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My Keynote Address at the 2011 International Consumer Electronics Show

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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.

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