Microsoft Maintaining Strong Product Momentum and Long-Term Focus, Gates Tells Analysts

REDMOND, Wash., July 25, 2002 — The long-term outlook for the technology industry is bright, according to Bill Gates, chairman and chief software architect at Microsoft Corp. Speaking today to an audience of more than 300 financial analysts, investors and journalists at Microsoft’s annual Financial Analyst Meeting, Gates shared his optimism about the technology sector and highlighted the company’s achievements in fiscal year 2002, as well as the major investments the company is making in the coming year to foster future growth and innovation.

“We’ve always taken a long-term approach to our business, even in times of economic challenge and uncertainty,” Gates said. “Our products deliver great value today, and our technology road map puts us in a strong position for the years ahead.”

Microsoft Garners Big Wins During Past Year

Microsoft’s position in the enterprise is strengthening, Gates said, as a result of continued product enhancements in scalability, reliability and manageability, with Microsoft® SQL ServerTM 2000 leading the way with top industry benchmarks and improved ranking from key industry analyst firms. Another momentum driver has been Windows®
XP, which has now sold more than 46 million licenses, making it the fastest-selling Windows operating system ever.

“We saw some remarkable successes in 2002,” Gates said. “For example, Web services are gaining broad appeal, and even some of the original skeptics have re-evaluated their position on the technology. WS-I, which is promoting Web services standards, now has more than 100 member companies, and Visual Studio®
.NET developers are now deploying all kinds of Web services applications.”

Gates also touched on Microsoft’s role this year in raising awareness of trustworthy computing as an ongoing, industrywide issue. He noted that consumers, information workers, developers and business leaders will only be able to rely on technology in every aspect of their lives when they are certain that security, privacy, reliability and business integrity are engineered into the fabric of every computing system.

Company Takes Long View, Investing in Employees, Incubating Ideas

Business successes and economic issues aside, the heart of Gates’ talk was forward-looking. Gates outlined three “waves” of software that will form the core of activity at Microsoft over the next couple of years:

  • The Now wave consists of software the company expects to release throughout fiscal year 2003, including Windows .NET Server, Windows Media (TM) 9 Series, Windows XP Media Center Edition, MSN®
    8, Windows XP Tablet PC Edition, Windows CE for Smart Displays, an update of Visual Studio .NET, XboxTM Live and innovative, new Xbox games.

  • The Yukon wave will center on the next major release of Microsoft SQL Server, which, while furthering the industry-leading scalability and programmability of SQL Server, will also deliver the unified storage architecture foundation for future products in the Microsoft .NET Enterprise Server family as well as the Longhorn wave of products.

  • Further out, the Longhorn wave, surrounding the next major release of Windows, promises the greatest breakthroughs to date for information workers. Applications, operating systems and Web services will be tightly integrated in how they store, present and manipulate data.

Each wave connects the four customer “domains” — information workers, IT professionals, business processes and consumers — with .NET, and each wave enables new user scenarios and new solutions. “As we continue to move into the ‘Digital Decade,’ we’re seeing the boundaries between systems and applications start to dissolve,” Gates said. “It’s this fluidity that will power incredible, tangible change in how all of us use technology.”

Investing for the Future

Gates said Microsoft expects to increase its employee base by 5,000 over the coming year. In addition, Microsoft’s research and development spending in fiscal year 2003 will increase to $5.2 billion, more than 16 percent of net revenues. This represents growth of more than 20 percent over R & D spending in 2002.

One critical element of the company’s research and development efforts centers on incubation projects, which give new ideas room to grow inside Microsoft’s various product development groups. Every business unit at Microsoft is nurturing incubation projects. As promising ideas take shape, a small team is formed, with a charter to flesh out the idea and, ultimately, create a prototype that can be evaluated against the larger business objectives. Incubation projects allow creative engineers, architects and researchers to explore specific new technologies or even entirely new product categories in the supportive environment of a product group that has design, development and testing resources at its disposal.

Webcast Details

Microsoft is holding a webcast of the Financial Analyst Meeting today from 8 a.m. to 6 p.m. PDT. In addition to Gates, the day’s presenters include Chief Executive Officer Steve Ballmer, Chief Financial Officer John Connors and several other executives, highlighting Microsoft’s business and product strategy. The session may be accessed at In addition, the session will be archived on Microsoft’s Investor Relations Web site under “speeches/events.” Visitors to this site can read transcripts of the presentations, see the slides or watch the replay of the audio/video presentation at

About Microsoft

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

Microsoft, Windows, Visual Studio, Windows Media, MSN and Xbox are either registered trademarks or trademarks of Microsoft Corp. in the United States and/or other countries.

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

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at on Microsoft’s corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. Journalists and analysts may contact Microsoft’s Rapid Response Team for additional assistance.

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