Steve Ballmer Speech Transcript – Fall COMDEX 2001

(Cheers, applause.)

STEVE BALLMER: It’s a cheap trick, the megaphone, I thought. (Laughter.) How do you get an audience to get enthusiastic after a long day at COMDEX? Answer: You make them by giving them a megaphone.

It’s my great privilege to have a chance to be here. It’s been a number of years since I had a chance to keynote with this group at a COMDEX. And so when Alan, the guy said, you know, “would you come,” my number one reaction was “of course”; my number two reaction was, “I wonder what I did last time to make me so undesirable as a return invitee.” (Laughter.) Hopefully today we’ll do a little bit better.

This is a wild, wild time. You know, I was talking with a number of folks over dinner, who have been involved with the PC and involved with the whole user group movement, if you will, for a number of years. And for people who can kind of look back and we were talking about the time I was at San Francisco, we all think it was ’84 or Sacramento Club, and I think that was probably about ’88, ’89 and certainly what’s going on with the technology that we all care about, we all love so very much continues to evolve. The topics are all different, the hot buttons are all different, the frustrations are mostly all different. (Laughter.)

Well, you’ve got to remember we just introduced Windows XP and we’re saying it’s the one that doesn’t crash. It’s a little bit like Windows 3.1 was to Windows 3.0. (Laughter.) So not everything changes. (Applause.)

But it’s great to be with a group of folks who care as much about how technology can transform the world as we do. And as Alan said, we come; we do this event. We run our Mind Share program. And we do that because we think that the leading edge users, the folks who know the most, who carry the messages, good and bad — good and bad, because we know when we do good you carry good and when we do bad you carry bad, but the folks who carry those messages are so important for the general advance of the use of technology in society.

You know, I can look back 10 years and I can look forward 10 years. And if you were to ask do we expect technology to make a bigger leap forward in the next 10 or in the last 10, I’ll tell you it’s in the next 10.

And so when we’re all here 10 years from now at this dinner, whether it’s at the Orleans or someplace else to be determined, I suppose — there’s probably going to be 38 new hotels by then in Las Vegas — but when we’re all here 10 years from now talking about what’s changed, what’s different, one thing that will be constant is we know that the efforts that we and you make together will be as important 10 years from now as they are today and as they were 10 years ago. And so for that I want to make sure I say thank you to everybody here for the time, the energy and the passion that you show for the technologies that we all love so very much.

Our support continues in a fairly consistent way. You know, there has been a lot of what shall I say reconsideration amongst many companies in our industry about what do you do, what do you not do in general in marketing, whether it’s user groups or showing up at COMDEX. I don’t know how many people had real time today to walk the floor. I did and I was disappointed, I’ll say. What you see on the floor is in some senses less exciting today than it was several years ago. It might be more exciting if you’re in the business of building computers — there’s a lot of great component supply out there. But in terms of really exciting and interesting and innovative products, I think that stuff’s going on in our industry; I just don’t think people are reaching out in the same way. And I think the folks in this room understand with me that really interesting technologies don’t take off overnight by and large. They have to be nurtured. They have to be fed. They’ve got to work in the grassroots. They’ve got to be communicated about.

And we’re still here at COMDEX. You may not have noticed. Our booth is only three-quarters that size that it was last year and it still seems to be the size of about two good football fields. So you could say we’re reflecting tougher economic times by only taking two football fields, but we continue to believe in the grassroots, community-based outreach.

I know for us and for you, we were talking some over dinner, things have evolved. The role of the Internet as a place to expose people to technology, to build communities is certainly very, very important.

If we’ve learned one thing over the last several years, it’s we need to make sure that in every sense, in both the physical sense as well as the electronic sense the community that supports users of Microsoft products, from Windows on out, has to be as rich and robust as the community supporting Linux or anything else in the world.

And so in some senses I guess you could say we rededicate ourselves to those knowledgeable and influential users who really are the support mechanism and outreach mechanism, whether that’s physical outreach or virtual outreach to the rest of the community.

The other key thing we commit ourselves to do at the end of the day is to continue to bring great products. And if you assess on that dimension, I think we’re in the middle of a pretty good 12-month period. A lot of people thought that the trial and all this other stuff we were involved — harrumph — involved in — got a little twitch there — (laughter) — but, you know, people thought that perhaps all that stuff would slow down our pace of new product flow. Anybody who’s seen Office XP or the Pocket PC 2002 version, Windows XP, Xbox, the tablet stuff, our .NET programming environment, the new version of MSN, we’re trying to do what we do best: New product, new product, new product, new product, to make sure that there is something interesting out there for you to love, for you to hate, for you to criticize, for you to support, for you to talk about, but at least let’s be controversial and try some things that really help people in new and powerful ways.

And that’s what’s motivated the folks at Microsoft for 26 years and that’s what will continue to motivate us.

It’s particularly funny; I was sitting at dinner and we were talking about, quote, “the old days,” ’84, ’88, and all of a sudden I feel this bear hug from behind. And I thought, “Well, this is a pretty forward user group president. Who is this?” And I turn around and I see Miriam Lubaugh, who I don’t think is a user group president, but she started with Microsoft in 1978 — before me, that’s all I can tell you, B.S., that’s Before Steve — at Microsoft. (Laughter.) Sorry. And, you know, it really makes you think back to the way things grow and evolve.

What I want to do tonight is talk about where I think we’ll expect to see change over the next 10 years. You know, the industry, the technology industry is an industry of revolution. You know, if there’s one thing that I think all of us would agree on, or any poll of people who know about computers, if you were to ask, “Do you expect the world of technology to look the same five, six, seven years from now as it looks today,” you’d have to say no.

Now, people might disagree about what will change, but just take, I joined Microsoft in 1980 and in the time I’ve been with Microsoft I’ve lived through four — or three — I guess I could say I think we’re starting on the fourth — but three veritable revolutions. Nobody in the world would question the PC was a revolution. It changed the world. You don’t need to be a user group president or an influential; you can be the man on the street and you know that.

Take a look at what happened with graphical user interface, with the Macintosh and Windows. There was another revolution that the whole world could recognize and see.

The Internet: Is there a soul who wouldn’t understand it and see it as a fundamental revolution, not just a technology revolution but things that stimulate it, vast changes in our economy and our society?

And so to make a prediction that the next five or six years will be a period of low change would have to be one of the more backward views of the world I’ve ever heard.

So the real question is what is the fundamental change? We all know there’s going to be smaller devices and more intelligent devices. We all know disks are going to keep getting better and processors and graphics and all that great stuff, and some day we’ll all be able to get broadband, but you can’t get it on Hunts Point Road in Bellevue, Washington yet. (Laughter.) We’re still looking. We like those 45K dial-up line to Microsoft in our house, but anyway they’re working hard. Both Qwest and AT & T promised it will be just another six months to a year now and we’ll get it on my road. (Laughter, applause.)

By the way, Microsoft is the second largest shareholder in Qwest and it still didn’t help to get a DSL line in my house, just for perspective. (Laughter.)

But when you take a look at all that, the question is where is the next — not will there be, but where’s the next revolution?

We think and we are as inarticulate from time to time on this as you could possibly be, but we think the next revolution will come from this notion of XML web services.

I sat down with a couple of press people today and one of the fellows who’s prone to asking kind of sarcastic and cynical questions said to me, “This XML thing, you haven’t been able to make it sound like a big deal. Bill’s speech last night, you know, they showed us some expense application that would have been easier to write without the XML. You know, tell me what’s this all about?”

Well, to me what we’re really talking about is the next generation of software, a generation of software that is fundamentally more extensible and easier to combine and integrate with other software than anything that has preceded it. And if you really look at where you get big advances in this business and big advances in this industry, it’s where companies can feed off of the work of other companies.

People talk about program or productivity like a Holy Grail. Well, the best piece of software is the software that doesn’t need to be written again. It can be added on to. It can be customized. It can be extended.

If you look and ask the most corporate users, “What’s your biggest expense?” they’ll say, “Enterprise application integration.” What does it all mean? They can’t get things to talk to one another.

If I go through a lot of the frustrations we’d hear out here, where would they be? It’s in getting things to kind of come together in the way you want them to come together. And we think this notion of a next generation of software that is fundamentally easier to extend and integrate is the next revolution.

XML, was it the only technology that somebody could have latched on for this? Of course it isn’t. But it’s a technology that has grown out of the Internet and the standards process. It’s right for the job. It’s got the right capabilities. And the key then is to build software, in our case a platform that lets people build this next generation of software.

And that’s what we call .NET. And people say, “But what is .NET? Show me the CD.” It’s the software, whether it’s in the client, the server or out in the Internet itself, that helps people write the next generation of software that integrates together in a different way.

When we think about things, people want to do, I’ll just give you one out of my life, I’d like to be able to have my personal homepage. I really would. But what I want on my personal page is the following: I want my e-mail. I want my calendar. I want the data out of Siebel, our internal customer management system, on the accounts I’m meeting with that day. That’s pretty important to me. I want Microsoft’s sales data, pretty important to me. I want the score of the Seattle Supersonics basketball game — (laughter) — pretty important to me. And I want the most mission critical application in my life, that is my wife’s calendar on the same page. (Laughter.) And even more importantly, since I keep a work calendar and she keeps an MSN calendar, I actually want to be able to compare them, a magic application, and see whether I’ve created conflicts, which are going to get me in trouble at home. (Laughter.) That’s what I want on my personal page.

Now, what is that problem? I mean, how would you do that today? Scratch your head; I don’t know.

Another one: How would some corporate IT guy with a lot of resource do it? We ought to give people the tools to integrate and extend software so that the kind of thing I talked about is routine instead of something, which sounds nigh impossible.

And that’s what this .NET and XML web service revolution to us is all about. It’s about integration across applications, across devices, across Web sites, across businesses, you name it, business to business, business to consumer, consumer to consumer — that’s sort of the politically correct way of saying peer to peer, which is out of fashion after Napster — (laughter) — but nonetheless all of that integration is very, very important.

Software in this world needs to evolve to be more of a service. Is there a reason that in an environment in which we can count on sort of connectivity to most homes we still don’t really use it very much to take care of software? How many people in the room here subscribe to or are regular users of Windows Update, just for a show of hands? And how many people could see the improvement but even more sort of in their minds project what a service like Windows Update should do for them? It should provide automatic services to update your computer, to back it up, to take care of your files, to store your information, to roam it, dah-dah, ba-ba, ba-bum, and on and on and on. That’s what a software service should do.

It’s funny; we all preach what the Internet revolution will do to the media business, to the banking business. Heck, it’s going to do the same thing to the software business. What we think of as a software product will be part software, part Web site, party service by the time the next decade is done.

The range of clients that want to participate in the world is bigger. You know, today we’re all excited about new pocket-based devices. We kind of love this Xbox thing that we’re getting ready to launch here later this week. I’m particularly under pressure from my 9-year-old to “Go get an Xbox, Dad,” and if not we’ve got to go to Taco Bell for the promotion to get one there. (Laughter, applause.)

As a small aside, it’s actually a great thing, my son is still not quite old enough to recognize the fact that he’s probably more likely to get one from me than we are to win one at Taco Bell. (Laughter.) So I’ve got about another year and it’s the year I’m going to really love. (Laughter.)

You know, the scenarios that we think about that people want to do with computers continue to evolve. I was hearing at dinner how digital media is now one of the — you know, digital pictures, digital videos; it’s one of the hot topics among a number of the groups. It was a topic that was nowhere three or four years ago.

Real time communications: If you haven’t taken a look at or used any of the new built-in help and support capabilities in Windows XP, it gives you a sense of why we think real time communication is really a platform; it’s not just another name for instant messaging. I encourage you to take a look at it.

Reading, note taking: I’m going to ask you guys a question in this room. How many of you would say that of all the things you read over the course of a day, a week or a month, you read primarily on screen as opposed to on paper? And how many are paper? Pardon me? Somebody said this is a what? I think he said it’s an older group. (Laughter.) In a younger group the answer would be even worse. More people would be reading on paper would be my fundamental answer.

If you take a look at it, it’s because the screen is still not as user friendly as a piece of paper. It’s easier to move a screen around. You know, I need to gauge distance of how far am I from the darn thing and read it. You can mark on a piece of paper. Text looks better on a piece of paper. And, you know, in some senses, as some of our guys like to joke, paper has had 500 years of usability enhancement. (Laughter.) And we’ve got to catch up quick if we’re going to be better than paper for reading, for note taking, for a variety of other things. And all of these issues I think are part of the very dynamic future that we should expect to see for software over the next years.

Where do we want to contribute at Microsoft? We think of ourselves as a software company. We don’t care whether you want to put it in your pocket or put it in your TV or put it in your PC or put it in your data center. We want to do core enabling software that lets you take advantage of this phenomena.

What was the key about the PC? The PC was a tool of empowerment. It sort of gave real people, not just sort of the high priests, if you will, of technology, the ability to really use these things. And we want to continue to be part of pushing that kind of empowerment to people in new and varied ways.

People ask, “Well, what are you doing at Microsoft? I mean, are you guys trying to be in everything?” The truth of the matter is I don’t rule out being in anything. But today we’re really only investing in seven businesses, one new platform, that’s .NET and it will affect our Windows client business, office productivity, TV devices and other TV-attached software like games, handhelds, business solutions for small and medium-sized business, which we’re really jumping into full bore with the acquisition of Great Plains, servers and then consumer services as represented by MSN. That’s what we’re focused in on right now, all of those businesses, and pushing them to be things that go beyond what we’ve ever considered.

I love where our Office team is. We had Jack Welch, who just retired as CEO of General Electric come speak at a group at Microsoft about four years ago, and he said something that changed our Office guys thinking. He said, “Any time you think you’ve got a high market share in anything you do, your problem is you haven’t defined the problem you’re trying to solve for your customers broadly enough.” Is Office a spreadsheet and a word processor? Not the way we think about it. Office has to be the definitive tool to help people manage, analyze and express information. And it’s not today and it’s got plenty of room for change.

We still want to hear about the 166th feature that you guys want to see in Excel and we want to give it to you, but we also want to transform Office to continue to keep up with reading, with note taking, with messaging, with real time, with media, with all of the things that people who deal with knowledge want to have on their PCs.

In the Windows business we’re pretty excited about XP. In some senses it’s been way too long, really, really it’s been way too long that we’ve had this undesirable situation in the world where we had two different operating systems in the marketplace, different device drivers, incompatible applications, and there are a lot of, quote, “good,” unquote, reasons for that, but at the end of the day it took us longer than I wish it had. And I’m super enthused that we’re able to bring the reliability of one and the compatibility mostly of the other, because I’ll probably get at least two people who tell me they’ve got some problems with XP compatibility, but to bring those together in one operating system.

And yes we have a home version and yes we have a professional version, but they’re compatible. One is a pure superset of the other. Professional is a superset of home. That let’s us have two different prices and businesses, and all that kind of good gobbledygook. And I’m pleased to tell you that if you fill out those evaluations that Alan was begging for so diligently, you turn them in, we’re giving everybody who turns in an evaluation a free copy of the Professional version tonight. So please fill out the form. (Cheers, applause.)

And if you don’t have a business you want to dial into, sell it to a friend and go buy the home version and pocket the hundred bucks. (Laughter.)

So we’re pretty excited about XP? How many people here own XP already? Okay. How many people feel like — how many of our owner community feel like they have themselves pretty fully exercised old XP? A show of hands? Used it, not exercised, I’m not trying to put it on a diet. Maybe it should go on a diet, XP actually. It could be a little bit smaller and all that, but, no.

I think what we’d like to do now is do a little bit of a demonstration ourselves. I’m going to have Greg Sullivan, who’s product manager on Windows XP, come up and just kind of let you wallow in the product a little bit with us and maybe show you some things you haven’t seen in XP before. So please welcome Greg Sullivan.

(Applause.)

Greg tells me I’m helping with the demo.

GREG SULLIVAN: We’ve got a few surprises.

STEVE BALLMER: They haven’t really let me do that much in the last 10 years, but go ahead, Greg.

GREG SULLIVAN: All right. We’re very fault tolerant here. (Laughter.)

So I was going to ask and mention that some of you may have heard that recently we launched a new version of Windows, but judging by the show of hands, I don’t need to tell you that.

A couple of things that Steve pointed out though, there’s really things that are core to us, and I think I share with the folks in the room. We have passion for this stuff. We do it in our spare time when we don’t have to. We get phone calls from our neighbors and our friends and our family, not always when we want to hear from them, about the problem they’re having, but they know that we really are into this stuff.

And so in Windows XP we delivered this great new code base that solves a lot of the issues that people had, and that makes so many things so much easier for new users, but there’s something in it for us, too, the folks in the room that get those phone calls, and we’ll see a little bit of what that’s about.

The first thing I want to talk about is one of my favorite features. I know this is big in your house too. Windows XP supports multiple users of the same PC in a really robust and rich way, something that we kind of tried to do before, but didn’t have the architecture underneath to do.

And you’ll notice right away when you look at the Windows XP welcome screen that I can see, and this is, in fact, the members of my family, each of whom has an account. Eva is only two and a half, so she’s not doing a lot yet. (Laughter.)

You can see that I have right away —

STEVE BALLMER: No, she is doing a lot. That’s why she has her own account. She’s like my two-year old, yah-yah.

GREG SULLIVAN: Delete, delete.

STEVE BALLMER: Yep, bang on keyboard. (Laughter.)

GREG SULLIVAN: Yes, she can try and try and never reformat the hard drive though the way we have it set up. (Laughter.) And that’s because Windows XP has very robust down to the very low level local security. So when Eva logs in, she gets to do the things that I think are appropriate and important for her.

The great new thing about this though is that the industry, the PC industry is really supporting this, and one innovative way is in hardware that ties into this authentication and this security they have at Windows XP.

A company called Digital Persona has a biometric authentication device, a fingerprint scanner that we plug into a USB port. And with this device I don’t have to click on my icon and remember a password and log in and have everyone in my family track their passwords and keep post-it notes of the passwords around the monitor, not that anyone would ever do that — (laughter) — Steve.

STEVE BALLMER: No, mine’s taped on my laptop, yeah.

GREG SULLIVAN: So what we do is I’ll show you here we can do a couple of things. We can instantly logon and we can instantly switch between users. So with the touch of a finger here I log into my system. And so I’m in and I’m doing my stuff. I’m getting my e-mail. (Applause.) This is my favorite feature.

And one of the things that happens in my house is that my oldest son Danny will be playing a game, and he’s really getting into this stuff now, and it would be very difficult for me to convince him to let me get on and check my mail or browse a Web page or check the score, and so it’s then a 20-minute negotiation of saving his game and logging off and me logging on and him logging back on again, and it’s pretty painful. With Windows XP let me demonstrate how it works.

I programmed this finger for Jimmy. (Laughter.) And now we’re into Jimmy’s account. And he’s playing his pinball.

STEVE BALLMER: Now go back to your account.

GREG SULLIVAN: Well, I also wanted to show this real quick. Jimmy is getting pretty advanced here, and so he’s also got the new cool Plus pack game called Hyperbowl, and that’s really cool, so we’ll just give a little tease of that.

But now if I want to go back, I press the button on my system and I’m instantly back into my account.

So with the snap of a finger, so the process that went from 20 minutes of negotiation of saving, logging out, logging back in, reloading games, you see one touch of the finger and I’m back into his account and then back and forth again. So this is a really — we use the PC more. We do more stuff with it. Yeah, I think it’s pretty cool, too. (Applause.)

So I’ll go back to my account now. We use the PC more because of this, and so that’s a really cool thing.

One of the ways that we use the PC more now with Windows XP is instant messaging. We talked about this trend. Real time communications, Windows has been capable of communications for a long time. It turns out we didn’t make all of that capability very easy for the average person to get to. And so a real focus with Windows XP is let’s make it easy. Let’s make it one click easy to do a video teleconference.

And so we’ll take a look at some of the work we’ve done here. I go into Windows Messenger here, and this is a paradigm that people are familiar with. You’ve got a list of buddies. You can see who’s online, who’s logging in and logging off. And some of you may know that your kids have a whole new language that we don’t understand when they talk to each other in this way. But this is something that people have really grabbed onto.

And so I can see now on my account that I’ve got my buddy Steve Ballmer logged in here, and so I can find out he’s online, and so I can indeed communicate with him.

Kids also have new handles. It’s like the CB days when they have names for each other, and it happened that somebody told me what Steve’s handle is, so I can type that in. Hi there, Monkey Boy. (Laughter, applause.)

And then there was even odds that I was going to get fired for doing that actually in Las Vegas. (Laughter.)

So Steve can go ahead and open up his if he clicks on — the eraser mouse is not my favorite either, yeah.

STEVE BALLMER: No, I actually like the eraser. Okay.

GREG SULLIVAN: So Steve could click down there and type something back, and this is something that happens every day. There are 45 million registered IM users. “Nice working with you,” yeah. (Laughter.)

And so this is something that people get, right, they understand how to send — (Laughter.)

STEVE BALLMER: I’m waiting. Keep going.

GREG SULLIVAN: — messages back and forth, and this is where it stops for most folks, though. The PC can do a lot more and so with Windows Messenger we make it really easy to take that next step from this to real time video communication, to voice, all in the same entry point.

And as Steve mentioned, this is a platform capability. Real time communication is something that application developers are building on top of. Web sites that offer support, the customer service center might have a button that says, “Click here if you have Windows XP and a Web cam,” and you can do that, you can figure out how to put that Toys R Us together online and see somebody actually show you how to do it. So these are really new capabilities that the industry is going to build on top of.

One of the other things we wanted to show leverages this communication and some of the other new things in Windows XP, and this is something that I think is going to be a real boon to the folks in this room, because this has really helped me out so far.

I just noticed your instant message. I didn’t hear the beep. (Laughter.)

In any case, no pressure — (laughter) — Windows XP has a new capability called Remote Assistance. And so for those of us in the room who ever get phone calls from somebody who has a question about their PC, Remote Assistance is really going to simplify this process.

And so, in fact, if Steve had a question, he’s got XP, he’s checking it out, he could click on Invite right from his instant message session. This is one of the ways that you can invoke this. And if he clicks onto Start Remote Assistance, it sends me a message that says, “Steve Ballmer is inviting you to start using Remote Assistance.” That sounds like something I’d better accept. (Laughter.) So I’m going to say Accept.

And so then what it does is it establishes a secure session between our computers using this real time communication infrastructure. It uses multiple levels of authentication, so the key actually has to actively say this is the person I want to connect to here, and this is someone I trust. In fact, what we say is think of this as you’re inviting the person into your home to sit at your PC and let them do whatever they want, because effectively that’s what you’re doing. So we point that out and we say you should trust this person.

STEVE BALLMER: Well, it doesn’t say you should trust them; it says do you trust them? (Laughter.)

GREG SULLIVAN: Good point.

STEVE BALLMER: I just wanted to be precise. (Laughter.) Most people know you shouldn’t trust anybody who actually says “I’ll take over your computer,” but for today, yes, I trust you.

GREG SULLIVAN: He knows me so he’s going to trust me. (Laughter.)

All right, so that’s great and now on my screen I can actually se Steve’s computer. So if we were talking on the phone I wouldn’t have to say, “Well, go into Control Panel. Hit the Network Options icon, you know, or this tab dialogue box,” and then he’d say, “Wait a minute.” And I’d say, “Lower left hand corner, Start button.” You guys have been through this.

But I can go beyond that — I wouldn’t have to do that with Steve, of course. I could take control of his system. And so this is another affirmative action that he has to take, a step to say, “Yes, I want this person to take control.” And if he decides the demo should continue, then he’ll click Yes.

STEVE BALLMER: And if you really aren’t sure about the person, you know where to click. (Laughter.)

It is important though. For all this kind of stuff we really want to make sure we have the right level of privacy and security in the interaction, and we’re kind of having a hambone about it, because we’re sitting here right after dinner, but this, it’s absolutely critical that we allow for this kind of integration and that we protect the user appropriately.

GREG SULLIVAN: It’s another way that we take advantage of the security built in at a very low level in Windows XP from the fingerprint authentication to these kinds of sessions. So it’s a great new capability that we just couldn’t have done before.

So I’ll say, you know, Steve, if you really wanted to go in and change the way your computer looks, we have a new look to the Control Panel. And this is something that novice users are really going to like, because that array of 50 icons didn’t mean a lot to them, but they say, “Boy, I would like to change the appearance and themes,” and we take them through that process in an easy way.

STEVE BALLMER: My mother-in-law, I mean, it’s real world stuff. My mother-in-law gets a new computer. My mother-in-law does need help. My mother-in-law lives in a rural area. My mother-in-law has traditionally called me. I love my mother-in-law. (Laughter.) I don’t visit very often. You know, we’ve tried to find someone who’s willing to trek out to their farm to help her. Not anymore. (Laughter.) It’s me remote help desk person helping with the new printer install, using the remote help and support facility. This stuff really works.

GREG SULLIVAN: Yeah, and this is something that I think, as I said, everybody in this room is really going to — we’re going to get a lot of free time back because of this.

So he can go in and do what he wanted in this PC, and I could have shown him — and there are many, many different ways. It could be help questions, problems or even just collaborating; there’s a facility to do that too, so this is a great new capability in the communications capability of Windows XP.

STEVE BALLMER: And it’s an example of an application that’s built on the messaging infrastructure that’s built into Windows XP. But you could build hundreds of others. This is just one we built. It’s not instant messaging really, but it certainly uses instant messaging as a platform for building applications.

GREG SULLIVAN: So we don’t have a lot of time. Later on at the end of tonight we’re going to have a little more in-depth demo, but we want to show one more thing, and that is extending this communications experience to other devices using the platform and the infrastructure that we built, the capability of the PC, and extending it down to some of the new devices. This is an HP Jornada Pocket PC running Pocket PC 2002. And this one actually has I’ll show an integrated Compaq Flash 802.11 wireless networking card in it. So I can carry this thing around with me and be connected and get my e-mail and surf the Web if I’m in a wireless hot spot, I’m at a Starbucks or I’m on the Microsoft campus, and I don’t need to be near a computer all the time, that I can still have access to a ton of this great capability.

STEVE BALLMER: The Seattle airport, for example, is already an 802.11 hot spot. You can walk around the airport in Seattle. You’re on the Web with your PC, with your Pocket PC, whatever device suits you.

GREG SULLIVAN: So in the same way that I can use instant messaging on the PC, I can try to use it on the Pocket PC. And we’ll go ahead and sign in here and it will authenticate me. And the same user account that I had there shows that my buddy Steve is still online and so, in fact, I can then send a message to him.

Now, we’ve done a neat thing. Because this thing doesn’t have a keyboard, we’ve captured some of the key phrases that you might use and so I could say, “Yeah, you know, I’ve been doing the demo; I can’t talk right now,” and send that over to Steve.

But you see this is an example of taking the infrastructure that we’ve built, this new capability, and getting it into the devices. (Laughter, applause.)

STEVE BALLMER: Should we have rehearsed the demo more? Sorry, Greg. (Laughter.)

GREG SULLIVAN: I’ll be looking for that e-mail in my Inbox.

So this is an example of taking this great capability and whatever the device is — Steve showed the vision statement up on the screen. I think what we’re showing here is that we’re realizing on that vision step by step that we’re going to keep working, and Windows XP is a big step there, and as I say we’re going to keep going.

STEVE BALLMER: Thanks, Greg. Thanks a lot.

GREG SULLIVAN: Thanks.

(Applause.)

STEVE BALLMER: Just a surface scratcher for what was supposed to be seven minutes, but I kind of held him up up here, but I think it gives you just again a little bit more of a sense and certainly we do encourage those of you who don’t have XP and to all of you, fill out the evaluations and it will be our pleasure to give you a copy of the Professional version of the product.

(Applause.)

I asked you all about Windows Update a little bit earlier. I love what we’ve started. We’re not at the end of the road, but what we’ve really started is a continuous improvement cycle. Windows is the first operating system we’ve brought out that I can tell you will be better three days from now than it is today and we won’t have to do an update. As long as you let your computer connect up, we’ll be constantly monitoring changes, improvements, new drivers. If you let us. It’s your privacy, your security, but we can essentially put users in a place where we’re constantly improving their systems, taking their feedback, improving more, downloading patching. It starts an important continuous improvement cycle.

I talked a little bit about two of the other big applications of this generation for us, Office XP and MSN 7. And in both of these, both for I could say the business or knowledge worker market and the consumer market, we’re also trying to do a set of things to improve that overall experience: more productivity, better collaboration. If you’ve shared files before, which I’m sure everybody has, it’s not the same as collaborating with a group of people and sharing those files through a SharePoint Team site, a technology that we support both in MSN and in Office.

We showed you a little bit of the Pocket PC. You know, in some senses I think most compelling devices come about when they become multi-purpose. The single purpose device: Do you really want to carry a pager and an organizer and a voice communication device and a music player and a gaming device, et cetera, et cetera, et cetera?

What we’re really trying to do with these devices is let them be all in one. And this doesn’t have a keyboard, but there are people working on keyboard versions of this. There’s a new version that will come out next year that’s got a wireless radio built in. This can be used for making voice calls. Just put the little thing in your ear. It’s your PDA. It’s your phone. Oh, if you don’t like — and most people probably won’t hold it up quite like this, but you don’t like this form factor, you like this smaller form factor, we’ll have a phone that is a PDA and a PDA that can serve as a phone.

I don’t know which of the device types will be most popular. In some senses that’s not the important thing. The important thing is being able to have software that really interacts well across the devices.

If you haven’t seen the new Pocket PC 2002s or the Jornada, Compaq iPAQ, the new Toshiba devices, really, really I think it’s some of our best software work and some of the best hardware engineering we’ve seen out of our PC partners really in quite a long time.

How many people in this room have Pocket PCs? How many people have a Handspring device? How many people would have a Palm device? Okay. How many people would have a Nokia Communicator? Okay.

I heard today it’s the speech by Mr. O’Leary that it’s now the most popular PDA in Europe. I’m just checking the United States for a quick market sampling.

I think this handheld device category is super big, and I think we’ve all learned it’s not either or. It’s not a PC or something that fits in your hand. I think most people will carry both and want to be able to exchange software and have those things interact in very nice ways.

Xbox. (Cheers, applause.) Need I say more then? We’re pretty enthused. This is the craziest darn thing we’ve ever done, you know, spend hundreds of millions of dollars to build a product that you lose money on every unit you sell, and I don’t know, you make it up in volume or something. (Laughter.)

There’s a business model, and I talk to reporters and they’re all super interested in the business model. And, you know, over time I bet it will make some sense. But the key thing, the thing I got most passionate about, I think we’ve built, our guys, our engineers have designed a box that’s really going to change the way people play games and over time again you’re going to want a general purpose device next to your TV.

How many — just ask yourself, over time how many different DVDs are you going to have sitting next to your TV? I don’t see a reason to have more than one myself. But, you know, today you buy a DVD player, you buy a videogame console, you get a DVD with each of them.

How many storage devices should you have sitting there next to your television set? Well, in the Ballmer household today we’ve got the DVD player, of course. We’ve got the VCR, of course. And we’ve got the Ultimate TV, of course, which has a hard disk in it that you can use to record your own shows. Well, that’s kind of crazy. How many of those should you have?

How many broadband connections? How many places should you have to store your movies, your videos, your music, the stuff that you want to play around with in the house?

The answer is over time one, but it starts with a great machine that is great at what it does, and we wanted to introduce simply the best darn gaming machine in the market.

And if you haven’t been by our booth or you haven’t been in to one of the stores that have started to show the Xbox games, I really encourage you to go look.

We have three small children who love videogames, and I have one lovely wife who hates videogames. (Laughter.) And so there’s a lot of tension in the Ballmer household.

I brought my wife and my oldest son, who’s 9, just at the lower end of the Xbox target market range, to a big demonstration we were doing inside the company of these things. And, you know, my son asked of me, “Oh, dad, you know, your speech was okay, but Xbox really rocks, dad. It’s fantastic, blah, blah, blah.” No surprise. I expected that response.

My wife, “Oh, honey, you were good, but, you know, I could really tell the difference in that Xbox. It really looks a lot better than the other stuff the kids play with. We might actually have to get him one for Christmas.”

It is a phenomenal experience, the photo-realism in the games, in the driving games, in the football games. And the thing I’ll tell you is the games you see today versus the games you’ll see in a few years, it will be night and day, because these videogame designers aren’t used to yet having that hard disk. And with the hard disk, the broadband connection, which is built in, and the graphics, you haven’t seen anything yet. The quality and excitement in those games I think will really go to another level over the course of the next several years.

I’m going to wrap up. I’m well over time. I don’t keep a watch, but I viscerally know that I’ve gone over my self-appointed time limit. Suffice it to say we’ve got a lot of excitement for what’s going on. We share that enthusiasm with you. Please support us. We will certainly support you. Thanks.

(Cheers, applause.)