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PAGE 3
Multiple studies found that Windows has lower total cost of ownership, is more secure and reliable, and includes the industry’s
most comprehensive customer indemnification protection. As a result, many enterprises are choosing Windows over other
alternatives, or returning to Windows after trying Linux.
Growing Microsoft Through Innovation
In the years ahead, we believe that Microsoft will continue to succeed through innovation that enhances customers’ digital
experiences at work, at home and on the go. We believe we are innovating across a broader spectrum of software technologies
than any other company. We develop software for platforms and tools; communication and collaboration; information access
and organization; entertainment; business and e-commerce; and devices. Through the synergies of these broad innovations, we
are intent on accelerating Microsoft’s growth in three principal ways.
Growing our foundation businesses. In our largest businesses today—the Windows Client, Information Worker, and Server and
Tools groups—growth will be driven by hardware shipments and product upgrade cycles, accelerated by our forthcoming
innovations such as Windows Vista and the new version of Office. Given the new technologies we will be delivering, we
anticipate growth through increased share of growing segments. In servers, for example, we have opportunities to increase our
share in Web servers, datacenters, mail servers, and high-performance computing.
In addition, we see opportunities to grow these businesses through reducing revenue lost to software piracy. We recently
launched Windows Genuine Advantage, an initiative to enhance the benefits from licensing Microsoft software. We believe that
rampant piracy in emerging economies will diminish over time as these economies become more integrated into the global
economy.
Expanding our innovation portfolio. We see opportunities to grow by developing best-of-class products and services that
expand our technology offerings. Within our larger businesses, we are working to develop new technologies that offer greater
value in meeting targeted customer needs. These technologies will be offered as new products and as higher-value and
segmented versions of existing products, such as Windows Small Business Edition, Windows XP Professional Edition, and
Windows XP Media Center Edition. Within our emerging businesses, we are also moving forward with a broad portfolio of
technologies, with a goal of providing best-in-class products wherever we compete, such as gaming, software for mobile devices,
small business applications, and Internet Protocol television.
Delivering software services. While the PC and Windows remain at the center of consumer and business technology, Internet-
based services are growing at dramatic rates. We are working across the company to infuse services into everything we do, and
we expect both consumer and business services to be an important part of our future growth.
In the past several years, we have gained extensive experience in providing a range of online consumer services, many
supported by advertising or subscriptions. Such services include Hotmail, the world’s largest free email service with over 205
million active accounts, MSN.com, one of the world’s most popular online portals, MSN Messenger, MSN Search, and Xbox Live,
the world’s largest unified online console gaming service.
We are working to deliver several new services, including Windows OneCare Live, an integrated PC Health offering that
combines security features as well as critical PC maintenance services. We also have expanded our range of services for
businesses, such as Outlook Live and Office Live Meeting, which enables workers to collaborate interactively without the cost
and hassle of business travel. Our acquisition of FrontBridge Technologies will enable us to provide managed services that
enhance e-mail filtering and improve security for businesses. We see many other opportunities in managed services for
businesses.
Protecting Customers, Helping Communities
As we drive for growth, we are also working to help protect the privacy and security of computer users everywhere through
technological innovation, collaboration with industry and government, and education. With our own R&D and strategic
acquisitions, we are making our products more secure and delivering comprehensive security solutions. In less than a year,
customers have downloaded more than 218 million copies of Windows XP SP2, which helps protect against software worms and
viruses. We are aggressively committed to building out our security technologies to fortify all of our products and services.