(Applause.)

STEVE BALLMER: It is a great pleasure for me to have a chance to be here with you today.And I want to say it was probably three years ago that I last had a chance to speak up at Comdex here in Toronto, and Im just delighted to have a chance to be back and share some of the exciting things that we see going on in the industry, with it, and a little bit about some of the things that were up to at Microsoft.

One of the things that some people wonder a lot about whether or not we are up to is Canada.Theres been a lot of speculation recently in the press about whether were moving.A lot of people thought BC looked like the winning place for us.Some people thought Alberta would be a good place for us.Nah.(Laughter.)Nah.Theyre wrong.Now, this is not any kind of official pronouncement, and so for the journalists in the front row who think theyre going to file in about 30 seconds, I want you to just wait just a minute.(Laughter.)But if we were to ever relocate to Canada, theres only one city for us.Ill bet you can guess what it would be.Thats right, not Churchill Im afraid.(Laughter.)Its Ballmer Town, Ontario.(Laughter.)Definitely the only place for us.(Applause.)

The funny thing is there is such a town.It has about six people, and I had a chance to go there one time when we were vacationing north of Lake Superior a long, long time ago.

Seriously though, if you look at the range of amazing things that are going on Internet eh business I think it is clear that the computer industry, the IT industry, the information industry, the Internet industry — since its all really one — is every bit as dynamic and competitive and full of change as its ever been.And so some of the lawsuit and some of the speculation thats brought us to this place, you know, well work our way through that and in the meantime I think as consumers the most important thing to know is we stay dedicated to the future and the future really stays dedicated to you.Theres so much going on.There are so many opportunities to innovate, to create exciting new products, to do things that youre going to find valuable and exciting.Theres so much opportunity for companies to gain and lose market position.

You know, if I think back to this being my third decade of Comdex, if you look at who are the important players, you know, when I went to my first Comdex in 80, actually 80, 1980, my first Comdex, 85, 90, 95, the key players have changed every year.And I hope they dont keep changing, but certainly the competitive juices of the marketplace are going to keep this the most dynamic, exciting industry and the best industry to be a consumer in that I can possibly imagine.

The thing that has really fueled the information revolution, not just the PC revolution, but the information revolution has really been this concept of Moores Law, as articulated by Gordon Moore, past chairman of Intel.And he said very simply that every year and a half well have double the computing power at the same price.And if you track that over the course of the last 20 years its been true.And as we turn and we look forward for the next ten-plus years we see Moores Law continuing.

So if today we think about 600 megahertz or 800 megahertz processors are being standard, literally you can go out, you know, another six years and were going to have another 16 times the power at precisely the same cost, or youre going to be able to get a little less power at lower costs.But this phenomenon is what is propelling everything.Its whats letting us have smart phones.Its whats letting telecommunications gear become lower cost and opening up new vistas of telecommunications through the Internet.Its whats allowing PC servers to drive up and support the mission critical applications of the worlds businesses.Its really the fuel for everything thats going on.And it will continue.

Some of our erstwhile competitors would have you believe that all intelligence and all computing is going to re-centralize and were all just going to have dumb terminals or dumb cell phones or dumb set-top boxes talking to big, smart, powerful computers in the sky.Nah.(Laughter.)Thats not whats going to happen.It flies in the face of this basic law of science.You know, were all going to have more and more intelligence.You might say,
“Why do I want all that intelligence in my television set when Im just sitting there couch potato-ing, watching the golf tournament on the weekend?Why do I want all that intelligence?”
You want all that intelligence so your brain doesnt have to have all that intelligence.(Laughter.)

I dream about the day when I can yell at my TV set,
“Hey, Bill, did you see that putt Tiger Woods just made?”
And its going to do voice recognition and natural language and check my instant messaging list and all of a sudden Bill Gates will hear on his TV set,
“Hey, Bill, did you see that putt Tiger Woods just made?”
(Laughter.)We need real power for that scenario.(Laughter, applause.)

So the world of our future is not a world of dumb peripherals talking to big central intelligence.The world of our future is a world where every one of us is given and has and buys devices, which are smart, powerful devices that help us to help us enjoy life more, help us get information, help us communicate with our friends, with our family, with our coworkers, help us analyze, help us run our business.I mean, it is really amazing when you think about the fact that the small business of today can easily own a computer thats more powerful than the mainframe computers that even the biggest banks would have owned just ten or so years ago.And this phenomenon is really powering the spread of devices far and wide.

If you look here in Canada were really talking about a market that is amongst the most sophisticated in the world today.The penetration of PCs into Canadian households is about 56 percent.Depending on exactly how you count I think we can fairly say that household acceptance of PCs is now higher in Canada than it is in the United States, that is a higher percentage of Canadian households have PCs than US households.Thats a phenomenon of the last year.But certainly weve just seen an incredible boom in smart devices of all kinds.And, you know, theres no aspect of this revolution in which things are not happening at quite a rapid clip here in Canada.Acceptance of cable modems is ahead here in Canada versus anywhere else in the world.The penetration of cell phones, North America is somewhat behind in general whats happening in Europe and Japan, but certainly, you know, theres been a very good uptake and move to smart cellular devices here in the Canadian market.

We wanted to make sure that we gave you some real scope and specific market intelligence before I got into the whole presentation here, so I want to share a little bit of market research that weve done on the acceptance of new devices.This is North American research, but conducted primarily in the United States, so if we could roll the tape I want to really bring you into the fold some of our secret market intelligence.

(McLaughlin Group video segment.)

(Applause.)

STEVE BALLMER: The social issues of our day in the use of the Internet.

Id like to turn and talk a little bit though about the future.I mean, were all very excited.I think thats what brings us here today.Were excited about technology, about the PC, about the Internet.

And the question that we always have to come back to and ask ourselves as technology, people, as people are enthused about technology is whats going to happen next.If I asked you the question ten years from now,
“Do you expect using the Internet to be largely the same or quite different than using the Internet today”
, what would you say?Different.The fact that people are here today would say its going to be largely different.

If you though were to ask,
“In what ways will using the Internet be different ten years from now than it is today”
, wed get a stronger variety of answers.

And if you actually asked the question of
“How will the Internet transformation from whatever we might call this generation to the next generation, how will it happen”
, I think the answer is it will happen slowly for the next several years, slow change, slow change, slow change and then there will be kind of almost a hockey stick of accelerating change in the Internet.

Why do I say that?Were just to the point now where businesses and Web site producers are starting to see real value and starting to really get some traction with the first generation Web site s that theyve built.Were starting to get to the point where users are familiar with whats going on in the Internet.I dont think well expect to see a change that happens instantaneously, but sometime over the course of the next three, four, five, six years I think were going to see an incredible change come about the Internet.

What will characterize those changes?Well, if you think about what is deficient in the Internet today or what is deficient in the technology business today, it points you clearly to a few key things.And Ill start with a perspective of what will change about software, because in some senses thats the glue that brings all of this stuff together and its certainly the core of our business.

The software business, for at least the 20 years Ive been in this industry, has been primarily a business where you build the piece of software and you deploy it, and then you leave it alone and then you deploy it again.So we build a copy of Office.We put it in a box or a CD.We give it to you.You deploy it to your machine, to the machines in your organizations, whatever the case may be.Its a very static activity.Its not very dynamic and we all suffer in a sense with that.

The nature of software and I might add I think the nature of all goods that can be physically delivered on the Internet — music, financial services, entertainment; these are all services that can not only be ordered but also delivered on the Internet, but the character of those businesses, and particularly the software business will change.Software will become a service.Ten years from now because of the Internet we wont ship you disks.We will have — every software vendor will transform their products into a set of services, which are constantly updating themselves, monitoring your system, delivering you new functionality, storing information on your behalf, watching other things on the Internet on your behalf.The whole nature of what software is will be transformed in this next generation of the Internet.

For that to happen I think there are some things that have to change in the basic technology infrastructure in the Internet and the first and most significant is already happening.And thats the acceptance of XML as the protocol set for the next generation of the Internet.XML, as Im sure many people in the audience know, is a protocol that in some senses is a lower level protocol than HTML.HTML, the protocol which is used in Internet browsers today, lets you put up a Web page, and it describes whats on the page.XML is a protocol that actually describes the content, the data, the semantics, the code.It lives at a little bit lower level and it lets you pass meaning back and forth as opposed to just pictures of screen.

Now somebody might ask why is that a fundamental revolution?Well, the move to XML will change many things on the Internet.First, if will enable this notion of
“software as a service”
because you can really use the intelligence on a client and on a server.In todays Internet you can have a dumb device on one end, because all youre doing is sending down a screen full of information to the client.

Secondly, in the world of XML you actually have a world where Web site s can talk to Web site s.Today the world is pretty much producer-driven.Somebody builds a Web siteand you look at the Web site.And you could say some Web sites let you personalize them, but they let you personalize them exactly the way they want you to personalize them.We dont live in a world today where you can create your own Web page or Web siteout of information that comes from multiple sites.Suppose you have accounts with two or three different brokerage firms and banks.Theres no easy way to go collect that information and have it integrated.You have to go visit each one of those sites and look at the information and copy it down.

Suppose you want to — I dont know — look at a sports site and share your opinions about — I dont know –maybe today I shouldnt say the Argonauts, but share your opinions about the Argonauts or the Alouettes game from last night with your friends.How do annotate that Web site?How do you circle something and tell your friend,
“Look at what I think”
?The Web today is a one-way medium.People present to you; you dont comment back onto the Web.Yes, you can send email and this and that, but the pages on the Web themselves you cant annotate, you cant commend upon, you cant share your comments and annotations with your friends.It makes it tough to do many of the things that at least Tim Burners Lee (ph), who was the original sort of founder of the World Wide Web, conceived of.

And so in this world of XML we envision a world in which Web site s talk to Web site s using this XML protocol.

Let me just give an example of some of the scenarios that I think the first two things should enable.Suppose youre going to go, you want to book a reservation to go visit a friend in Seattle.And you want to book the reservation.You want to tell the friend youre coming.And, of course, if your flights late, what do you want to have happen?You know, youd love to have some Web site notify your friend.And your friend has ways in which he or she likes to be notified.Maybe they want to get an instant message.Maybe they want to get a piece of email.Maybe they want to get paged.Maybe they want to get called.How would you write today, how would you use the Internet to write a program that accomplished that?

Well, youd have to have the travel booking Web site would have to know how to talk to your contacts list, so it could recognize your friend.It would have to know how to talk to your friends email, personal agent, contact management system so that it would know how to find your friend and notify your friend when your flight is late.Oh, it would probably want to talk to your friends calendar, so it could just note on your friends calendar what your initial arrival time is, et cetera.

So youve got calendars communicating with travel sites, communicating with email programs, communicating with instant messaging just to make a basic scenario work.

Medical records, another good example of where I think the next generation Internet comes together.Today if you wanted to get your full medical record, what would you do?I dont know what I would do frankly.I mean, Id go see my doctor and he would give me what he had, and then he would remind me that,
“Oh, by the way, when you got your throat surgery after Comdex Canada three years ago, you know, you got that in a different clinic; we dont have any of your throat surgery records.”
And then Id go there and theyd remind me,
“Well, yeah, of course, thats okay, but remember when you got sick when you were home in Detroit a few years ago?We dont have any of those records.”
And it would be a mess.

In this world of software Web site talking to Web siteIm going to have a Web site someday that is my healthcare record.And I will tell doctors and clinics that they are allowed to update my record on my behalf.I will give permission to my orthopedic doctor to look at my old x-rays.And I will not give him permission to look at my — I dont know — psychiatric records or whatever one I want to keep off limits.(Laughter.)Not that I have a psychiatric record — (laughter) — but just in case.

This is the world that we see evolving to in the next generation of the Internet.These are worlds in which the technology Internet changes fundamentally, but so does the business model.The business model of todays Internet is you own eyeballs and you own everything about the user and people pay a tremendous amount of money to get access to eyeballs.This is a world where you discover Web sites.This is a world where the user is back in control, not the producer of the Web site.Its quite different.

In this next generation well need to see continued improvements in operational excellence.The scale of Web sites will continue to grow.With MSN and Microsoft.com today we do run the most trafficked sites on the Internet worldwide.And I can tell you the amount of effort that we need to put into enhancing the tools to manage and deploy Web site s at scale is still quite large.

The range of devices that people use to access the Internet will continue to grow.

The user interface to the Internet will change.Today we think about accessing the Internet through a browser.Well, for years weve had users complaining about the PC user interface.People want to be able to talk to their computers.People want natural language.They want to be able to express themselves the way they express themselves in their native language:English, French, whatever it is.They want to be able to express themselves.They dont want to have to know its
“File” “Open”
, blah, blah.They just want to say,
“Get me all the information about”
or
“get me the stats on last nights All Star Game.”
They want to be able to express that simply.And well see the user interface evolve.

Thats also necessary if we want to make these other devices worthwhile.Believe me, a cell phones not going to be a great device to access the Internet if everything has to be through sort of todays traditional user interface paradigm.

About three weeks ago we introduced the Microsoft .NET platform, and the role and goal of our .NET platform is to provide the tool, the building blocks, the platform that helps underpin this next generation Internet experience.It involves a new user interface paradigm.It involves technology, which we put in all of our operating systems — Windows, Windows servers, technology that we will work with third parties to put on various forms of UNIX to make it easy to write XML applications.It involves new Internet services that run up in the sky and are available to software developers.

Just take the following simple problem.When you log into the Internet today or when you travel the Internet today, how many different passwords do you have to remember?I dont know for the average person, but when my wife, whos not a techno aficionado, had to learn a password in order to find out what the status was of the tickets to the Hall and Oates concert that she had bought on Ticketmaster, a password she to this day doesnt know where she wrote it down, we have a problem here.The world of the future is a world, and one of the problems we try to address in .NET is how do you create a service so that a user can authenticate themselves once and then travel the Internet and have that credential log them in, authenticate them, authenticate them for payment? How do you create a set of services so that I as a user might describe heres how I want to be contacted and notified?And if my bank balance is below $100, I want to be notified in this way.Or if my test results come back from school, heres how I want to be notified.You want to be able to get notifications on a broad set of things in your life consolidated and presented to you through one scheme.

And so we see an opportunity to create a platform.Its not a platform exactly in the Windows sense.Windows is a platform for building applications for clients and servers.But its a platform that runs on clients, on servers, on new devices.It might run on UNIX systems.And actually runs out in the Internet cloud and provides services that underpin these notions of software as a service, new user interface paradigms, and XML as a new programming model.

I dont think this is something that sort of changes the world overnight.But youll start to see us bring products out that support the .NET vision.This week down in Orlando, Florida were having our annual big conference for software developers.And most of what were talking about is the development tools and operating system runtimes that support this .NET platform, starting with our new release of Visual Studio, which will be out about a year from now.So were working down at the low level on the standards.We and IBM and others are driving XML standards on the tools and operating system runtimes like Visual Studio.

And at the level of building blocks were starting with things like our Passport authentication and identity system, which is built into Hotmail and some of our MSN properties, but which were opening up for developers to use for general authentication on the Internet.

I talked about some of these examples:travel, healthcare.You can think of a lot of other examples in which this next generation of the Internet is valuable.Suppose youre a business thats trying to plan manufacturing of a given item, and you want to be able to go in and find out how much your dealers and distributors have in stock.You want your Web site to talk to their Web site.You want your Web site to talk to your suppliers Web site.These are all important characteristics of this next generation of the Internet.

In this next generation — actually in this generation of the Internet we also will see a change in the way Web sites are constructed.Today a lot of Web sites have one or two big backbone systems, and if they go down the whole site is shut down.And weve seen some major outages on big Web sites in the Internet.Weve seen Schwab be down.Weve seen e-Bay be down.And generally when these systems go down its because they have a single point of failure, a big UNIX or a big mainframe type system that goes down.

Now, you might say,
“Hey, this guys trying to act like Windows systems never go down.”
(Laughter.)Nah.They do go down sometimes, Ill be the first to admit.But in the new world of Internet operations what youll have is farms of servers, and if one of them goes down youre okay because other members of the farm, the Web site farm, other machines pick up the load.

So when you look at these big Web sites that have problems its never because a Windows machine went down, because theyre almost always a group of Windows machines that are cooperating in the processing.They avoid a single point of failure.

And so the architecture of the future for availability reasons, for reliability reasons, for scalability reasons will really be groups of servers, groups of inexpensive servers acting as a single system as opposed to big single unitary machines that can go down.

Now those groups, those farms of servers will give great scalability and performance.Theyll give higher reliability because there is no single point of failure.Those servers have to support this XML protocol to the core so that they can be programmed and scripted and managed, so that they can serve up XML data to other Web sites.They will have to federate with other services on the Web through XML.My calendar will talk to your calendar.I will be able to book an appointment on both of our calendars and have that work seamlessly because there is a common schema for how XML is represented on the Internet.

And these Web sites will need to be managed from anywhere and scale from very small organizations, from the home even, on up to the largest enterprise.

One of the areas of I think greatest work will be in what we call residential gateways.Most homes — my prediction — ten years from now will have multiple intelligent devices hooked to the Internet, two or three PCs, two or three set-top boxes, a phone or two.Youll have a wireless LAN in your home.And youll have a gateway.The gateway may be one of your set-top boxes.It may be one of your PCs.Or it may be a specialized gateway device that you just use to share the high bandwidth linkage of the home.

So even in the home there will be a server that someone is, quote,
“operating.”
In my opinion the operations of that server wont be done by the family.Theyll typically be devices, which are remotely managed by the person who sells you your high bandwidth access to the home.But the whole nature of server operations in this next generation must evolve.

Everybody focuses in on the fact that theres going to be new devices and more devices, non-PC devices hooked into the next generation of the Internet.The thing that a lot of people miss is the PC will still be the most important device hooked to the Internet.We believe that strongly at Microsoft.Will there be a higher growth rate in phones and TVs connected to the Internet than PCs?Sure.Just because today we already have over 300 million PCs connected to the Internet, which dwarfs the number of these other devices.So the PC will stay a primary device, but we certainly dont deny that people will use dumb terminals.People will use cell phones.People will use set-top boxes.And there will be a variety of devices that you want to use depending on who you are, where you are and what form.

I see a number of people sitting in the office with pads of paper, maybe making a note or two.You know, my prediction is within ten years youll carry not a notebook even.The notebook is a little bit big.Its got a keyboard.Its a little bit bulky.Youll carry something thats about the size of a piece of paper, about this size, a little thicker.Well call it a Tablet PC.And youll literally sit there and write on your Tablet PC.If you want my presentation, my presentation will be beamed via wireless Internet here in the room.If you want to comment on it, you want to make your own notes and annotations, youll make it right on the slides, right on the tablet, right in the room.If I decide I dont like the way something looks — well, I probably wont do it in this audience — Id sit here and type, youd get it live in real time in a sense in this room.It will be a very different kind of device.

And some of you will want that.Some of you will want a small device that fits in your pocket.Some of you will still want to carry a cell phone and will want to have that be the only device that you carry.

So there will be a variety of form factors from very small phones, screen phones, what we call Pocket PCs, Tablet PCs, notebook machines that have full keyboards.The range of devices that you carry, that you use in your living room, in your family room will continue to evolve quite rapidly.

And were doing investment in a lot of areas.Our new Pocket PC hit the market a couple of months ago.If you havent looked at it, its a super device.We still dont have the cheapest device in the market, but if you really want a powerful thing that fits in your pocket, where you can carry your music, the pictures of your children, all the maps youd ever want, your email, your contacts list, your to-do list, its a super nice device.Its a general purpose, programmable computer.And it has all the benefits of that.

Weve announced earlier this year our Xbox videogame console, which again is another smart device that can plug in, a very powerful device for the family room context.

Were working very aggressively with Rogers up here in Canada on next generation TV set-top boxes.

We announced a new phone type with Samsung, an intelligent phone a few weeks ago.

And at our .NET launch several weeks ago we showed the first prototypes of these tablet PCs.

So across the board were making a big investment not only in the PC, but in these new devices as part of this next generation of the Internet.

Ive expressed my enthusiasm already for the PC as a device.Why do I think it has such a bright future?Well, PCs have amazing power and performance and price.They really do.And if you want a general purpose device, a device that can do a lot of things, that has the most capability of any device you have in your home, the PC will always be the most capable device.

Were working very hard on making the PC also the most reliable device.Its not that today, but for those of you who perhaps have already migrated your desktops to Windows 2000 you know that were making great strides forward on reliability.The PC, because of its general purpose nature, has been less reliable than some special purpose devices.We can fix that.Were doing a lot of work, and certainly I encourage everybody to take a look at the Windows 2000 desktop.

PCs today sometimes people say theyre too hard to manage.Well, weve made a lot of investment again in making it possible to centrally manage these machines.In fact, over time I think youll be able to buy services in the next generation of the Internet.Youll be able to buy services where somebody says,
“Ill take care of your PC in your house.You buy it.You buy the service from me.Ill install all the new software.Ill manage your PC.Ill keep it up to date for you.Ill do that all via the Internet.Just pay me five bucks a month.”
And so well get out of a mode where people worry about managing and keeping their own PCs up to date.

Flat panel screens are becoming more common.People do like large screens.As much as I like the TV and as much as I like things that fit in my pocket, Im getting a little older.I like these big screens where I can see things.

I talked about the tablets.Multimedia is an area in which well I think continue to see the PC be on the leading edge.Whether its for video or audio or music or movies, the PC will be leading edge.

The initial broadband connectivity that most people get will be through the PC as opposed to one of these other devices.And these devices are designed to be expandable in a broad set of ways.

We did a little video that Ill admit this time in advance is designed to be a little bit cute.But its kind of a scene that you might expect in the world of the next generation of the Internet.But the scenario that youll see is a scenario that very much depends upon the PC as one of the core devices.Other devices are involved, but the rich things that our heroine for this video, Jenna, can do, she can only do if she has a PC.

So why dont we roll the video and sort of take a look at what the next generation PC might look like.

(Video segment.)

(Applause.)

STEVE BALLMER: What were trying to give you a sense of in the video is some of the amazing scenarios that we are very focused in on enabling through next generations of technology.If you take a look at the kind of video editing and project sharing that the girls were doing in this video, theyre things where you are really going to want the power, the processing capability, intelligence of a PC, the screen size of the PC.

So we see the PC as staying a vital and exciting device.We showed you a little bit of what the tablet PC kind of functionality might look like, and still there are other devices.She can plug that cassette into something in her car.It can talk to her.So there are a variety of devices.But the PC stays really sort of the showcase device for the general purpose, high-end things that people want to do.

Were certainly investing in two core products for the PC environment:Windows 2000 and Microsoft Office.Windows 2000 has come to the business market.Next year well bring Windows 2000 to the consumer market with a version that actually runs the vast majority of current games and home devices.Were working hard to continue to push Office forward.Office, if you think about it as a spreadsheet and a word processor, youre thinking about it in yesterdays terms.Were trying to make Office the very definitive tool for the knowledge worker, for people who want to communicate and analyze and meet and collaborate and share information.And we see the definition and scope and sort of essence of Office expanding.Yes, theres more we can do in spreadsheets and word processors, but we have to do more to facilitate the work of students and business people who want to analyze and communicate and understand data better.

This year, around the Windows 98 code base, were bringing the next generation of consumer PCs to the market.We call it Windows ME or Millennium Edition for the home market.It adds capability that new PCs will want to have.It adds better capabilities for supporting digital media:videos, music, pictures, et cetera.We improve the user experience in fundamental ways — better help, better support, better support automation.

We protect the system.At least in the Ballmer household my five-year old is well capable of deleting things that he is not supposed to delete, and we protect the system from the likes of Peter Ballmer in the next generation.

Enhanced home networking.More and more people, today I think in the United States about 20 percent of all households actually have more than one PC.And the numbers are quite similar here in Canada.We want to make it very easy for people not only to plug together multiple PCs in the home, but to have the PC talk to other intelligent devices:stereos with intelligence, TVs, phones and other intelligent home automation devices, security cameras, et cetera through our so-called UP & P or Universal Plug and Play technology.

And weve improved the Internet experience:an update to the browser, better online support, communication, printing from the browser, et cetera.

What Id like to do now is invite Dave Carter, whos the manager of Internet Strategy for Microsoft here in Canada to come on up and show you a little bit of Windows 2000 and Windows ME.Dave.

DAVE CARTER: Thanks, Steve.Good morning.I brought you a little present.

STEVE BALLMER: Youre my hero.What have you got here?

DAVE CARTER: What Id like to do is take you through two different scenarios and talk about Windows from a perspective of a business user.Well talk a little bit about Windows 2000.And then well go and talk about Windows ME or Windows Millennium Edition.And then well give you a little quick preview of some prototype stuff were working on.

STEVE BALLMER: Super.

DAVE CARTER: One of the issues —

STEVE BALLMER: Though I havent seen it, Bill, I wont admit it to the audience.

DAVE CARTER: Look surprised.It actually really impresses everybody.

STEVE BALLMER: Good.

DAVE CARTER: One of the issues we had with our NT 4 users was you had to make some tradeoffs.If you were a business user and you wanted scalability and security and robustness, what you ended up giving up was the really cool user interface of Windows 98 and the broad device driver support.And that was very frustrating.So now with Windows 2000 we actually have that broad device driver support, plug and play support, and we can now use all these really cool plug and play USB devices.

This is actually Compaqs i-Paq legacy-free PC.And what that means is we can create a very, very low-cost PC that hasnt got serial ports, parallel ports.Its really moving from here forward.

So I thought Id show you this really cool device.Its called a white board.No, its actually this thing I want to highlight.This is called a
“Mimeo”
and what you do is just stick it on with some suction cups onto a white board and you plug it in the USB port, which well do right here.And so now thats installed.If it was the first time it would ask me about drivers, but this is actually a certified Windows application so now its working.We can open up the Mimeo software.And Ive only brought one color.It does do multiple colors.But whatever I do on the white board — (pause) — so now that Ive done that, what can I do with that?Well, I could print it out.How many times have you done a meeting where youre sitting at the white board and then you want to go and print a copy of that and youre desperately trying to take notes?Or I can use this it something like NetMeeting and teleconference that.

So a really, really cool device that you couldnt use under Windows NT 4, but now we can use that now.

Some other neat things we wont have time to show you like the multi-language packs that we could actually load in another user profile and see the interface in French.

Now what Im going to do is take this machine out of hibernation and if youre a laptop user, even if you were a business user, you didnt use Windows NT 4 because of all the mobile features that werent in it, so that whole USB thing that were talking about before.But now weve got these really, really cool, really sexy, super powerful PCs.So this is Sonys Picture Book, which has got a little camera in the front.You can actually use it as a camera or teleconference.Its a nice, small footprint PC.

Or a lot of our staff are carrying around these Toshibas, which are really big boxes in tiny shells.Its a really powerful, nice slim line, but I want to be able to use a scalable, secure system.

Now my system was in hibernation, so I can save power.You know, youre on a plane and you want to save battery, battery, battery, of course, so weve put it in hibernation.When we come out of hibernation our apps that were running are still there and it tries to reconnect to the network.So all those really cool advantages of having a great mobile PC we can actually have and have Windows 2000 right now as well.

STEVE BALLMER: Just for perspective, I never turn my PC off ever anymore.I always hibernate so my applications are always live, everythings always in the state I left it in when I come back to it.I literally carry one of these Toshibas and my works always live.I plug it into the dock.I take it out of the dock.And Im always sort of live and working.

DAVE CARTER: And your desktop stays intact.

STEVE BALLMER: Yeah.

DAVE CARTER: Now, infrared support is becoming more and more popular because youve got all these really cool infrared devices.Cellular phones now have infrared connections.The Pocket PCs, digital cameras, printers, other peoples laptops.Youre on a plane and you want to exchange a presentation.So now weve got great IR support.And I thought Id just prove that by taking a picture of you.

STEVE BALLMER: Uh-oh.

DAVE CARTER: There we go.I think I got one.And now what Ill do is its got an infrared transfer on it, so literally I just hit transfer on here and lets hit transfer.Stand by.And if youll notice in the bottom right it just picked up that there was an infrared device trying to connect.Its copying the file over.And literally Im doing nothing on the PC.Its just accepting that file and in a second, if we give it enough time, that file will come over and be on my hard drive.This could be a Word document.This could be a Power Point presentation.This could literally be anything you want.Ill be selling that photo on e-Bay later on today if youd like to come up and see that.(Laughter.)

Im kidding.

STEVE BALLMER: Nobody will bid anything for it.Thats the problem.

DAVE CARTER: That would be a career issue, wouldnt it?(Laughter, applause.)

Lets talk about what the consumer sees now.All these really cool features in Windows 2000, but a consumer has a totally different approach.We think about these great services that will be on the net.And one of our partners here in Canada, London Drug, theyre sort of like a department store in British Columbia, theyve teamed up with a company called TelePics to take your real film and digitize it online, so you can drop off your 35 millimeter film and there it is in the sky for you to download and you can actually log in, download a photo if we want, and its giving me an ID.

STEVE BALLMER: Another one of those IDs you have to remember.

DAVE CARTER: Yeah.Were working with the Passport.

And weve got some pictures up here that we might choose to download and put into a presentation.But the cool thing is all those people who dont even have PCs can now share their stuff out in the net.And if you have both its even better.Its actually very high resolution.

So if we wanted to download the photos, lets select an image size and hit download.I wont finish the download, or I wont finish selecting image size, but we do the download and there it is on our PC.

So now our Windows ME or Millennium Edition version has a really cool piece of software called Windows Movie Maker.And I have to confess actually when I heard you were coming to town and we were going to be on stage together I thought, you know, we could hang out together for the day and maybe see some sights.Youd probably make some time in your calendar.So I left a couple messages for you, and thought maybe we could do that.I didnt really hear back —

STEVE BALLMER: Did I answer any of them?

DAVE CARTER: I didnt hear back from you on any of them.

STEVE BALLMER: Okay, good.(Laughter.)

DAVE CARTER: And, you know, I knew you were busy, so I thought, well, you know, were going to synch up on this, so it wouldnt be a problem.And, well, you know, Ill show you how the tour worked out.(Laughter.)

So Ive digitized some clips from the video camera and put them into Windows Movie Maker.And lets show you some of the things that I did.

STEVE BALLMER: This is a tour we would have had.

DAVE CARTER: Yeah, this is a tour we would have had.And let me just — now Ive actually got to put a soundtrack on that, the rights to some music I could put in a music track over that.

STEVE BALLMER: If you had the rights.

DAVE CARTER: If I had the rights.So lets just play a bit.

(Video segment.)

(Laughter, applause.)

DAVE CARTER: So hang onto that for a second.(Laughter, applause.)

Now whenever you start showing videos to a consumer audience, theyre thinking,
“Great, I guess my 50 gigabyte drive isnt going to be enough.”
But a really cool feature of this software is when you save it the compression is getting so good with the Windows Media Player that youll see that first of all the media quality its only 500K so this is about a 45 second video.And then if we go to high quality, which you were just looking at, it still actually fits on a floppy disk.So that good of quality is going to fit on a floppy disk.

So thats really exciting about Windows ME or Windows Millennium Edition.

Now lets look at this thing that youve probably been seeing in the audience and wondering about.This is a concept PC weve put together, and the idea of this was we took all these off-the-shelf components that you can get today, so weve got a video camera in there, a really neat flat screen monitor — you were talking about flat screens — some very cool speakers, a neat digital display that synchs with the software.So if somethings happening on the computer well see a display that reflects that and we can get some alerts actually on that.

In this case this is a family computer.And this is sort of the next version after Windows ME, or the next version of our Windows.But we can play a video stream.(Music.)This is just a one megabit stream, so this is perfectly doable on a lot of peoples sort of cable model DSL type modem.Were just getting just tremendous, tremendous quality with these types of applications.

Lets stop that.

Now, the neat feature, and I only have time to show you a couple, but if I log off, weve got a very, very friendly log off screen, because 90 percent of those homes share different people using this computer.We were talking about that.When I log on theres a password.If one of the children log on, so in this case the sons name would be Quinn, when he logs on theres no password asked, because maybe hes too young and the softwares geared at him.And, of course, just like when we restore from hibernation the applications are running.That childs applications or that persons applications were still running.In fact, the Media Player you see up there is actually running inside a different skin.So the PC really takes on that whole look and feel and it makes it much easier for the entire family to use.

So you have a go through Windows 2000, Windows ME or Millennium Edition and then sort of where were going with the Windows after that, and Im just really, really pumped about what were doing with Windows.

STEVE BALLMER: Super.Thanks very much, Dave.

(Applause.)

Windows ME, available this Christmas.(Laughter.)

The future user interface I talked about as being essential in this next generation of the Internet.I see a lot of things changing.We talk about the notion of authentication.We talk about natural user interface where I can express myself.I say,
“Get me all the information on my last trip to Canada.”
Ill want to see the presentations.The computer will be smarter about recognizing the intent of what I say.

We talk about the information agents, the thing that will help me customize who can access me electronically, when and how.

We talk about the notion of access to information anywhere.I should be able to call from my phone — Im sure many people have gone through the painful experience of calling somebody on the phone.You dont know their extension number.And youve got to try to type in using the keypad some semblance of their name.You really just want to be able to say, you know,
“Im looking for Dave Smith”
and you want to be able to get to Dave Smith.And you want to be able to perhaps call in over your phone and get your email read back to you.It involves access with speech, with voice, with handwriting recognition as a built-in piece.

Well show you some things in a demonstration a minute from now where we talk about the notion of a universal canvas.Today you still have to think about these applications being separate, even though we allow you to move information between applications.We talk about the notion of a universal canvas.

We talk about the notion of smart tags.Today if you get a document, you just get the document.The document doesnt try to intelligently help you understand it.In the future if you see a document and the documents got a name of a business embedded in it, youll right click on it, it will say,
“What do you want:its financial results?Do you want to go to its home page?”
It will recognize intelligently the context and the items inside the document and tag them for you.

To give you a little bit of a sense of some of the future ways we see taking the user interface and to just give you a fun little demonstration of the future user interface of MSN in Canada Im going to ask Hillel Cooperman from our MSN team to come on stage and demonstrate for you a little bit of the next generation, just a little bit of the next generation of user interface.Hillel?

(Applause.)

HILLEL COOPERMAN: Hi, Steve.Okay, so like you said, were going to give you a preview today of the next generation user experience.So the first thing youll see here is — and again were going to touch on essentially three of the themes that you talked about in your slides:the overall umbrella of having an integrated user experience and how that makes things easier.The second thing is personalization and roaming, your data everywhere.And the dynamic delivery of code.Those are the three things well touch on as we go through.

So the first thing I note, and this touches on personalization, is its very optimized for multiple users, just like the logon screen on that concept PC.

STEVE BALLMER: Concept PC.

HILLEL COOPERMAN: So I can logon here as me. Sign in.And essentially whats happening now is today MSN is a variety of great stand-alone services.Right now what weve done is instead of having to log in to each of those individually, here weve logged into all of them at once.So the first thing —

STEVE BALLMER: And I guess you log into any other Web sites that accepts Passport.

HILLEL COOPERMAN: Absolutely.Absolutely.

So the first thing I notice is again logs you straight onto your personalized homepage.And again one of the points to our talk is integrated user experience.So you can see if you look across the top and down the left all of the key things that you do, that you might want to do, every day, are available to you all the time.So, for example, your email, your favorites, your buddy list.Even, for example, if you were to go to your favorites, for example, go to one of your favorite Web site s — (loud Web site presentation) — I think well skip the loud part.

But the point is all the access to your favorite things, your email, et cetera are still available to you.So your buddy list is there, for example.We can go talk to my friend Mike backstage, and again say,
“Hi, Mike.”
Oops.I hit the wrong.There.I called him Nike.

STEVE BALLMER: I always call him Nike. (Laughter.)

HILLEL COOPERMAN: Lets see.

STEVE BALLMER: Nike better be good.(Laughter.)Not offended to be called Nike.

HILLEL COOPERMAN: Looks like hes asleep at the wheel.Oh, okay.So this is a great example of how we access —

STEVE BALLMER: Thats why were not launching today in Canada.

HILLEL COOPERMAN: Yeah.(Laughter, applause.)

STEVE BALLMER: Thats what I think it is.

HILLEL COOPERMAN: And actually this —

STEVE BALLMER: I was going to caution you its not available right away, but you took care of that for us in the demo.Nice job.(Laughter.)

HILLEL COOPERMAN: No problem.

The nice thing about this actually is — and its actually kind of part of our demo, because we talked about this dynamic delivery of code.So instead of — so here obviously the program has a problem.Its confused about whats going on.In the old days we didnt know what was going on.The customer had to tell us through customer support.Here, in fact, what happens is the customer can actually choose to tell MSN about this.Im going to do,
“No, thanks”
right now, just because I dont want to take the time to send the data back.But we could find out about that —

STEVE BALLMER: But it would actually send the status up to MSN.

HILLEL COOPERMAN: Send that and then we can modify the program when we feel we have a good fix for that.We can deploy it immediately to our customers without actually having to have them go through a new setup process or a new install or anything like that.So we can go fix the problem for the customers without having to cause them any trouble and head it off at the pass.

STEVE BALLMER: The system got nervous.

HILLEL COOPERMAN: I think the system — (laughter.)

STEVE BALLMER: It looks very nervous, in fact.(Laughter.)Are you nervous?

HILLEL COOPERMAN: Im fine.

STEVE BALLMER: Okay.(Laughter.)Im nervous.(Laughter.)

HILLEL COOPERMAN: I think its having some issues.

So I think thats it pretty much.

STEVE BALLMER: I think that will be the end of the demo today.

HILLEL COOPERMAN: Thats the end of the demo.(Laughter, applause.)

STEVE BALLMER: But its a bright future.(Laughter.)

Weve had a lot of success with the current MSN in Canada.We have over five million Hotmail accounts in Canada.And the Microsoft site, MSN.com and Microsoft.com actually reach almost three-quarters of all Canadian Internet users in a given month.I mean, its the largest reach we have actually in any country in the world.Almost three-quarters of the Canadian Internet users use MSN on a monthly basis.

MSN.com is now the top global domain.Weve passed AOL and Yahoo on a worldwide basis mostly because AOL is really only strong today in the United States.And over the last couple of months, if you look consistently over the year weve been either number two or number three, depending on whether were talking about French or English for MSN here in Canada.For the last couple of months MSN.ca has actually been the number one site on the Internet here in Canada.So weve been happy to see the kind of uptake and acceptance and the kind of great new technology were bringing to MSN in Canada is sure to help this and to help you some day.Well have to ask Hillel backstage later what day.(Laughter.)

Theres been incredible Windows adoption, Windows 2000 adoption both at the client and the server here in Canada.Weve sold worldwide over three million copies of Windows.Fourteen of the top 25 Web sites here in Canada run on top of Windows 2000.About half of all the B2B secure Web sites in the world run on top of either Windows NT or Windows 2000.Weve done a lot of work with Nortel.Theyve been an early development partner in the Windows 2000 client, with Telus.Weve built out the FutureShop.ca site on top of Windows 2000 with Future Shop.And weve done a lot of work with CIBC both at the desktop level, the Internet level and in the branch banking level to really help them take full advantage of the opportunities in Windows 2000.And were very excited about the acceptance of Windows 2000 client and server here in Canada.

Weve been particularly excited as weve gotten to know the folks at CIBC better.We started out working with them on Windows 2000 in a variety of ways.We developed some mutual excitement about whats possible.And actually today we want to announce in conjunction with CIBC a new growth fund for ISVs here in the Canadian market, where Microsoft and CIBC will partner to invest over $50 million Canadian into software companies focused in on applications around Windows 2000.We will provide the leads to CIBC and CIBC will then make final decisions about which of the companies to finance.

To talk more about that, Id like to invite on stage and have you help me join in welcoming John Hunken, the Chairman and CEO of CIBC.

(Applause.)

JOHN HUNKEN: Thanks, Steve.Steve, I dont think you appreciate it, but here in Canada with you as, you know, the lead in and me with $50 million, I can actually get a crowd like this together.(Laughter.)

Im just delighted here to be here this morning to participate in the announcement of the ISV growth fund.The Canada technology industry has caught the attention of the world.JDS, Research in Motion, BCE Mergis, Nortel, theyre just some of Canadas great technology successes today.And there is a wave of next generation emerging tech firms.The ISV fund is for these emerging technology firms.

Over the next two years CIBC will invest $50 million in Canadian independent software vendors.We have decided to zero in on those companies that have launched one or more products, but need capital to grow to the next stage.

I think its often pointed out that this kind of company tends to be under-funded.I believe that this is changing.The Canada venture capital industry is more robust than it has ever been.Every major Canadian bank now has an active merchant bank with significant investments in emerging Canadian companies.This means that theres a large pool of capital looking to invest in great ideas.

With the SIV Growth Fund and Microsofts expertise, we hope to make it easier for great ideas to connect with CIBC.

It was only a few months ago when Microsoft contacted us with the idea of a fund.I can tell you we couldnt say yes fast enough.We have been working closely with many Canadian technology companies for several years now.The client successes weve had made us bullish on the Canadian technology industry and its potential.

Weve also been involved in merchant banking for more than 11 years.CIBC now has a $6 billion merchant bank, with more than 450 investments around the world.

So this initiative was a great fit for CIBC and it will prove to be the same for ISVs with great ideas.

Based on the turnout, clearly the interest in the Canadian technology industry is keen, and I believe that it is very well placed interest.Many of you here today are no doubt part of growing tech firms as owners, investors and employees.The ISV growth fund is just one indication of the respect that you are gaining for your successes to date and for your dreams for tomorrow.

Thank you very much.

(Applause.)

STEVE BALLMER: Thank you.Appreciate it.

Now, its really amazing as we look at the exciting development work, R & D work thats being done in the Canadian market.It really is amazing.The startups, the activity level here in the Toronto area, in Ottawa, some of the things that we see in Vancouver, very much on our radar screen and the opportunity to partner in this way with CIBC is particularly great.

With the move that we see forward, with more devices becoming popular attached to the Internet, with the continued success of the PC, with the growth in e-commerce, and with the move to hopefully .NET, but certainly the next generation Internet, these are going to be exciting times.And the opportunity for all of us to benefit, to do new things, to start exciting businesses, to participate in exciting projects I think is absolutely incredible, and certainly at Microsoft we look forward to providing you with some of the important technology to drive the next phase of our mutual revolution, and we look forward to having that opportunity with many of you here in the room today.

I appreciate your time and attention, and enjoy Comdex, Windows World, Network+Interop and even that last show, whose name I cant quite remember right now.(Laughter.)Thank you all very much.

(Applause.)

END