPAQ; lighter, nicer form factors, really I think quite incredible devices.

And these are the devices we want to share with you today. So I’d now like to invite on stage Ben Waldman. Ben is the design leader and conceptualizer of this stuff, and Ben’s going to take about 20, 25 minutes and really show you the Pocket PC 2002. Please welcome Ben.

(Applause.)

BEN WALDMAN: Thank you. When we first introduced the Pocket PC about 18 months ago, a bit of a debate ensued. We and our hardware partners thought that people wanted to be able to do more with a handheld device than simply organize their contacts or manage their tasks, and so we worked hard to create a combination of hardware and software that would enable people to have rich e-mail with attachments, be able to browse the Web, be able to listen to music. We sought to create a rich development platform, which would allow people to create rich applications for the enterprise space and the consumer space.

At the time, a lot of our competitors ridiculed us. They said, “Nobody wants to read Word or Excel documents on a handheld.” They said, “Nobody wants to listen to music on a handheld.” They said, “Nobody needs a Web browser device.” They said, “Nobody needs wireless connectivity, 802.11 connectivity from a handheld.”

Well, it’s now 18 months later and there’s no longer any debate on these issues. Our customers have spoken loudly and clearly and they’ve indicated that they want more than just a simple, limited functionality organizer. They want more than just a date book with batteries, that essentially our original premise was correct.

Now throughout the industry we’re seeing a wide variety of companies rushing to provide this functionality to end users, particularly those in the enterprise space.

Now, we came to our belief not because we have any magic crystal ball, but because we spent a lot of time speaking with our customers. Over the past several years we’ve literally spoken with thousands and thousands of customers, those who use PDAs and those who don’t use PDAs, those who use Palm and those who use Pocket PCs, and we’ve asked them what kind of functionality they wanted to see in a handheld.

Now, one thing that we heard pretty loudly and clearly was that people use these devices both at work and at home, and so we knew that we had to create a device that spanned both worlds, that was an ideal companion at the office and a great companion at home, and also provided a bit of fun for the down time in between work and home. And this is research, which has provided the foundation for the work, which we’ve done inside of Pocket PC 2002.

As Steve said, we had three goals with Pocket PC 2002: First, we wanted to address our top customer requests and make a great device event better. And we’ve done that by enhancing the user interface, extending the functionality of the applications on the device and also adding several new applications to the device.

Our second goal, as Steve said, was to extend our lead in the enterprise by providing the functionality that our enterprise customers require. Pocket PC 2002 has the best security, has the best networking and has the tightest integration with Microsoft Exchange and Microsoft SQL Server of any PDA available today.

Our third goal again was connectivity, to make Pocket PC the most connected device on the market today, not only with the richest set of connectivity options, but with software on the device optimized for wireless connectivity.

Now, I’d like to spend a few minutes showing you some of the features in Pocket PC 2002. If you happen to see a feature, which happens to be your particular request or which you think is particularly interesting, you’re welcome to applaud or cheer or even stand on your chair. (Laughter.) Well, no, don’t stand on your chair, please. People will be mad behind you.

So why don’t we go and take a look at the product.

Well, the first thing we did is we began by taking steps to make the user interface more intuitive and more fun. You’ll notice that at the top of the screen we have a row of icons and those icons are visible no matter what application you’re using on the Pocket PC. With those icons you can present your status information. If I tap on the time, for example, you can see the date and what my next appointments are.

And we can also use it as a quick way to use a single tap of the stylus to access common functionality on the device. For example, if I want to change the volume, I can just tap on the volume controls on the device and you can go see that I can now change the volume just with a single tap of the mouse.

The volume control, and, in fact, the time indicator appear in what we call a bubble. Bubbles are a new user interface element that you’ll see throughout the Pocket PC. We use them to let you know when important information is happening, when new e-mail has arrived or a new meeting is about to start or in this case when someone tries to beam you a file. In this case, someone tried to beam us a file. We beam up the bubble and we can tap no and say that we won’t go ahead and accept that beam.

We’ve also sprinkled animations throughout the new Pocket PC user interface both to add some more fun, but also to help with some discoverability issues and make some features more discoverable. For example, if I tape on the Start menu, you can now see that the menu slides into view rather than just appearing, so that’s kind of fun.

We also in the last version of Pocket PC had a new feature called Tap and Hold where you could tap and hold on any user interface element like this task here and go and have a list of options available for things that you could do on that item.

Now, a lot of people couldn’t find that functionality, so in Pocket PC 2002 as soon as you start tapping the stylus, it will bring up an animation to let you know that something is going to happen. So if we tap on that, you can see a little circle animation appears and you know that if you keep holding the stylus down, something interesting is going to go and happen.

We’ve also revamped the visual appearance of the entire Pocket PC and we’ve done that by changing the fonts used in the device and also redesigning every single icon on this device to look a whole lot nicer.

So if you go to the Program screen, for example, you can see that we’ve changed every single icon on the device and they look at lot more beautiful than they did before. Sometimes it’s hard to see on a screen like this, so I encourage you to go look at them and I think it’s a pretty visually stunning device.

Now, one thing that we heard from our customers too was that they viewed these devices in many cases as an extension of themselves. They wanted these devices to be personal and express themselves with their devices. So with Pocket PC 2002 we’ve added a feature called Themes, and with Themes people can completely control the appearance of their device. They can change the background of the Today screen and they can change the color schemes used on the device.

So if you go and take a look at some of the Themes, here we have a couple installed. We have a fire theme, an America theme, even a Star Trek theme. If we pick the America theme, for example, and then we can hit Okay and go back to the Today screen, you’ll see that the device completely looks different now. We have an American flag in the background and red, white and blue are the colors that we’re now using throughout the user interface.

Now, one of the other great things about Themes is that you can share them with your friends. You can beam them from one person to another just by hitting the Beam command on there, and we expect a lot of people to do that. That America theme was created with our new Theme Builder tool, which we’re releasing on the Web today to allow anybody to create a Theme.

I’m using a pre-release of this tool. We’ve actually seen hundreds of themes created already and they’re starting to appear on a number of enthusiast’s Web sites and we expect to see a lot more.

Now, Themes are great but we also wanted to give people the ability to add any digital image they wanted to the backdrop of their Pocket PC. So here I have a CompactFlash card, which I just took out of a digital camera, and it actually has a picture of Beth’s niece on here, and we’re going to go and make that the background of our Today screen. To do that, we’ll take the card. We’ll just stick it into the device. We’ll check the checkbox to use the picture as the background, and then we want to go browse all the images available on the device. We’ll go Browse this picture of Beth’s niece. She looks really cute; I’ll warn you in advance. And you can see that we have Beth’s niece as a background for our Pocket PC.

(Applause.)

You’ll notice that we automatically made this picture lighter than it actually was on the CompactFlash card so that the dark text could be seen against this picture. That’s a thing that we do automatically for you when you install a picture as your background on your Pocket PC.

I said that we wanted to address a lot of our customer requests in Pocket PC and we had quite a few. Some were big requests; some were small requests. Some took a lot of development work; some took a little development work. I thought I’d walk you through some of those as well.

One of our top requests was to enhance our contact application to allow people to do contacts by companies. So if I go and view by company, I can now see that my contacts are now grouped by company. I see how many contacts I have in each company. And I can have a hierarchical view of all my contacts organized by companies.

(Applause.)

Another request that we got was that a lot of people when using these calendar applications like to switch between views a lot, between day and week and month view, and they wanted to be able to do that with just a single tap of the stylus. So we’ve now added that capability by providing icons at the bottom of the screen so you can easily switch between different views in the calendar.

One of the biggest requests we got was the ability to enhance our synchronization capabilities in the Inbox application. With the current version of Pocket PC you can only synchronize your Inbox folder, your Outbox folder and your draft folder. Well, a lot of people told us that they actually use other folders in Outlook. They store things in other folders. They had rules that sent things to other folders and they wanted to get to those folders in their Pocket PC.

So we listened and we did that. Now you can see that I can now access any folder in my Outlook mail store from my Pocket PC and I can synchronize any folder from Outlook on my Pocket PC; finally I can go ahead and do that.

(Applause.)

Another thing people asked us for was the ability to spell check documents, so we’ve added the ability to spell check information in the Inbox application, in Pocket Word and in Pocket Excel.

So I’ll go and open this e-mail message. It looks like I have a Word attachment. I’ll tap on the Word attachment and go launch Pocket Word and we’ll run the spell checker. When we run the spell checker, you’ll see that we’ve spelled the word “series” incorrect. We’ll give you a way to change it. I guess Blue Tooth is spelled correctly. And now we’ve spell checked a document on our Pocket PC.

We’ve also enhanced the version of Microsoft Reader on Pocket PC. The new Microsoft Reader supports the highest level of Digital Rights Management known as DRM Level 5. And that’s really important, because the highest level of Digital Rights Management means that content providers are willing to put their best content out in digital format, and it also means that Pocket PCs can now read all the content that’s available in Reader format. Before we weren’t able to read the content with this highest level of security, and that was actually the majority of the content. So now with DRM Level 5 I have other books. This morning we went to Amazon.com and bought Jack Welch’s new book and are reading Jack Welch’s new book. We can do it on our PC, on our laptop and now on our Pocket PC as well with the new version of Microsoft Reader.

We also have a new version of the Windows Media Player, which not only supports audio but supports video as well, both local content and streamed content. So you can see here I’m playing some screen content, and we’ve found that this is particularly interesting to our enterprise customers with wireless networks because it means that they can broadcast company meetings and other things and stream them over their corporate network and have people watch them from their Pocket PC as well as from their laptop or desktop, even when they’re not in their office.

So we can go and play a video clip on here and you can see that it looks pretty good on our Pocket PC, once we start playing it. We got a new clip this morning, and I guess it’s not something we’ve seen.

Now, a lot of people said you couldn’t do video on a handheld device, and it was too hard, but with the combination of some great hardware — thank you, Intel, for the StrongARM processor and in the future for the next scale. I’m not pre-announcing anything. This is the StrongARM processor in the device, and the software from the Windows Media Team at Microsoft, we’re able to provide video like this.

Now, Pocket PC also contains for the first time on any handheld a built-in instant messaging client, and so we can have chats with people even when we’re not at our PC. So here on the Pocket PC we’re able to just communicate with other people. You’ll see that I can just type right out in my own handwriting. I don’t have to learn any new sort of way to write things on here.

It’s kind of interesting to demo this on stage, because usually you’re kind of nervous and you’re writing a little bit different than you would usually.

So we can see that we’ve just typed out, “Hi, Craig” on the device and Craig is responding back.

Now, if you’re lazy and actually don’t want to use your own handwriting on the device — (laughter) — we’ve included 20 built-in messages, which you can use to pretend that you’re actually paying attention. (Laughter, applause.) And, of course, this list is fully editable so you can put in any of the common replies that you happen to use.

Another thing we did is that we noticed when a lot of people were switching from the Palm to the Pocket PC we noticed that a lot of them were still more comfortable using the Graffiti handwriting recognition system rather than just writing out in plain English, so we’ve added support for Graffiti for the Pocket PC, so using the Block Recognizers you can enter Graffiti characters and it will go ahead and recognize them just fine and help people migrate to the Pocket PC.

So those are some of the things that we’ve done in Pocket PC to address our top user requests and make what we think is a great device even better.

The second thing I wanted to talk about today was the work that we’re doing for our enterprise customers, how we’re extending our lead in the enterprise by providing the functionality that they need, the functionality that’s needed by mobile professionals, by IT managers and also by developers.

When we talk to enterprise customers, the number one issue that we hear consistently from enterprise customers is concern about security. We absolutely have to make sure that all the data on the device is secure, that no one without authorization to access the device should be able to get access to that data.

And with the enhancements we’ve made in Pocket PC 2002 we think we have by far the most secure handheld device available on the market today.

Pocket PC is the only device to have had a power-on password from the very beginning. If you don’t know the password, you can’t get onto the device. Here we’re going to try to get onto the device and enter a password. And let’s enter the wrong password to begin with. And you can see that we don’t get onto the device; we don’t have the password.

We also added a little gratuitous animation there too. Do you want to try that animation again? I kind of like that one. You see that kind of gives you a visual indication that you entered the wrong information into the device.

Now we can go ahead and enter the right password and actually get access to the device.

We’ve enhanced this feature in Pocket PC 2002 by adding the ability to have a strong alphanumeric password as well. So you can enter an alphanumeric password of any length you desire and use that to protect access to the device.

Pocket PC also has an extensible security architecture and that enables third parties to provide additional levels of physical security for when that’s needed for certain applications or certain industries. For example, you might not want to allow people to get onto your Pocket PC unless they have the right fingerprint or unless they have the right Smart Card. This device right here is a CompactFlash card with a fingerprint sensor on it. And when combined with your Pocket PC, this won’t allow access to any information on the Pocket PC unless your fingerprint matches the fingerprint that’s stored on the device. It’s a pretty cool device, and as I said, there are Smart Card readers as well.

Another piece of third party software we have is software that encrypts all the information on the device. All the information on the device’s RAM is encrypted, and there’s also the ability to encrypt all the information on external hardware cards as well and do that encryption in hardware.

Finally, in Pocket PC 2002 we’ve added anti-virus hooks throughout the device to make it easier for anti-virus software vendors to create anti-virus software.

Another thing that we heard loud and truly from our enterprise customers was that they wanted the Pocket PC to be able to integrate with their network infrastructure. People wanted to be able to access network resources from their Pocket PC, for example files. If people forgot a file, forgot to put a file on their device, they wanted people to allow them to get to any network share and get that file.

So in Pocket PC 2002 we’ve built in a Windows networking client. We built that into the file explorer, so I can go and connect to any server within my enterprise, get a file, copy it off the server and then go ahead and paste it onto my Pocket PC and have it on our Pocket PC, all with just a few simple taps of the stylus, new in Pocket PC 2002.

(Applause.)

Now, with Pocket PC 2000 we allowed people to use the modem to dial up to their corporate networking using RAS, using Remote Access Service. We’ve seen though however that a lot of times that keeps you at 56k, a 56k connection. A lot of times though people have access to a higher speed connection, say a wireless connection at an access point at home or at a Starbucks, for example. And so in Pocket PC 2002 we’ve taken a giant step further by including a virtual private networking client, a VPN client directly into the device.

And that’s also important because for a lot of the cellular access, wireless access we’re seeing the emergence of packet data networks, which put you right on the Internet, CDPD from AT & T, GPRS or PHS in Japan. These connect you right to the Internet and you need a secure way to get back behind the corporate firewall, and VPN allows you to do that, and that’s built in to the new Pocket PC.

Let’s take a look at that. We have a Pocket PC here and we’d like to synchronize it back to our desktop. The only problem is that the Pocket PC is here connected to the Internet and our desktop PC is located back behind our corporate firewall in Redmond, Washington.

So what we’re going to do actually is just tap Synch. The device is going to automatically set up a VPN connection back behind our corporate firewall and connect to our PC back in Redmond. And you’ll notice that VPN session was initiated automatically because we’ve integrated this VPN capability tightly into the device.

Now we’re going to go connect to our desktop PC and do the synchronization, and when the synchronization is done we’re going to disconnect from our PC.

Now, that ability to do that is great, but what if you’re traveling and your PC isn’t on and you can’t get to your PC? Well, then how are you going to synchronize your information? Well, even if you can get to your PC, if you’re using a slow link, those of us who have used wireless links so far know that they’re actually fairly slow — GSM is at about 9,600 baud, about a sixth of the speed of a modem, and CDP Is only about twice that, a third of the speed of a modem — you’ll notice that synchronizing over a slow link is actually a pretty painful experience.

And so we’ve taken a significant step I think in addressing both of these issues. Earlier this week we announced a new product, Mobile Information Server 2002. Mobile Information Server 2002 contains a new feature called Server Active Synch, and what Server Active Synch allows you to do is have your Pocket PC connect directly to the Exchange server without going through a desktop PC.

Essentially the Pocket PC becomes a first-class device on your corporate network just like a laptop PC or just like a desktop PC and can access and talk to the Exchange server and grab all information off the Exchange server.

Another important part of our Server Active Synch is a new protocol that we’ve developed that dramatically speeds synchronization over slow wireless links. Synchronization, using Server Active Synch, is about 10 times faster than you would have seen it otherwise. We use intelligence on the device, of a smart device, and the intelligence on the server and use that to really minimize the amount of data that we send across the network, making synchronization an order of magnitude faster across the wireless link.

So if we go ahead and synchronize here, this is over an Internet connection, so it’s actually pretty fast. So that’s Server Active Synch, which we’re introducing that’s part of Mobile Information Server 2002.

One other thing we’ve seen in the enterprise is integrated communication, unified messaging where people are integrating their voice mail systems and their e-mail systems together. Of course, with the Pocket PC that’s not a problem. If I bring up an e-mail, which happens to contain a voice note in it, a voice mail in it, we can just go and play that voice mail. So we’ll go and play that voice mail.

So voice mail just appeared in my Inbox and I heard it. Of course, with a Pocket PC you can respond with voice as well. We’ll go ahead and reply to this note, say that we want to record something.

CRAIG: Hey, Vern, how are you doing? I got your message and I’ll call you.

BEN WALDMAN: We’ll go ahead and play that back and see that we’ve played the right note, and let’s go ahead and send that, and we’ve gone ahead and sent a voice note.

The last thing I wanted to show in terms of enterprise functionality is, as Steve said, a client for Windows Terminal Server, which we’ve now put on every Pocket PC. With Windows Terminal Server a Pocket PC can now become a window onto applications being run on a remote Windows server. And that’s important because a lot of enterprise developers like to write applications that are targeted for these Windows servers, for Windows 2000 or Windows XP Server, and then format them for a Pocket PC screen, and then you can effectively run those applications from your Pocket PC, even though they’re being run remotely.

This is also useful in a couple of security scenarios, because this prevents any secure data from being sent across the wire because we’re just sending bitmap data across the wire.

Craig, why don’t you show us a little bit about Windows Terminal Server?

CRAIG: Okay, so I’m going to connect to my terminal server, and as Ben said, it’s great for secure data, for line of business apps and also for people like administrators who need to do quick password resets and so on.

So here’s a full Windows 32 desktop being shown on the device, and I could go ahead and run any application that’s supported on Windows.

What I have here is a small line of business app that’s a medical application, and, as Ben said, this is great because now the secure data can be stored on the server. So I could go in here, view a patient record. I could enter some information into that record and save it, all without that information being on the device.

Once I’ve finished I can disconnect and log off from my terminal server session.

BEN WALDMAN: Thanks, Craig.

(Applause.)

So those are some of the things, some of the additions that we’ve made to Pocket PC, some of the new enhancements we’ve made to Pocket PC for our enterprise customers.

Our third area of focus, as Steve said earlier, was to ensure that Pocket PC was the most connected device out there, with the richest set of connectivity options available and also software optimized for wireless connectivity.

Now, all Pocket PCs can be expanded via the industry standard CompactFlash card. Using a CompactFlash card you can add additional memory, you can add connectivity. You can even add digital cameras or GPS receivers. And we have some of those CompactFlash cards with us here today, which I thought I’d show you.

Earlier we saw the fingerprint sensor. These are CompactFlash wired modem and Ethernet cards, which you can stick in any Pocket PC and use a modem or a wired Ethernet connection.

Now, in terms of wireless connectivity, a lot of you are probably familiar with this. This is a PC card, which gives wireless 802.11 connectivity to a Pocket PC or to a desktop or to a laptop PC.

This is something different. This is new. This was introduced by Symbol earlier this week. This is fantastic. This is a CompactFlash 802.11 card.

(Applause.)

And I don’t know how well you can see it, but this thing is tiny. This is a type 1 CompactFlash card. It’s barely bigger than the size of the CompactFlash slot inside the Pocket PC. This is about the size of the CompactFlash slot and we have this tiny little antenna, which is sticking out of the device.

I can just take this CompactFlash card, I can slide it into my Pocket PC and then all of a sudden I have wireless connectivity using this wonderful CompactFlash card from Symbol, which we’re very excited to see.

(Applause.)

We’re also very excited about the cellular options that are available for Pocket PC, both with PC cards and CompactFlash cards. We have PC cards, which give us CDPD network connections, which some of you may be familiar with. This is also a CompactFlash CDPD modem, which I can stick inside of any Pocket PC as well, which gives me access, to that wireless network with a CompactFlash card.

Later this year we’ll also be seeing cards for the GPRS network and also CDMA networks as well, giving access to those from Pocket PC.

And, of course, with this version of Pocket PC we also support Blue Tooth. This is a Blue Tooth CompactFlash card, which will enable Pocket PCs to support Blue Tooth. Some Pocket PCs contain that capability built-in, the Compaq iPAQ. Some of the new models contain it built in, and this is the CompactFlash card to add that functionality to other Pocket PCs.

We’ve also done a lot of work in our software, as I said, to optimize for wireless connections. For example, if you’re using Internet Explorer over a slow link, you may not want to download all the pictures that are on a Web page. So now with just a single tap of the stylus, you can go and decide whether or not you want to download pictures. And when you want to download a specific individual picture, you can just tap and hold, and you see that animation, and we can go ahead and show that picture on the device, or tap on the icon again and see all the pictures that are available on that particular Web page.

With this new version of Pocket PC we also support WAP content on Internet Explorer and we’ve integrated it seamlessly under Internet Explorer so you don’t have to know if you’re using WAP or whether you’re using HTML or WML or not. We’ve hidden all that information from the user, because you shouldn’t have to know about it, and that’s completely integrated inside the Internet Explorer Web browser. You typically know which pages are the WAP pages though because they don’t look as good as the HTML pages, but in any case it’s integrated into Internet Explorer.

I mentioned earlier that we’ve integrated Virtual Private Networking tightly into Pocket PC. So let’s take a look at that with Internet Explorer. What I’m going to do with Internet Explorer is go and hit an intranet Web site now and you’ll see that we know that it’s an intranet Web site and we’re automatically going to establish a VPN connection now back behind our corporate firewall and now load this page, which exists only on our corporate intranet, because again we’ve integrated VPN throughout the entire product.

One other thing I’d like to show you is communication between devices. We saw earlier how two Pocket PCs can communicate with each other by beaming information to each other, but with the new version of Pocket PC the connectivity options are far broader. You can now use a Pocket PC to beam information to a cell phone. Here we have a cell phone and we’re going to go ahead and beam a contact from the Pocket PC to that cell phone over infrared, and you can see that the card was received by the phone. The phone is going to offer to send its card back to the Pocket PC, so why don’t we go ahead and say yes. And then that will go ahead and get received by the Pocket PC and stored inside the Pocket PC’s contact list. So we’ll go ahead and accept that contact and it’s now stored inside the Pocket PC’s contact list and all in Pocket PC 2002.

(Applause.)

We’ve also integrated support for Palm devices into the Pocket PC, so now you can seamlessly exchange data over infrared with all Palm devices, built-in to every Pocket PC.

And now with Windows XP you’re also able to exchange files between any Pocket PC and a Windows XP machine all without any additional software whatsoever.

I mentioned Blue Tooth connectivity, and we thought we’d show you that as well. The phone we’re using happens to have a Blue Tooth radio in there as well. And so we’re going to use Pocket PC 2002, and we have one here with a Blue Tooth card in it, and we’re going to go and use it to use the phone and set up a wireless connection over Blue Tooth. And you can see that it’s talking to the phone and hopefully setting up a Blue Tooth connection with the phone. And you can see that we had trouble connecting over Blue Tooth, but you can see for a while the phone came up there and we’d established Blue Tooth connections between the phone and the Pocket PC.

I guess we’ll try it again. So anyway that’s Blue Tooth on the Pocket PC. I guess we’re still working out some of the kinks on that.

That was our third goal with Pocket PC, to make it the most connected device out there, to other devices and to networks.

Now, there’s one other thing I thought I might show you today, something, which we’ve never talked about publicly before today. Today is the first time we’re showing this. And I think it’s actually kind of interesting. This here is a Pocket PC built by a company named HTC in Taiwan. This Pocket PC is about the same size and shape as the other Pocket PCs we’ve looked at today, but it’s a little bit different because it has an antenna sticking out here on the top. And the reason it has an antenna sticking out here on the top is because it has a built-in GSM and GPRS radio in this device, for the first time on a Pocket PC device.

And that means without any additional hardware whatsoever I now can connect to the Internet, I can synchronize, I can exchange files, all without any additional hardware whatsoever.

(Applause.)

So, for example, we could look at Web pages on this device, here MSN Mobile, and we could be looking at some content from MSN Mobile.

And there’s also one other thing that we can do with this device, which I think is pretty interesting as well. You can see the signal indicator. You see we’re getting a phone call on the device right now from Brian Schaeffer. Let’s go ahead and answer that call. Because the device contains a radio, this also can be used as a phone. So here we’re speaking with Brian doing the phone call on a Pocket PC.

CRAIG: Hey, Brian, how are you doing?

BRIAN: Hey, Craig. How are you doing? Hey, look, I hope you’re not busy. I’m actually kind of looking for Dale at the moment. Do you know where he is?

CRAIG: Actually, I am kind of busy, but I can actually help you out, because what I can do is I can conference Dale into the phone call. So let’s set up a conference call.

BRIAN: Okay. Cool, I’ll wait.

CRAIG: And what I’ll do is I’ll go into my contacts and I’ve got Dale’s number here, so I’m just going to click on Dale’s number. And let’s actually just dial it and tap and hold and call Dale’s mobile number.

BEN WALDMAN: Setting up a conference call is usually pretty hard, isn’t it?

CRAIG: I can’t do it on my desktop phone at all.

So we’re making our connection. Hopefully Dale is available.

DALE: Hey, Craig, what’s up?

CRAIG: Hey, Dale, are you there?

DALE: Yeah.

CRAIG: Hey, I’ve got Brian on the other line and he actually wants to talk to you. So what I’m going to do is I’m just going to go back into my phone application and he’s on hold at the moment here, and so what I’m going to do is conference the two of you together.

Brian, are you there?

BRIAN: Yeah, I’m here.

CRAIG: Dale, are you there?

DALE: Hey, Brian. What’s up?

BRIAN: Hey, what’s up?

CRAIG: What’s up?

(Applause.)

BEN WALDMAN: So that’s conference call on a Pocket PC. And as Steve mentioned, we’re really excited because earlier today in London MMO2, formerly the wireless division of British Telecom, announced that they will bring this integrated wireless device to market in the United Kingdom and Germany and Ireland and the Netherlands. So we’re pretty excited about that.

So that’s Pocket PC 2002, first a better Pocket PC, second a great enterprise product, and third the most connected device out there.

Thank you very much for your support and we’re looking forward to doing more stuff with you in the future.

(Applause.)

STEVE BALLMER: Well, I hope you share the excitement I have for the Pocket PC 2002. I know for me the three different form factors I talked about, I’m likely to be a guy who’s got a tablet, and I’m likely to be a guy who’s got the last device you saw, the PDA device, the Pocket PC with the built-in radio, because for me that would be about all I need with a nice little headset in my ear. I’d be super excited to have that device.

I want to make sure you have a context on the overall role the Pocket PC plays in the Microsoft strategy, and I think it’s important for me to perhaps give a little bit more context from a technology standpoint on some of the challenges in mobility.

The kinds of scenarios that Ben brought out in the demo and the kinds that we’re trying to work on as a company, not only in the mobility world but quite broadly, fall into a number of categories.

First, we still live in a world where information and people and data are relatively isolated. Information is in this device or that device. This software can’t talk to that software. This person can’t talk to that person. And the notion of letting people have one uniform integrated view of the information that they’re interested in, whether that’s me as an individual or my company wanting to see information that with its suppliers and its distributors and dealers is very important.

That challenge is perhaps even more dramatic in the mobility space where certainly you want these devices not to be islands unto themselves. You want them to plug into the great computing infrastructure.

Application development: We certainly believe that the answer to the first issue is a broad industry embrace around XML. XML will be the lingua franca, if you will, of computing, but it’s very important then to provide people tools that make it easy not only to write these next generation applications for the PCs and for servers, but to also target these mobile devices.

When I think about a mobile device, I want to be able to write one instantiation of an application essentially and have it realize itself on that mobile device. In a sense, I think about giving developers an environment in which they can just think about the application, you send down some XML to the Pocket PC and it takes care of saying, “Aha, I’m on a Pocket PC now. I’m not on a personal computer. I’ll present myself in the right way for this device. I’ll give the right manipulation options for the set of applications that are on this device. ” And really facilitating that is very important.

And last and certainly, as Ben said, not least, is this notion of greater and greater connectivity.

What we’re trying to do with our .NET platform is really provide XML leadership, help a user pull together all of their information wherever it may lie in one unified view. I want to have one view of my contacts, not one that I see through my PDA and another through my PC and another through my PC at home. I want one unified view of that information.

I want to be able to pull together one unified view of my financial information, whether I have one bank or three banks, one brokerage firm or three brokerage firms. I want to bring that information together.

I want one unified view of my information, whether it’s on my PC or on my PDA device.

And our .NET platform is really all about sort of taking advantage of the XML standardization effort and providing a platform that will be part of Windows, Windows Severs, Pocket PCs in a way that the software developer gets a uniform platform on which to build this next generation of applications.

And so I think what we’re doing with .NET reinforces what we’re trying to do with mobile devices and vice versa. We put the user in the driver’s seat with the Pocket PC. .NET lets us extend that by giving the user an even more integrated view of what they’re up to.

We try to create an environment in which software developers can take advantage of XML and can take advantage of today’s Windows programming model and help them through that transition.

The Pocket PC device supports essentially today’s Windows programs through some of the technologies that Ben showed you, and we’re busily incorporating .NET in as part of the Pocket PC architecture.

And last but certainly not least part of all this is about getting not only a good online experience but a very smart and rich offline experience. That’s key to .NET and it’s key to what we’re trying to do with Pocket PC and our mobile devices in general.

One thing I want to stress is this is not a short-term initiative. I believe those IDC numbers and Gartner numbers and all the numbers about market growth and wireless connectivity. It may happen this year, it may happen next year, it may happen the year after, but he kind of innovation you see here is the kind of innovation that it will take to spark and really turn the market on.

The good news certainly from our perspective is, and from a wide variety of customers is there are already companies that are really embracing the fundamental notions and concepts that we’re talking about here. And this is just a list of some of the customers.

(Videotape presentation.)

STEVE BALLMER: That gives you something of a sense of how corporations are embracing Pocket PC and Pocket PC 2002. There’s just some of the customers, in addition to Temple Physicians, and of course Bechtel, who have already reached out and embraced the Pocket PC as an important part of the way they do enterprise computing.

Today we’d like to have one of these customers, Bruce Nelson, who’s the chief executive officer of Office Depot, an excellent Microsoft customer and, of course, a business partner join us on stage to talk about and to have a chance for his staff to show us some of the exciting things that Office Depot is doing with the Pocket PC. Please welcome Bruce Nelson.

(Applause.)

BRUCE NELSON: Thanks, Steve.

STEVE BALLMER: Glad to have you.

BRUCE NELSON: Thank you. Glad to be here. Good morning.

First, I’m delighted to be here with you this morning and talk about Office Depot’s use of PC 2002, Pocket PC. We’ve got some exciting things I want to show you, because it is clearly an application that will help us achieve our objective, which is to make Office Depot the most compelling place to work, shop and invest in our business.

But first a little bit about Office Depot: We’re global in nature. We sell to small, medium and large businesses through an outside sales force, through the Internet and through 850 stores here in North America. We sell more products to more customers in more countries than anyone does in our business.

We have the world’s leading e-commerce position in our industry. In fact, only Amazon.com does more business over the Internet than does Office Depot. Our distinction is we make money at it and they don’t. (Laughter, applause.)

Being a large retailer has been interesting to talk about the Internet, and this is important because this application fits well. And I heard about the demise of bricks and clicks or bricks at least. They aren’t dead. They aren’t going to die. And we’ve figured out a way to do it profitably.

But we sell to customers of all sizes, primarily business customers. As I said earlier, one of our primary objectives is to make Office Depot the most compelling place to work, shop and invest. The Pocket PC 2002 helps us do those three things.

We sell internationally in 16 countries. We sell through an outside sales force. We sell over the Internet. We sell through catalogues. But we’re best known for our retail stores. Here in the United States in North America, as I said earlier, we have about 850 stores. Fifty-four percent of our business is in retail sales, and most of the customers in these retail stores are small and medium sized business customers.

This fits well because having been the CEO for Office Depot now just a little over a year, I discovered an amazing thing about our retail stores about information versus data. Our stores are loaded with data. In looking at how we could use an application like this, one of the things that we discovered was that last year here in North America we printed or sent by mail to our 850 stores here in North America over 220 million pieces of paper. They either printed them out in their stores or we mailed them to them from central headquarters. In those 220 million pieces of paper was a lot of data.

We put binders in each of our stores, 100 or so binders that stored all this written data, and successful store managers would have to go through this information, or data if you will, and pull out pieces of it to try and learn how to run their business better.

So our solution was to set up a portal, a store portal, kind of like a home page for every retail store manager in North America. And the value of the Pocket PC is that we can now make that mobile.

See, before what we were going to do is put these PCs in the offices of our retail store managers, where they would be confined to the office to get information. So if this store portal, for example, is customized to each store. It delivers critical indicators to the store on the Pocket PC.

Every morning in North America we have a thing called a huddle. Our store managers meet with the store employees each morning to talk about what went on yesterday in their store, to talk about some of the critical indicators of our business.

Before the Pocket PC, they would spend a couple of hours going through this enormous amount of data to get a little bit of information. The store portal allows us to deliver the information to the handheld device, the PC and deliver the information that that store manager wants to do for his or her store that makes Office Depot more efficient, more productive and more profitable.

For our customers, we also sell devices, but our real interest today and our real excitement this morning is the enterprise solution that we’ve developed, together with Microsoft, that gives customers and store managers mobility, flexibility, information at their fingertips, gets information from data that wasn’t otherwise available. We’re excited about what we’ve done with it and we’re only in the early stages of what this device can do for Office Depot to make us a better place to work as people have the tools to work with, a better place to shop, our customers have more information, and we’ll show you that in a minute. We’ll be more productive, we’ll be more efficient, we’ll be lower cost at what we do; it makes it a better place to invest and everybody wins.

So what we’d like to show you now is a little bit of a video and then we’re going to show you a little bit of a demonstration of the processes we’ve got on this wonderful device. So here’s a video to just take a look at.

(Videotape presentation.)

(Applause.)

BRIAN: Well, good morning, Bruce.

BRUCE NELSON: Well, good morning. Hi. How are you?

BRIAN: Okay.

BRUCE NELSON: Okay.

BRIAN: What we’re going to do is take a look at the Office Mobile Portal that you had referenced in your talk there, and what’s important to note here is Bruce had described how they’ve actually built this for their managers on their desktops and the key thing is they’re taking that desktop application and then also extending it in an integrated way down to the device. So this is the device view, obviously, of that.

So we talked about here’s the look of the Mobile Portal, as they’re calling it, and a couple of things we can do in terms of: I have a Today screen, so Bruce and his management team have a means of actually communicating with their staff and particularly their store management about some of the issues of the day and important things and newsworthy items, et cetera.

So that’s obviously interesting, but what’s more fun is actually the store vital signs, because then we get into the actual line of business situations.

BRUCE NELSON: A lot more interesting.

BRIAN: So here let’s say I was one of your district managers — although, Steve, don’t worry, I’m sticking around — but let’s say I was one of Bruce’s district managers. I’m going to go ahead and I’ll log in and we’ll go ahead and log into this device. And now I’ve actually got right away by virtue of logging in with my ID through the integration of the back-end services running SQL Server for the most part and then also down through the device using XML to actually build this Web page on the fly of the red flags for me as a district manager in Bruce’s organization.

So here we can see I’ve got a bunch of red flags. That’s not good.

BRUCE NELSON: I know, apparently.

BRIAN: So what I’m going to do —

STEVE BALLMER: I’m not going to take you back if you can’t do a good job for Bruce today. (Laughter.)

BRIAN: Indeed. Well, let’s go ahead and take a look at this refund analysis and figure out what’s going on. So here we can see I’m actually talking about the Lauderdale Lakes, Florida store and I’ll go in and very simply in a way that even I can understand I’ve got a red flag here. So we’re going to go ahead and click on that and I pull up a chart of the actual refund activity for particular employees in general.

And here you can see one of them is actually way out of whack, so I can drill down and see the information. They’ve got a lot of returns on a few products there. We won’t mention them by name. And you can see that we can actually now go —

BRUCE NELSON: None of them Microsoft.

BRIAN: Indeed. We can now go and actually follow up with those employees about why they have higher return rates than their colleagues.

So we’ll go ahead and just to make sure I keep my manager honest I could actually instant message him, but since we’re standing in the store together I’ll actually go ahead and click on an e-mail.

Now, you’ll notice what happens, just to make things easier, we actually fire off that e-mail from within the application, so we fill out e-mail, pre-populate it, and drill it down to that person.

So let me go ahead and we’ll go ahead and click on e-mail. So here it’s actually built up that e-mail for me, pre-populated it with the issues, and I can go ahead and click Send off and now we both have a note of the conversation of what’s going on.

So carrying on then, if I go and look at my indicators, you can see that I have other stores to go and visit, so I’ve already taken care of store number one. We’re going after 45 now. And just to refresh my memory, obviously I can look up and do simple things like finding out where it is, in case I forgot.

So that’s a look at sort of the district manager view. If we shift gears and actually look at the store level view, this is one of the things that I think is particularly interesting when Bruce talked about getting the information down to the customer, getting the managers out of their back office and on the floor with those customers, and then empowering them with some powerful information.

So here I have this is actually a Compaq iPAQ here. Now, this has a very interesting jacket on it. This jacket is actually a Symbol product. It’s actually an 802.11 combination hand barcode scanning device.

So let’s say if I’m walking around in the store and I get sort of cornered by one of the customers saying, “Hey, you know, I’m looking for another couple of these products and there are only three on the shelf. I’m looking to buy a few. Can you help me out?” So the first thing I’ll do is obviously I’ll just go ahead and log into the system, and once I’ve logged in I’m just going to go ahead and pick this up and go ahead and scan the product, and we actually go ahead and we scanned up the UPC code.

Now, two things are going on here. First, if I was disconnected I actually have a snapshot of the store’s inventory in the iPAQ that I’m carrying around with me. More importantly though because of 802.11 I can go real time back to the back-end database and do a few interesting things, the first one being we’ll go ahead and take a look at the pricing obviously and then the inventory levels associated with that product.

So I’m going to zoom back and we’re going to actually do a query in real time to the warehouse. Here we have a Symbol device, which would actually be in the hands of the store men in the back going about their business, and I’m going to actually go ahead and increase sort of this desired inventory level just by going ahead and clicking on it, and also increase the actual information that I’m going directly to my supplier. And we’ll go ahead and save that information, and immediately after I save it, it goes off to the system and generates a picking list down on the other device for the actual store men to go ahead and pull that information.

So right away what happens is the store men get this information, goes picks the product and by the time I walk the customer back to the cash register we’ve met them there at the front door.

So with all of that communication and all of that integration it’s really hard to know where that’s going to lead.

BRUCE NELSON: Well, I’ll tell you, I’m excited about the functions we have so far, because they are going to improve productivity and efficiency and deliver information to our store managers to help them.

What I’m really excited about is the possibility of this. I happen to believe in the retail business that if you’re going to get a customer to buy from you, you have to impress them so much that they want to buy again. To do that, the only way you can do that today is impress them with knowledge. Given how fast technology changes, the limitations you have on trying to teach and train 30,000 people that work in our stores here in North America, to give them product knowledge in their hands, we can deliver in the future instant product knowledge.

If they’re with a customer at a printer section in our store and they don’t know which of the four or five printers are best suited to their needs, these are business customers, they want business functionality. Through the intranet, the connection to our network, the connection to the handheld device, we deliver content, comparative content, pages per minute, how it’s used, what its best functionality is, what its featured benefits are. So at the hand we can deliver point of sale information to the customer. The only way you can do that today and win in technology is in your hands. You can’t deal with printed pages. You can’t deal with trying to teach or train all the content. And I think one of the ways that retailers can make themselves more distinguishable than others is have better content.

I’m confident we can deliver the content. I’m confident through the technology of the PC and what Microsoft does working together we can deliver information that will make us a more compelling place to shop. And I’m delighted to be able to help launch it today.

BRUCE NELSON: That’s great. Thank you very much.

STEVE BALLMER: Great. Thanks a lot, Bruce and Brian.

BRUCE NELSON: Great. Thanks, Brian. Thanks very much. Thank you.

(Applause.)

STEVE BALLMER: Before you go, Bruce, I’m sure you all want to rush out to Office Depot and get a Pocket PC 2002 and good luck selling some XP systems later on. (Laughter.)

BRUCE NELSON: Thanks a lot. Thanks, Steve. Thank you very much.

(Applause.)

STEVE BALLMER: There’s customer enthusiasm, as you can see, around this concept. An important aspect of acceptance of any device actually though is what we call the ecosystem that develops around it, our hardware vendors doing innovative new designs, our peripheral vendors extending the environment, our application builders really targeting the platform and our systems integrators working together with the customers to bring about the kind of exciting solutions that we had a chance to see at Office Depot.

And those aspects are critical to the acceptance essentially of any new platform, and as an integrated general purpose computing device Pocket PC 2002 is certainly a platform.

One of the things I’m most excited about in terms of progress over the last 18 months has been the rush of enthusiasm from our partners around the Pocket PC and now the new release. Independent software vendors: We’ve distributed over 180,000 — 180,000 software developer kits, and we have almost 4,000 certified application developers and partners working with us.

Systems integrators: People like EDS and Accenture and KPMG and Price Waterhouse Cooper and others, who are working with us and our customers aggressively.

Independent hardware vendors: People like Sierra Wireless, who are targeting the CDMA connectivity, Symbol with 802.11 products, the kind we just had a chance to show you, Socket, Proxim and others.

And last but certainly not least is the range of OEM partners who are actually building the devices that we showed you. I had a chance to talk about Toshiba and to talk a little bit about O2 in the UK, Audiovox, but we have a number of other new partners, Acer, E10, Fujitsu, people who have really raced to get on board the bandwagon and build exciting new devices.

And so we’re particularly enthusiastic to have a chance to kind of celebrate a little bit some of the new partners and new people who have gotten involved, as well as continue to be very appreciative of the efforts of existing partners like Hewlett-Packard and Compaq and others who have really been with us from the start.

This is a fun launch for us in a variety of ways, not the least of which is it’s really a launch. Today is the first day of availability of the Pocket PC 2002. You can rush out and buy one. You can buy one at the Circuit City store in the neighborhood, the Comp USA, the Staples. There’s a Microsoft San Francisco, which is kind of a demo and showcase store just around the corner here. And, of course, there are a number of Office Depots here in the city of San Francisco where you can go out today and buy a Pocket PC 2002.

It’s an exciting device. I think it is right on the sweet spot of the market. And for all the reasons Ben had a chance to share with you in sort of the general, what shall I say, evolution and improvement, I think we have a device here that’s a real winner in the sense that it really will continue to improve and simplify the way a lot of people access information, communicate and actually entertain themselves.

So with that, I thank you very much for your attendance and encourage you to get a chance to spend some time with our partners, and we look forward to seeing you again.

Thanks very much.

(Applause.)

END