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My Keynote Address at the 2011 International Consumer Electronics Show

Posted: 01/06/11 01:50 AM ET

The following post was originally delivered as the keynote address at the Consumer Electronics Show on Wednesday, January 5, 2011 in Las Vegas.

2010 was a very, very exciting year for our company. We launched Windows Phone 7, Office 2010, and Kinect, and we introduced Internet Explorer 9 and Office 365. We saw great growth in our Bing and Azure Services. And with the amazing success of Windows 7, it's truly been a year like no other.

So, we want to start by saying thank you to the over one billion customers around the world for their support and feedback. I also want to have a chance to say thanks to all the folks here in the room, and on the webcast for taking the time today. We appreciate your time and your support. The products that I mentioned resulted from big technology bets that we made, bets on the cloud, natural user interface, new smart client technology, machine learning. Tonight at CES, we want to share with you not only what we've done most recently, but a little bit of what's coming next. We're going to show you the impact of some of those technology bets through the lens of the three most important consumer devices, the TV for the Xbox, the Windows Phone, and the Windows PC. So, I want to start and dive on in.

A decade ago, we took a bold step forward towards transforming entertainment. We started with gaming with the launch of Xbox, a smart device powered by the magic of software. Xbox transported, literally transported tens of millions of people into the world of Halo, Gears of War, Call of Duty, Fable, and many others. The next step in that journey was the launch of Xbox LIVE, which transformed gaming experiences with the cloud. That put Xbox front and center in the social entertainment revolution connecting millions of people so they could have fun with their friends.

But entertainment goes beyond gaming. So, we expanded Xbox LIVE to include music, TV, movies, Facebook, and much, much more. And just over two months ago, we took our biggest step towards transforming entertainment for the whole family. We launched Kinect for Xbox 360, opening the broad world of entertainment to the entire family. With Kinect you are the controller, and there's nothing else like it in the world. Xbox 360, Xbox LIVE, and Kinect have made 2010 the biggest year in Xbox history.

As we speak today, millions of people around the world are enjoying their TV, their music, and their movies on demand through Xbox LIVE. Millions more are playing blockbuster titles on the Xbox, and living this idea that you are the controller through Kinect. Let's take a look at how you control all of your entertainment with Kinect, and a little bit of a sneak peek at what's coming this year.

Please welcome Ron Forbes from our Interactive Entertainment Business to do a little bit of a demonstration.

RON FORBES: Thanks a lot, Steve.

I'm here tonight to show you how Xbox is transforming the way people enjoy their movies, their music, their TV, and their sports on Xbox. This is Zune on Xbox LIVE. Zune features a massive catalogue of movies, TV, and music that you can instantly enjoy right in your living room. You can watch movies in full 1080p with 5.1 surround sound instantly. No waiting, no need to download. Today, our Zune Video Marketplace is available in 20 countries.

So, let me show you other websites. As you can see here, all I have to do is wave and Kinect knows that I'm ready to get started. Now, there are several things for me to choose from on this menu, and I could use my hand to choose one. But, you know, there's nothing easier than just using your voice. All I have to say is, Xbox, and Kinect is listening. So, when I say, suggest some movies. It takes me to previews of this week's featured movies.

So, here I can browse full screen trailers of movies that I can watch, like this first one, "Inception." Awesome, awesome film. And I can easily swipe my hand to move it on to the next one. All right. "Despicable Me," also looks pretty good. But you know I kind of want to wait to watch this one with my little nephew. And so, let's just see what else we have.

"The Twilight Saga" and "Eclipse." You know, I actually started watching this one last night, and I can continue right where I left off by saying, Xbox watch this. Now, because I started watching the movie last night, I have the option of picking up where I left off with resume, or I can restart the video from the beginning. I'll just jump right back where I was, and say, Xbox resume. So, there you go. Didn't need to go find a DVD case and pop it in the Xbox, I'm already right back in my movie watching experience. And this is a pretty good scene, but if I wanted to refresh my memory a little all I have to do is wave to bring up the playback controls, reach my hand up and just go a little to the left, right there. That's how easy it is to control Zune movies with Kinect for Xbox 360. It's simple, natural, it's effortless, and I didn't even need to remember where I left the remote control. Xbox stop.

Let's go check out some music. Xbox Zune hub. I can also enjoy controller-free access to more than 11 million songs right in the Zune catalogue. I just wave one more time, and when I select music, I can bring up a playlist of songs that I put together in my queue. All right. We've got a little Daft Punk. I think this one is right off the new "Tron Legacy" soundtrack. Also a good film.

And just like searching for a movie, I can swipe to move to the next song. I actually own the music video for this one, so it automatically starts playing, or again I can just use my voice. Xbox, next. All right, there we go. A little Janelle Monae, one of my favorite new songs. So, this is what millions of people are discovering, a new world of controller- free entertainment that you cannot find anywhere else. So, that's Zune.

But the same people who have discovered the wonder of Kinect with Zune movies and music have also been asking what about Netflix? When can I use my gestures to select and browse movies and TV shows? When can I use my voice to play, pause or stop a movie?

Two years ago Xbox was the first console to bring Netflix to the living room. We continue to innovate. Tonight I'm pleased to announce that this spring we are bringing the magic of Kinect to Netflix. Making Xbox the only place to experience thousands of movies and TV shows from Netflix, controller-free, in the living room, on the biggest screen in your home, but what about Hulu?

Tonight we are also announcing that we are bringing the controller-free Hulu Plus subscription service to Xbox LIVE in the U.S. later this spring. So, you can instantly watch the full experience from back catalogue seasons of popular TV shows in HD, like "30 Rock" and "Modern Family," any time with the magic of Kinect. Controller-free Zune, controller-free Netflix, controller-free Hulu Plus, are all part of our vision to bring partner content, plus the magic of Kinect straight into your living room.

Finally, let's talk sports. For sports fans like me it's all about ESPN. In November we launched an exclusive partnership with ESPN on Xbox LIVE. I can watch over 3,500 live and on-demand sporting events from ESPN3.com, plus highlights from ESPN.com, which includes the best in sports, from college football, college basketball, the NBA, and international soccer, including the premier league.

Now, one of the things I love most about this time of year is the college football bowl season. I always watch the bowl games with my friends from Virginia Tech, but since I moved to Seattle three years ago I miss watching the games with my crew. So, you can imagine how excited I was on New Year's Day to be able to watch the Rose Bowl right along with my friends on the other side of the country. My sister Melanie joined us, too, and she was cheering for Wisconsin. I'm a bit more of a TCU fan myself. And Melanie and I are pretty competitive with each other, so there was a lot of trash talk going on between us.

Back in the day I needed to make my picks on the PC, while chatting about the game via text message. Now, as we watch the game live, I can make my picks and trash talk as my team is crossing the goal line, not in e-mail, not in IM, not a text, but in my living room right on my TV, live sports plus social experiences happening right now only on Xbox Live.

So, you're probably wondering how you can get in on the action, and it's not too late. ESPN on Xbox LIVE will be carrying the BCS national championship game on Monday January 10th, Oregon versus Auburn. And with the College Bowl Showdown you can enhance the national championship viewing experience. You can pick the winner. You can watch the game live with your friends, and you can see how your prediction stacks up.

Let's take a second. Let's go see how the community thinks, who the community thinks will win. It looks pretty split, about 50/50. And you know most of my friends are going for the Ducks, for Oregon but they're dead wrong. I'm going with Auburn on this one. Now, let's go take a look at the leader boards. All right. There's my sister, Melanie. She's doing pretty well. She's right up there. We'll just have to wait until Monday to see if she can maintain at least. So, that's the College Bowl Showdown, where sports fans on Xbox LIVE can earn their bragging rights. This is only the beginning of our exclusive partnership with ESPN, the worldwide leader in sports. Fans can look forward to more ESPN, more games, and more new ways to enjoy sports with their friends only on Xbox LIVE.

So, there you have it, all of your entertainment, music, movies, TV, and sports, all on Xbox LIVE, all with the magic of Kinect, and it's all happening right now. Thanks for your time.

Those are incredibly exciting entertainment experiences that are available on Xbox LIVE. With Netflix, Hulu, and great new features on ESPN, we will make entertainment more interactive, more social, and more fun for everyone. And we'll do it like no one else can. So, everyone who is enjoying Kinect knows that today is listens to your voice, and tracks your body, but what about your facial expressions? As you can see, now Kinect can track features like your smile, your laugh, and even the raise of your eyebrows.

Maybe it's just me, but that Avatar was pretty darned bald I think. Face recognition, body tracking, now even facial expressions all coming to your living room. I'm pleased to announce that this spring Avatar Kinect will be made available for free to all Xbox LIVE Gold members. So, there you have it, Xbox and Kinect transforming the living room with controller-free entertainment in ways that really no one could imagine. Consumers around the world have responded in droves. The Xbox LIVE community continues to grow every day, today reaching a new milestone of 30 million Xbox LIVE members.

In fact, a new member joins Xbox LIVE every two seconds. In addition, Kinect and Xbox LIVE have helped drive consumer demand for the Xbox itself. Xbox 360 has been the No. 1 selling console every month for the last six months here in the United States. And sales for the Xbox 360 are now over 50 million units worldwide. As many of you know, we predicted that we would sell about 5 million of these Kinect sensors by the end of the holiday season. We beat that forecast. In the first 60 days we sold over 8 million Kinect sensors worldwide. This has been the biggest holiday and the biggest year ever for Xbox.

You're going to continue to see more fun, more entertainment, and more innovation from our Xbox team in 2011. Xbox today is going where no gaming system has ever gone. Your Xbox is becoming the hub of your living room. It is your gaming system, but it's your movie, it's your TV experience, it's a TV show, and it's your sporting event. It's your social interaction all delivered directly to the biggest screen in the house.

The smaller screen in your life, your phone, is another place you'll see even more entertainment. People are taking advantage of Xbox LIVE on Windows Phone 7, achievements, gamer scores, your Avatar. Windows Phone 7 is the only phone that delivers all of it. It's Xbox LIVE on the go. And we have incredible games for everyone, from casual gamers to our heavy hitter game franchises, all coming to the phone.

You've already seen hits like Crackdown, or Halo Nation on the Windows Phone 7. Today, I'm excited to announce that Fable is coming to Windows Phone 7. Fable/Coin Golf is a brand new game exclusively for Windows Phone 7. And because everything is connected through Xbox LIVE, all the goals that you earn in Fable/Coin Golf goes straight to your Fable 3 character when you play on your Xbox 360. We're bringing it all together.

It's exciting to see how many games are available on the phone, especially since we launched just two months ago. Windows Phone 7 is dramatically different from other phones. We approach the opportunity with a pretty fresh, and very unique perspective. We asked a couple of basic questions. First, could we help simplify the tasks that people use their phones for the most. And, second, if more applications are released, and if phones can do more than ever, can we still make them easy to use?

The result in my view was something importantly different, a phone uniquely designed to delight modern day smart phone customers. By redesigning the fundamental way the phone presents and organizes information, we made it easier and faster for people to get things done like snapping and sharing a photo, keeping up with friends, family, and those who matter to us personally the most, and figuring out quickly where and what you're supposed to be doing next.

We pulled together the best of Office, Windows, Windows Live, Xbox, Bing, Facebook, and more to focus on building a great phone, and to deliver on this very new approach. The reaction to the product has been great. We launched nine phones across 60 mobile operators in 30 countries. It was really a very big launch. Our hardware partners and software partners are delivering all the applications that extend the Windows Phone experience across the categories that people value most: gaming, social networking, entertainment and productivity.

In the past few weeks alone, we've added great new titles like the Kindle, the Bank of America app, the first Ninja game. Today, there are already more than 5,500 applications available for Windows Phone customers. To put that in some context, our customers typically get access to more than 100 new applications every 24 hours. And more than half our customers download a new application every day. More than 20,000 developers have registered with us, and are keeping the application pipeline full with more signing on each day. However, job No. 1 is showing this new phone to people. What we find is that once people see the phones, they fall in love with them. Windows Phone customers are telling us that they're doing just that. The result is very high enthusiasm for the product. Nine out of every 10 Windows Phone customers at AT&T tell us they'd recommend the product, the phone, to others. We're proud of what the customers are saying about Windows Phone 7, and we're going to continue to invest in it aggressively in the future.

Over the next few months, we will be releasing a series of updates that will automatically be pushed out to our customers, and we'll boost several improvements. The two most noticeable for Windows Phone users is the addition of copy and paste, and significant performance improvements when loading or switching between applications. Additionally, we'll finish the release that will make the Windows Phone available on the Sprint and Verizon networks in the first half of 2011. Continuing on job one, I want to ask you all to see this phone, and to do that for us today, please welcome onstage Liz Sloan from the Windows Phone team.

LIZ SLOAN: Thank you, Steve. And hi, everyone.

In addition to being a devoted Microsoft employee, I'm also a zealous runner and chief goat herder to two young, rambunctious kids. If your life is anything like mine, it's a little bit busy. And I was invited up here today to show you seven things about Windows Phone 7 that are great for people like all of us.

First, the camera. How many times has this situation happened to you: you see something interesting happen, you'll reach for your phone, as it comes and you actually unlock it, fiddle around for the camera app, and take the picture, the moment is completely gone. We were not OK with this type of situation. So, we set out to build a phone in which you didn't cost this moment. With every Windows Phone 7 we have a dedicated camera button, and the best part is, this camera button works even when your screen is locked.

In this case, something interesting happens, like me being up on stage with all of you, all I need to do is press and hold the camera, and take the picture, and I can instantly share that picture with my friends and family, or I can upload it to Facebook, and other social network sites. Although, in this case, it's going to be pretty hard for me to tag all of you. Pocket to picture to post all within seconds.

No. 2, glance and go. One of the things that we did with Windows Phone is help surface up all of the stuff that you care about right up to the top so that you don't have to hunt around to find that information. We do this with a Lock screen. Here on the Lock screen you can see your time, your date, your next time to appointment. You can see missed calls, e-mails, and text messages. We also do this with our Start screen. Our Start screen is completely different from anything on the market today. It's not a list of icons, or a sea of apps. We have what we call Live Tiles. And just like their name suggests, these tiles are live, and they change. So, as my friend updates their Facebook status, and posts new pictures, I can see that right here on my Live Tile. I can also see things like the weather in the city of my choice. And I can also see if they have mission critical information like apps like this one, five and a half months until Summer Solstice begins. And when you're a Hawaiian native that lives in Seattle, you count every single day until summer arrives. We also surface simple things, like your alarm. It's on or off and what time is it, and things like your calendar, and your next appointment.

In this case, when I'm done with all of you tonight, I'm going out for a big team dinner that I was supposed to plan, which brings me to point No. 3, voice search. In this case, I was supposed to plan dinner, and since I haven't had the opportunity, I'm going to do it up here on stage with all of you. I want to choose a real classy restaurant to bring the team to later tonight.

In and Out Burger. That's right, for all of you from San Diego, we're going to have animal-style hamburgers tonight. So, I got all the results on the Web that relates to In and Out Burger. I also get all of the In and Out Burgers in the area. I can find my exact location, and it brings up all of the In and Out Burgers. In this case, I'm going to go to the one on Dean Martin Drive. I get the phone number, the directions, and the hours. I can also read the reviews, and there are a lot of great reviews for In and Out Burger. And then I can also find nearby locations.

So, once we're done having a few burgers, if we want to run by the Lion Habitat, or maybe swing on by Starbucks and get a coffee, which is probably what we'll actually do, we'll have all of the nearby locations.

And speaking of the phone, every Windows Phone comes with its dedicated search button, which brings me to point No. 4. We brought Bing to the phone. Not only do you get to see the same great pictures, and their descriptions, you also get instant answers. So, in this case, I'm curious how the Miami Heat did against the Bucks last night. I type in Miami Heat, and bam right up to the top comes the score instead of a lot of blue links that then brings me to the answer, I get the score that I want right up on top. I can do this for stocks, sport scores, weather, flight information, and more.

In addition to making search easy, we also worked to organize the stuff that you care about and a way that you can get to it that actually makes sense, which brings me to point No. 5, hubs. On other phones, your information, like games and apps and music are all a little bit disorganized, and live in separate silos. On our phone, we have what we call hubs. An example of this is the Office hub. Here in my Office hub, I can do all sorts of things. I can work on documents with colleagues and post them up to SharePoint. I can do a bit of financial modeling in Excel, and I can also keep all of my notes in OneNote.

I'm a big OneNote user, and one of the things that I love about OneNote is that my OneNote syncs across my phone, my PC, and the Web. In this case I'm keeping a OneNote of birthday ideas for my husband. What's great is I can pin this OneNote to my Start screen, so as ideas come to me throughout the day I have one-click access to this OneNote. Let me open up the OneNote to see some of my ideas. After Ron's demo I think he's convinced me that a new Xbox is in order for his birthday. So, what I'm going to do, since I'm running behind, is copy this up on stage with all of you and I'm going to go to one of my favorite shopping apps and do a little bit of research on this Xbox.

As Steve mentioned, we have over 5,500 new apps in marketplace, which brings me to point No. 6, our fantastic apps, big name apps, like Bank of America, Travelocity, Fandango, and in this case Amazon.com. If you remember a few seconds ago I copied the Xbox that I was interested in. And since it's a little bit long I'm going to paste it in and then I'm going to search and I'm going to look for the results. And within seconds the results come up and if I wanted to I could buy it right here on stage. But, I won't waste your time and I will bring you to point No. 7, many new hot games that are coming to our phone in the next couple of months.

If you have a Need For Speed, we've got you covered. If you like some retro gaming action we have you covered with Pac-Man. And if you're a secret ninja, like myself, that likes to lucky number seven, Xbox LIVE on the phone. As you saw several minutes ago we have slice and dice poor innocent pineapple and kiwi on the side, we've got you covered with Fruit Ninja. And the best part is, with our upcoming updates our action games will load even faster. And with the 3D graphics on this phone it makes you feel like these are falling right into your lap. If you haven't played this game, it's highly addictive.

All right. That was a lot to get through in seven minutes. If you can't tell, I'm excited about this phone. I hope each of you get a chance to go out and try it. We worked hard to bring together the things that you care about in an easier and faster way, so that you can just go out and enjoy life. Thank you.

When I get a chance to show people a Windows Phone, the feedback that I hear is very, very gratifying. People tell me how snappy it is, easy to use, how personal it really feels. And perhaps as importantly, all in, simply how beautiful it really looks. There's one more product that I want Mike to talk about tonight before we wrap up, and that's the Windows PC. We made some announcements earlier today, and I want to spend some time putting them in context for all of you.

A year ago at CES we talked about how excited we were with customers' early reactions to Windows 7. We had just launched, and all indications were that we had delivered a product that had hit the mark with customers. That really proves to be the case. Windows 7 PCs are the fastest selling PCs in history, selling over 7 copies a second, they now represent more than 20 percent of all the PCs connected to the Internet.

A Windows 7 PC is the best possible way and place to experience the modern Web, Internet Explorer 9 represents a leap forward in what developers can do with HTML5 and great hardware, including a breakthrough in hardware accelerated graphics.

Today 20 million people are already using the IE9 beta. We shipped a new release of Windows Live to over 500 million people around the world. It includes the Windows Live photo gallery that lets you sync up and organize pictures from all your devices and easily share them with friends on SkyDrive, Hotmail, Facebook, et cetera. And Hotmail, which is the No. 1 e-mail service worldwide, deeply integrating Microsoft Office, a major step forward. In the first 100 days we drove over 20 million people to use our Office Web applications through Hotmail. Finally, the all-new Windows Live Messenger connects easily to Facebook, and is already the No. 2 application on Facebook.

A year ago our partners were just getting started with Windows 7 PCs. There are more new innovative PC hardware designs and machines at this year's CES than ever before, hardware that brings the full Windows experience to life including the modern Web, rich media experiences, and full PC productivity.

Customers increasingly have come to expect the full power of the PC across a wide range of form factors. And we're excited to see our partners continue to bring great and innovative new hardware to market. I'd like to invite Mike Angiulo from our Windows team to come up on stage and show you some of the exciting, interesting, innovative, productive, and really beautiful new Windows 7 PCs that you'll be able to see.

MIKE ANGIULO: Hi. I'm Mike Angiulo, and I've got a few things to show you tonight. I'm going to start with some of the work that our partners have done on Windows 7, show you the new version of Surface, and then a little glimpse into a technology preview of what's coming next.

So, here are some new Windows 7 PCs, and I'm going to kind of walk through each one and tell you what's cool about them.

The first one, this is about Intel's new announcement. They just announced their new generation, their second generation of their Core processors. It was codenamed Sandy Bridge. And what Intel did was combine a multicore CPU and GPU onto a single chip, and that increases your graphics performance, and decreases the amount of power it takes at the same time.

PC World says that this gets 20 times more graphics performance than previous generation CPUs, and HP is going to put the new Core i7 into this notebook, and expects to get six and a half hours of battery life out of a standard six-cell battery, which is pretty impressive.

But I'm going to show you performance demo. So, this is the Galactic Performance demo, and it's an application that was written all in HTML. This is Internet Explorer 9, the only browser that really takes full advantage of the underlying PC to use the GPU to graphically accelerate the web browsing experience.

What you're looking at is an animated solar system that's made out of 2D pictures of planets that have been spherized by the GPU. It's really calculation intensive. You can see I'm getting 36, almost 40 frames a second on a mobile PC. A year ago, this was completely impossible.

Here's another example. This PC is using the new processor from AMD. They just announced it. It's called Fusion. It's a multicore CPU, a discrete quality DX11 level GPU, and a northbridge, all put together onto a single die. They call this an Accelerated Processing Unit or APU, and what this lets you do is have a really high performance PC in a very small form factor, with really great battery life. In fact, HP, by just changing the processor, almost doubled the battery life of this thin and light system to nine hours.

And I've launched the IE9 test drive site. This IE site has become a popular way for people to demonstrate hardware accelerated Web browsing. And I can increase the number of fish to 250 fish in this tank, and get over 40 frames a second. And we're talking about in a PC that costs less than $500, and is this thin and light. So, that kind of performance on an ultraportable notebook is really brand new and quite impressive.

And while processors continue to get more powerful and more efficient, our partners continue to invent really cool, new, modern form factors for the PC.

So, here's an example, this one is from Acer, and this is a dual-screen PC. So, you can see I have two 14-inch touch screens here. I can -- is that cool? Do you like that one? It looks really cool from here, too.

And what's neat is you not only have a lot of room for browsing, but I can take 10 fingers, put 10 fingers down on the screen, and immediately get a software keyboard that comes built-in. Go ahead, let it out.

So, I can launch Word here. I have a track pad. I can do productivity scenarios. It's got that kind of hardware and software integration here in a really cool form factor.

Here is an example, this is an engineering prototype of a PC that's coming in March. This is the Samsung PC7 sliding series. And you can see I can slide this closed, touch the screen, and then I have a PC that's really good for entertainment.

What's really neat about this PC is what it has. It's got a micro SD card, it's got micro HDMI and USB. It has all the things you want in a PC. It's really light, it's about a kilo.

But what's really cool is what's missing. This is an Intel Oak Trail-based PC. It has no fan. It's light, it's passively cooled, and you can immediately switch back and forth between those two form factors.

This new tablet -- you like that one, too? I think it's pretty cool.

This one I'm going to take a moment to really explain. This is the new Tablet PC from ASUS, and this is a full-power Windows PC. So, this PC has a Core i5 processor in it. It ships with this wireless keyboard. It makes a great productivity workstation for maybe a small area like on an airplane or a student's desk.

And what you can see is that it responds well to Windows Touch, because it has a capacitive touch screen. But because it's a Tablet PC, I can also take out the pen and use ink.

And what ink lets me do is stuff like I'm highlighting here in Excel. I can take a pen and say, "This is great." I can take an eraser, I can erase.

And one of the cool things about ink and Tablet PC is a Tablet PC has handwriting recognition in 26 languages, and you can see this: When I have the pen down on the screen, can you see how my hand is not moving the spreadsheet around? This is one of the reasons that it's hard to do ink on touch-only devices, and why Tablet PCs are so good for ink, is because it's implementing palm rejection here. It actually knows what my hand is and knows what the pen is, and doesn't get the two confused.

Here's a touch-only game that I can launch, and you can see the characters following me around the screen.

But what I want to show you here is the screen itself. This screen is really bright. And what we did with ASUS was we worked really hard with them to make sure that this screen would have off-axis viewing of almost a full 180 degrees. So, as I move it around here on the camera, you can see that from almost any angle this screen is really, really bright, and the colors don't shift.

And we did that by working together on a process to optically bond all the components of the screen. So, the gorilla glass on the surface, the underlying LCD, the touch sensor, even the electromagnetic digitizer for the ink are all bonded together as a single unit. And that process eliminates the air gap that's usually underneath the screen, so the screen is not only brighter, it uses 20 percent less power to actually get that same level of brightness.

You can order these PCs starting right now. The page just went live on Amazon.com in

the Microsoft Store. And I think they're going to be pretty popular.

But if you want to see an example of really extreme integration on Windows 7, you have to look no further than the brand-new version of Microsoft Surface. Microsoft Surface has announced today, this is a brand-new version. And if you remember from the first version, you notice there are some pretty stark differences from version one of Surface PC. We worked hand-in-hand with Samsung on the entire end-to-end experience I'm about to show you.

The first thing you notice is that the PC is thin. No longer is it a big box with the cameras inside. This is only four inches thin. Inside here there's a full-power Windows 7 PC. It's got a dual-core CPU, and a GPU from AMD. Up top, this is the biggest piece of gorilla glass that has ever been bonded to an LCD ever.

But what's really amazing about this technology, what really makes it magical, is the sensor itself. So, those first-generation Surface PCs needed cameras underneath that would look up to try to see what was going on. But what we have here is called PixelSense. PixelSense is new technology we've invented where there's infrared sensors all across this screen. Every single pixel is actually acting as a camera. The PC, the Surface here, can actually see.

So, I'm holding up a piece of paper that says "I can see," and when I set it down, what you see on this debug monitor, and what you can see on this split screen above is that the PC can actually see that paper. So, this is even beyond touch.

And PixelSense is more than just vision, it's actually the processing inside that takes that data and makes it available for developers to write cool applications on it.

One of the really cool things about this new, thinner form factor is it no longer has to just be a table. You can also use Surface as a kiosk.

And I want to talk a little bit about the Royal Bank of Canada. This is one of our launch partners that is going to be putting these Surface PCs in public. These are ruggedized PCs. This thing is designed for industrial commercial application. In fact, if you go across the street to Hard Rock Café, you can see some of the generation one Surfaces in use there in the bar. They can take the impact of a beer bottle dropping from 18 inches onto the screen without breaking, and even the fluid will run off properly. But do not tell them I sent you over there to try that.

Here is an example of an application that would be up in the bank. The Royal Bank of Canada sends these fliers to thousands of potential customers. And when they take the flier into the bank, they just show it to the screen, and Surface recognizes the flier. It can see the flier, and enter you into this drawing, and see whether you've won. And that's the power of PixelSense technology: Vision-based interaction creates a whole new category of applications that developers can write.

You can see in this case I've won, which always happens in my demo. And when I close this, I can interact with some of the other applications that the bank might have to show off, some of the products and services that they would have for customers.

So, here's an example of modeling how their savings products would work. So, I save $5 a day, I get a little more realistic interest rate, and save it for 20 years, and see how it accumulates.

So, with the new lower price, the smaller size, the more versatile form factor, I think you're going to see Surface PC in a lot of cool places in the next year or two.

So, Steve, if you want to come back out, you can take a look at what it looks like to have 20 fingers on the screen at the same time here.

I like this. This part is cool.

Only the imagination limits what can be done with Windows PCs today: write on them, draw on them, hang them on the wall, touch them, use a wireless keyboard, play a game, and much, much more.

All the Windows PCs that Mike had a chance to show you are going to be available in the new few months. I can't tell you how excited I am just personally as a user for some of the things that are becoming available with Windows 7 PCs. They're on the leading edge of new devices that offer it all, without compromise.

Earlier today, for the first time, we talked about the next version of Windows. We announced that the next version of Windows will support system-on-a-chip architectures from Intel, from AMD and from ARM. This announcement is really all about enabling a new class of hardware, new silicon partners for Windows, to bring the widest possible range of form factors to the market.

We made the announcement now in order to allow all of our partners to work together and build upon this innovation.

Windows has always been, and will continue to be, about the breadth of hardware and software applications and innovation. We're very excited about the full set of partners for the next version of Windows. NVIDIA, Qualcomm, and Texas Instruments are working on SoC designs based on the ARM architecture. Intel and AMD will continue to innovate on the X86 platform, including the new low-powered SoC systems that will be fully supported by Windows, and will include support for native X86 applications.

Windows support for SoC is an important step for Microsoft and for the industry. Increasingly customers expect the full range of capabilities from any device: the power and breadth of software that is available for today's laptop, the long battery life and always-on capabilities of a mobile phone, great browsing, productivity and media experiences, in addition to the basics, printing and support for all of the hardware devices and peripherals.

Windows has the breadth and depth and the flexibility to define and deliver this next generation of devices to customers through the innovation of our partners.

Mike had a chance to show you some of the things that are shipping right away earlier, but what I'd like him to show you now is some of the work that we previewed earlier today in terms of Windows support for system on chip. Please welcome Mike back.

MIKE ANGIULO: So, we announced earlier today the system-on-chip architecture for the next major version of Windows, and what we did was a technology preview. So, while everything out here today is based on Windows 7 and coming soon, what I'm showing you here is a first look at the platform support of the next major version of Windows.

Now, we're not showing the new Windows user interface, we're not showing any new Windows features. This is all about platform support today, so that partners can start working together on new designs.

I'm going to start with an Intel system, and what you're looking at here is Intel's low- power Atom SoC system.

Now, before I get started, I want to explain what we've got going on here. This is the kind of development board that we use to do preproduction software and preproduction hardware together. Underneath this heat sink is the actual chip. And the SoC is about this big, and by the time we actually ship, that entire chip fits on a motherboard about this big. So, this is the entire motherboard of the PC, with the memory, with the slots and everything. The PC doesn't need to be any bigger than this, plus a battery and a screen, and can be any size. And what we're working on here is an example of what it looks like when we're doing development.

Now, this is a future version of Windows. We're running on a low-power Atom SoC architecture from Intel. And what's so cool about this --

Current user interface. This is all about supporting the basic chip level kind of at the kernel level, if you will.

The thing that makes the Intel platform really interesting is the compatibility with all the existing software and hardware applications that run on Windows today.

So, what I'm showing you here is a version of Quicken that I just got from the store, off the shelf, installed it, and it just worked, no modification.

The same thing is true when I plug in this Windows 7 phone. You can plug in a camera, a printer; anything that works on Windows, works right out of the box here. So, a really high level of compatibility, you could see it recognizes the phone, and it's going to start synching. There it goes, it connected the device, and recognized it. So, all of that is working today, and that's one of the really big benefits of the Intel system.

We've also announced today partnerships with three more partners that are making ARM- based systems, and I'm going to show you Windows, real Windows Client, running on ARM.

So, this is Qualcomm's ARM system called Snapdragon. And this is the Windows client running on ARM. I can pull up the command prompt, and show you the version strings for the kind of people that track that sort of thing, just to show that it's real. I've got desktop pinning, I've got accessories launching. You could see I can open my photo library. I've got customization. I can change my desktop background.

What I'm showing you here is the Windows desktop up and running live on an ARM system. That's really the first time. This isn't virtualization, this is Windows running natively on ARM.

We're also working with Texas Instruments. This is their ARM platform called OMAP. And what I'm going to show here is an example of how hardware and software applications can work. So, I'm going to launch Word, and paste in some text, and hit print.

And what I did there is actually launched Word. That's Word running on ARM. So, this is a build of Word that we recompiled to be a native ARM application, and you saw it launch, you saw that I pasted in some text. And what I have down below me is an off-the-shelf printer for Epson. It's a USB printer. And what we did with them is we recompiled the print driver to run natively on ARM, and in just a moment you can see that it prints.

Thank you. That's real Office working, that's real print driver working, and the print driver is just one of the subsystems that we have up and running. We can connect to cameras and storage devices, and other cool things like that.

Now, this third ARM system I want to show you is from NVIDIA, and NVIDIA is known for really high-performance graphics, and the same is true on their ARM system as well. This is their Tegra platform. And what I'm going to launch here is PowerPoint. So, I have another Office application that's launching, and it launches quickly, and you could see I can type into here, "Windows on ARM." And I can create new slides quickly, and the performance is fast. And that's because PowerPoint is one of the Office applications that takes advantage of hardware acceleration, so you can get smooth transitions between slides and smooth animation. It's running really fast, because it's actually hardware accelerated today on the Tegra platform.

I also can show you another application that's using hardware acceleration, a next version of IE. So, here's Internet Explorer with an HTML5 demo. So, you can see how smooth and responsive spinning these pictures around is. And you can see how quickly it responds to the mouse. This is all because the graphics is being processed on the GPU on the ARM chip itself.

And performance is really important, especially for things like video. So, I'm going to launch the "Iron Man" trailer, and I'm launching this in HD. This is full HD output. And what you're going to see is smooth, fast-playing video. It doesn't drop frames, it doesn't stutter. It's really high-performance. This unit actually even has HDMI out, though it's not connected on this demo. I can jump around to a different frame in the movie, and see how quickly it can catch up, instantly, and it's playing fast and it's playing smooth.

So, what you've seen here today is Windows, real Windows running Office, devices, high performance browsing, high performance video, all running on next generation of SoC.

This is an exciting time for our industry and for consumers. We have the opportunity through the magic of software to bring Windows forward, to redefine what is really possible. That's the power of this announcement today. Whatever device you use, now or in the future, Windows will be there.

We've covered a lot of ground tonight. 2010 was an incredible year with over 1 billion consumers experiencing Xbox, Windows Phone and Windows PCs, and much, much more.

Xbox has transformed from solely a gaming device. It has become the place for your favorite TV shows, playlists and social networks. And Kinect, Kinect brings games and entertainment to a new level of accessibility for everyone.

Windows Phone 7 is the best new phone out there. As people try it and discover its new features and beautiful hardware, they see the difference. They see how it makes everything, from gaming to social networking to productivity, better than on any other phone.

Today's Windows 7 PCs can be found in so many wonderful form factors, from new tablets and convertibles to high-end gaming rigs. And Windows PCs will continue to adapt and evolve.

Support for system-on-a-chip means that Windows will be everywhere on every kind of device without compromise; all the performance and flexibility of Windows on low- power, long-lasting devices.

We're entering a new era of technology for consumers where you'll be able to use Windows anywhere you go, from the small screen to the big screen. It has the gaming, the TV, the movies, the music, the productivity, the social networking, that today's consumers are seeking.

I want to thank everybody so much for your time tonight. I want to wish you a wonderful new year and absolutely a fantastic CES. It's been my pleasure.