Ballmer Touts Microsoft’s Innovation Investments and Strong Growth at Annual Financial Analyst Meeting

REDMOND, Wash., July 28, 2005 – Innovating across the broadest spectrum of technologies in the software industry, expanding its pipeline of new products and investing to keep pace with changing customer needs are Microsoft’s top priorities for ensuring continued strong growth for years to come, Chief Executive Officer Steve Ballmer said today at the annual Microsoft Financial Analyst Meeting.

Microsoft Chairman Bill Gates (left), Chief Technical Officer Ray Ozzie (center) and Ed Lazowska of the University of Washington speak at the 2005 Financial Analyst Meeting, Redmond, Wash., July 28, 2005.

“There is no way for our company to grow without innovation,” Ballmer told the audience of more than 300 analysts, investors and journalists gathered at Microsoft’s Redmond campus to hear about the company’s business strategies in fiscal year 2006 and beyond. “We’ll achieve that growth not only by focusing on our anchor businesses but by competing and winning in a wide range of new services – many of them based on advertising or subscription revenue – and by creating a new portfolio of products that meet the growing needs of our customers.”

Ballmer said this commitment permeates the company’s upcoming releases of products and services that range from new versions of Microsoft Office and the Windows family of client and server operating systems to Microsoft TV, Windows Mobile 5.0, the Xbox 360 gaming console and expanded MSN Search capabilities. “In the next year, our product pipeline will double that of the past three years,” he said. “We’re moving forward … with the goal of having really best-in-class products in every major marketplace we play in: games, entertainment, search, mobile and business applications.”

Attendees also heard Bill Gates, chairman and chief software architect of Microsoft, and other top executives from the company’s major business groups describe numerous innovations taking place throughout Microsoft. No other technology company is seeking to compete and grow on such a broad scale as Microsoft, said Ballmer.

“This is not a set of unconnected experiences,” he continued. “We see synergy across what we do in these areas: synergy in user experiences, in the way people build and manage software, synergy between entertainment and communications scenarios, information access, and business and e-commerce.”

Microsoft CEO Steve Ballmer speaks at the 2005 Financial Analyst Meeting, Redmond, Wash., July 28, 2005.

As further evidence of the link between innovation and growth, Ballmer noted that Microsoft has seen its revenue grow from US$25 billion to $40 billion and its operating profits climb from $12 billion to $19 billion over the past five years, while its total spending on research and development has increased by 25 percent. He also displayed a chart showing that Microsoft’s share of the total operating income among 25 leading information technology companies has grown from 18 percent to nearly 23 percent over the same five-year period.

“We believe in the future, and we will invest in that future,” Ballmer said. “We bought $8 billion of (Microsoft) stock in the last 12 months – there’s no better sign that we believe in the future of our business.”

In positioning itself for the future, Ballmer said Microsoft is embracing the challenge of keeping up with rapid innovations in mobile computing devices, real-time communications, Internet-based services and other areas where the company faces stiff competition. “Here at Microsoft, it is absolutely a job-one priority to not only keep up with these shifts but to help drive them and shape them,” he said.

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