ASM 2013

Nov 19, 2013

Good morning and welcome to the Annual Meeting of Shareholders. I'm Chris Sutt, General Manager of Investor Relations. Welcome also to those attending the meeting online. We are streaming live today on the Investor Relations website. We strive to make this meeting as inclusive as possible and are excited to offer shareholders the opportunity to vote via the virtual shareholder meeting. Thank you for being with us today. We greatly appreciate your interest in the company. Let me first start by introducing Mike Williams and Jason Rissinen representing Deloitte and Touche are independent auditors. At this time, I would also like to now introduce our independent Board of Directors Dina DeBlanc, Member of the Audit and Compensation Committees Doctor. Maria Klave, member of the Compensation and Regulatory and Public Policy Committees Stephen Lusso, Chair of the Compensation Committee, Member of the Audit Committee David Marcourt, Member of the Governance and Nominating Committee Charles Noske, Chair of the Audit Committee and Member of the Governance and Nominating Committee Doctor. Helmut Ponka, Chair of the Regulatory and Public Policy Committee, Member of the Audit Committee and John Thompson, Chair of the Governance and Nominating Committee and member of the Regulatory and Public Policy Committees. So before we proceed, let me review a few housekeeping items. Please take time to visit our Microsoft store in the adjacent room. We have several of our products showcased including our latest Surface and the impressive Nokia Lumia 10 20. And you can also pre order the Nokia Lumia 15 20, our new 6 inches bablet. We also have plenty of knowledgeable store associates on hand to help with any product related questions you might have. As in prior years, members of the Investor Relations teams are also around and are available to answer your questions at the check-in desk located in the lobby or around the area of the store. Please be sure to visit the Investor Relations website. Our goal is to maintain the Investor Relations website as the authoritative portal to which visitors can easily find financial and business performance information about the company. You can sign up for e mail delivery of the proxy as well as alerts and RSS feeds to have information including quarterly earnings announcements pushed to you in real time. The web address is microsoft.com/investor. If you parked in the Maiden Bower Center parking lot, your parking will be provided free of charge. You will not need to get your ticket validated. American Stock Transfer and Trust Company has been appointed the inspectors of election for this meeting. The inspectors are located at the reception table in the lobby. Most shareholders have already voted by proxy and your proxy votes have been tallied. If you're a shareholder of record or a beneficial shareholder holding a legal proxy from your bank or broker and you want to vote your shares now or change your vote then ballots are available from the inspectors at the reception table in the lobby. Filling out a ballot and giving it to the inspectors will have the effect of revoking any earlier proxy you gave. Beneficial shareholders with voting instruction forms may also submit their instructions using the computers at the reception table. The polls are now open and will close in a few minutes following the presentation of matters subject to a vote. Following the business portion of the meeting, we will have some time for Q and A. So with that said, let me begin by saying it's an incredibly exciting time for Microsoft. We've begun a transformation to a devices and services company. And with the 1 Microsoft realignment, we've improved the way we develop and bring innovative new products to market such as Surface, Windows 8.1 and Office 365. Later this week on November 22, we'll be launching the much anticipated Xbox 1 console, which promises to revolutionize the living room with new scenarios for gaming and entertainment. So before we get started with the business portion of today's meeting, we We thought we'd show off some of these exciting new products and show you how it all fits into our broader devices and services strategy. Please help me welcome Ryan Asdorian to the stage. For those of you who were here last year, you remember Ryan from his great demo. Well, he's back this year to show you the latest and greatest that we have to offer. Ryan? Hi, everyone. I'm Ryan Asdorian and it is great to be here back at the shareholders meeting. Now some of you may remember from last year, I told you a story about my mom. Now this year, they actually invited me back and so I brought on my wife and hi, honey, she's there in the back. I figured I'd tell you a few stories about us and about my life. Now I lead a pretty busy life. In addition to working at Microsoft, I'm actually also the mascot for the Seattle Seahawks. And I thank you. And I spend a lot of my free time Ignition of that, volunteering and fundraising for the National Multiple Sclerosis Society. Now I need devices and services That are connected, that are personal and allow me to work and play at the same time. So here I brought a number of devices with me that I'm personally logged into So that I can show you a bit of how Windows really makes my life great. Let me start with the phone that I actually use Every single day, this is my Nokia Lumia 10 20. So this Since getting it, I no longer have to carry around a digital camera. Why is that? On the back here, this is actually a 41 megapixel camera. No other smartphone comes close and the pictures that this device takes are absolutely amazing. This is my start screen right here And scroll through and I get all sorts of live tiles with lots of rich information. I've got a family tile, my friends tile, lots of different apps. One of my favorite things to do on here is actually play chess. So I've got my chess app here all loaded up so I can have some fun with that. Let Let me actually bring this up to the big screen so you can follow along on some of the other things on the phone. Go ahead and bring this up. And What you see here is my lock screen. Now the lock screen can be customized with lots of rich content, your photos. One of the things that my My wife and I love to do is actually customize our phones with the Bing photo of the day. So every single day we wake up and we have a beautiful photo to look at. When we Log in here. We've got our start screen. I've got some of our favorite apps here Foursquare, Twitter, Vine, Facebook. And of course, here's the NFL mobile app. This helps me keep in touch with all the different league scores, manage my fantasy team. And of course, I'm playing around on this. I get all sorts of updates around the league and There's the Seahawks, so I can pin my favorite team. Now also one of the things on here is that with Windows Phone you get Office built in, Doing a little holiday shopping. So I was capturing some great gift ideas that I can use for the holiday season. I'll go ahead and I'll make a couple of additions here. One of the things that you heard Chris talk about was the Nokia Lumia 15 20. So I'm going to go ahead and add that. Now as soon as I add that on my phone because my OneNote and Office is connected through SkyDrive, it actually syncs to all of my devices. I'm talking about the Nokia Lumia 15 20. I figured I'd show you. I've got it right here as well. This is a beautiful 6 inches device. You can see that screen, gorgeous, gorgeous screen. It's got 1080p graphics. And what this really means with this big screen is you get even more Customized personal data right on your screen. Inside, you've also got a quad core processor. And on the back, You've got a 20 megapixel camera. So again, you combine all that and you just really have an absolutely amazing device. Now, I'll go ahead and put this one down. And I've got another phone right here. This is a little bit on the smaller side. It's one of the fastest selling smartphones, the Nokia Lumia 5 20. It's great for cost conscious customers and sells Subsidized for only $79 great, great value. You get a super responsive 4 inches screen and it's available In a range of exciting colors. Beautiful, beautiful phone. Now moving up in size, I wanted to take you through a few Windows 8.1 devices. What do you know? I actually got advice right here. This is Lenovo MiX. It's 8 inches It runs full Windows 8.1. I'll show you the back right there, this beautiful aluminum back. This comes for under $300 and includes office. Surprise, surprise, I got another one right here. This is the Dell Venue 8 Pro. And again, both these devices at 8 inches They're under $300 They come with Office and you can run everything on here. I can show you, I've got OneNote, which actually has all sorts of things synced through my SkyDrive. Of course, on this size device, I actually love playing some games. So I kind of brought this so you can kind of see it driving this truck. See how I usually crash right there it is. Back flip. Really fun. So lots of different apps that you can kind of play on here. And if you'll notice, What I just added to my OneNote shopping list, the Nokia Lumia 1520, that's already here synced up to this device. I type it on my phone, It ends up on my tablet. I type it on my tablet. It ends up on all of my devices. I'll just type Dell Venue Pro And I'll add that right there. Let me go ahead and put that one down. Now over here, I've got The Nokia Lumia 15 20. The thing I want to show you about this one is there you go. I'll log in here. All right. There we go. So this is the Nokia 2,520. It's a great 10 inches tablet. It runs Windows 8.1. It's perfect for kicking back, checking in on my Fantasy Football League, It's perfect for kicking back, checking in on my Fantasy Football League or just browsing Facebook. I'll go ahead and this is the Windows 8 app For Facebook right here, and you'll see this is all my notifications, this beautiful app, it's got in line pictures there, people I care about on the right, And then all sorts of things that I can manage my Facebook account from on the left. If I scroll down, you'll see, oh, look, there's a picture of me on Sunday, Pretty fun. So I can go ahead and pull that up on this. Now one of the things about this tablet that's really great is it comes with a full HD screen, so you get beautiful graphics And it actually has LTE built in. That means that almost anywhere I go, I'm connected with this device. Now the design of this device really goes hand in hand with the Nokia phones. Here I've got my 10 20 and my 2520. And this Friday, you can actually pick up both of these devices for only $300 That is an absolutely incredible deal to have 2 great devices. All right. Now moving on along the table, Here I've got the ASUS T100. This is a 10 inches 2 in-one. I'll go ahead and unplug this. I can show it to you. It's got an Intel Quad Core Processor and Attachable Screen. It also comes with Microsoft Office. It's only $3.49 And it's easy for me to bounce between consumptive and productive modes using this PC. Now when I'm just relaxing, I've got great apps that keep me entertained. One of those apps Is Flipboard. Now Flipboard is one of the top apps on the iPad today and what it does is it aggregates content from magazines. It just shipped on Windows last week and is already getting rave reviews. You can see just how beautiful this is. I can kind of flip here and You see I get lots of different make sure you can see that. I can flip back and forth between these pages. It flips just like a magazine. Now This is just one example of how we continue to add top apps every single week to the Windows platform. Now to show how versatile this is, I want to also show you a Word file that I've got open here. This is just a Word doc. It's in reading mode because I'm in my tablet. I want to kind of read on this device. I can scroll nicely here. So beautiful. But because this is Windows, I can also be productive. Watch what I do. I just snap this into this dock right here very nice and easily. And then just like that, I can go ahead, I can start typing on this keyboard, Works perfectly. All right. Now I've got some great laptops that come in multiple form factors here. They're powerful processors, beautiful screens. This first one that I want to show you is the Lenovo Yoga 2 Pro. Okay. One cool trick that it actually has, watch this, I can fold back the But as I continue, I can actually fold it all the way around. It flips 360 degrees and becomes a beautiful tablet here. You see my start screen Right there. And one of the things that I'd like to do with this PC in particular is put it in what we call tent mode where I can just set it down, works as a beautiful tablet. So I'll put this back here. And that brings me over to this Samsung ATV Book 9. Really powerful beautiful screen. Both of these PCs Have what's called the 3200x1800 resolution screen. What does that mean? Quite simply, you're going to have the most beautiful And crisp images you can imagine on this PC and this PC. Now I talked about photos that I take on my Nokia Lumia 10 20. Normally at this part of the demo, you and I will take a picture of everyone in the audience and I can show you how that syncs through all my devices. I think I did that last year with all of you. So this year instead what I thought I'd do is I'd actually show you a couple of pictures that I've taken over the past couple of months since I've been carrying around the Nokia Lumia 10 20. That way you can see just how amazing some of these are. Now let's load these up. You can see this on the big screen. This is a picture of my wife and one of our friends And we'll flip through here. This is a picture of a really cute dog. And to show you how powerful this is, let me zoom in. You can see just exactly how cute that dog is. But What I'll draw your attention to over here is actually look at the blades of grass. Look at how crisp and clear they are. Really cool. And this is all done with the camera that I have on my phone that I carry around in my pocket every single day. As I keep going, Here's some more fun pictures. This was at a concert. This is on our roof. We were having some food and captured the moment on the golf course. And then this is actually a video of a band that we like. And what I want you to pay attention to is notice I just zoomed in. We were in the back of the concert And you can hear clearly the sound from the band. The lights are changing as they're playing, but the band stays in focus the entire time. This is again all done from the back of a room with my Nokia Lumia 10 20, really, really powerful camera. So Let's move on here. This let me bring this up here really quick so you can see this. If you're in the market to update your home PC, This is the HP ENVY recline. It's a gorgeous 27 inches all in one that comes with a full HD display and built in Beats audio. Now at our house, we have an all in one in the kitchen because it's great for entertainment, but it's also great for stuff like the Bing Food and Drink app. Now this allows me to see lots of different recipes. I can dive into this. It gives me the ingredients, tells me how to cook it, all that stuff, which is fantastic. And it works great in our kitchen. Another app that I want to show you on here is Foursquare. Now Foursquare is one of the most Popular applications on mobile devices allows people to both check-in and share information about places they love. Now because of what Windows 8 offers, The Foursquare team have made this one of the most beautiful apps on Windows 8 and the first tablet that they've chosen to ship on our Windows tablets. I've loaded it up here so you can actually see just how beautiful it is. You can dive in and it immediately knows where I am. Okay. So I can see different things around us. There's a Microsoft Store, John Howey's stake. I'm going to go ahead dive into John Howey's stake and I get information about it immediately. And here I actually get more photos. I can pull in lots of rich imagery Right there inside the app, I also get tips, I get reviews, I get lots of rich information. And of course, The same app that I wanted that I showed you on my phone that I enjoy playing in my spare time is chess. So I've got that here as well. I can kind of make a move on up here, but I'll wait for later to do that. Let me throw let me put this back down now. All right. That Brings me over to Microsoft's new range of Surface tablets, Surface 2 and Surface Pro 2. We announced them in New York this past October. So let's start with Surface 2. Straight out the gate, the first thing that you see is it's Lighter, it's thinner and it's faster than its predecessor. Not only that, it's got this integrated kickstand with multiple angles That allow me to find the perfect viewing angle, so I can use this exactly the way that's right for me. Now it also has a beautiful 1080p screen. It comes with Office including Outlook. It comes with 1 year of Skype voice calling and it comes with 200 gigabytes Of SkyDrive Storage. Remember SkyDrive is that thing that connects all of my devices. And 200 gigabytes of storage, Well, that's enough space for you to take a photo every hour from the moment someone's born until they graduate from college. Of course, also got multiple colors of keyboards, so I can customize this even further. Just Snap that in. All right. Put that down and I'll come over here to Surface Pro 2. Let's take a closer look. Now The first thing I did over there was I showed you some photos. Since I'm up here and I can kind of show you whatever I want, I figured I'd show you a photo that might get me in a little more trouble. This is actually a photo of our closet when it kind of fell off of the wall. This was not a good day, Not a good thing to happen to your call. It fell right off and you got to kind of act fast. Now while I'm up here, I figure if I'm going to get in trouble for showing This photo, I might as well just kind of share it with a whole bunch of people. You can see I just can share right from there and type, pause it fail and I'll Speak that out just like that. So, see how that goes. But in the moment, you really got to get that fixed quickly. So, What do you do? One of the places where we go to do home repair is Home Depot. Now using Windows 8.1 you have Bing Smart Search Built directly in. I'm going to just type Home Depot. As I do this, you'll notice it's not the same 10 links you've become accustomed to a search. Instead you get a rich display showing all sorts of information from your PC, from your web, lots of rich information and I Quickly find a store. I can even install the Windows Phone app. So next thing you know we were at Home Depot and actually I have to say our closet looks better than it's ever looked before. So that was a good thing. Now there's a whole host of new things in Windows 8.1 and I figured I'd show you a couple of those things right here. The first thing to note Is we brought back the start button. So you see that in the bottom left right there. It makes it easy for me to go back and forth between my start screen and the desktop. Just press right there. Now on the start screen itself, there's even more ways to personalize it. You see I've got some photos up there. I can go ahead and resize those. Nice way to actually customize this just the way I want it, very nice and easily. And There's more apps as well. If I go into the store, you'll see we actually redesigned the store to get you more of the information and more of the apps that you want. There's thousands of apps and we've got picks for you. You can see stuff that's trending, what's new and rising, lots of ways to continually explore. And I'll bring up SkyDrive one more time to just emphasize the point that it's built in. And what does that mean? I have to tell you, it's absolute magic the way all of your stuff just moves Between all of your devices, if I edit a photo, if I save a Word document, if I'm playing with a PowerPoint file, any of those things Automatically sync and the changes I make, the content flows between devices. So that's a bit of Windows 8.1. Now I'm going to get to show you some of the new capabilities of Xbox 1, which we'll be launching later this week in New York. Now our heritage in Xbox As the best selling games console, we'll continue with the next generation. But we set out to create something entirely unique, a complete All in one system that will have the best games. It will have the best online services and it will have the best entertainment experiences And it's built for the future. So today, let me show you a little bit of how we're going to deliver on this vision and promise. Xbox, watch ESPN. Xbox, on Snap. To make sure you get the most out of your Toyota this winter. Xbox, go to Forza Motorsport 5. Genuine Toyota parts I'll just caveat that this doesn't normally you don't normally wear a microphone in your living room, so I'll try this one more time. Xbox, go to Forza Motorsport 5. There we go. Spin out a little bit. All right. Xbox, show my stuff. Now when I say my stuff, it's really my stuff. Notice the same live tiles, the same tiles that I With my applications and the stuff that I care about, the Xbox knows who I am and it knows how to give me a personalized start screen. So one of the things you'll notice when I was doing that is it was switching very quickly between the things that I'm doing, Between the games, between watching ESPN and you'll notice that the whole time I'm using the best controller in the world, my voice. So it's really, really fun and easy to use. Now I've got a cable box also hooked up to it and that's how I'm able to bring in lots of rich information, bring in live TV. And let me just show you a little bit of how that pulls in some information. Xbox, show guide. Xbox, watch Discovery Channel. Item 6, Slide show. And here I'm pulling up Lots of pictures from my SkyDrive playing them in slideshow mode. Again, these are the same pictures that are on my PC, the same pictures that I take with my phone. And it really offers a great way to bring these pictures into the living room on my big screen, which is just absolutely great. Xbox, Go home. Xbox, go home. Fast, fluid, beautiful, Xbox One offers me more than just gaming, but an entire entertainment system. Now As a big sports fan, I'm excited to share that the NFL experience on Xbox will also include an integrated Fantasy Football solution, enriched live viewing experiences, All sorts of stats on your favorite players, your favorite teams and it's really just a personalized NFL destination. Now Xbox 1 is shipping this Friday And we're really excited to be a personal and connected part of the family room. And I forgot to show you one extra really cool thing with this. Let me go ahead and I'm going to step out from in front of the Kinect sensor. And as I do this, I'm going to actually sign out here. One of the things that's great about this is Xbox knows exactly who I am. So it said goodbye to me right there. Now I'm going to step in front and using biometric recognition, it'll know exactly who I am. I just step in front, Takes a look at me and as you can see says, Hello, Ryan, which is fantastic. Now, I hope that gives you a brief glimpse Of why and how Microsoft delivers the most personal, familiar and connected experience across any company. I've showed you Content across all of my devices, my content, my apps and whether I'm at work, on the go or lounging on the couch, they're all at my fingertips. So thank you for having me. I hope you enjoyed my story and I hope you enjoy the rest of the meeting. Thanks, Ryan. That was fun. I know my Family is personally super excited to get their hands on Xbox One as well. So before I welcome our panel to the stage, let me remind you that we may make Forward looking statements during this meeting, which are predictions, projections or other statements about future events. Actual results may differ materially from these forward looking statements As of a variety of risks and uncertainties about our business, which we describe in our filings with the SEC, including our Form 10 ks and 10 Q. I would now like to introduce our speakers and welcome them to the stage. Bill Gates, Chairman of the Board of Directors Steve Balmer, Chief Executive Officer Amy Hood, Executive Vice President and Chief Financial Officer and Brad Smith, Executive Vice President and General Well, good morning. It's great to have you all here and have the opportunity to talk about what's going on with Microsoft. It's been a big year for Microsoft in a lot of different ways. And even this week it's going to be pretty exciting. We've got The Xbox 1 availability, we've got the new Nokia devices. In fact, Thursday at midnight down the street here Top store, you can be there and be the 1st in line. I told my kids though that it's a school night. So even though in the past, Paul and I used to sneak out after midnight and use computers, I don't want to see that Happening, so my kids will be asleep that night. When I look back at the last year, I'm proud of the things that we've accomplished And I'm proud of the role our software plays. It's a very dynamic and competitive industry. And so at the same time as we Feel great about our work. We can't underestimate the challenges we face or the opportunity of what software has left to do. In so many ways, we've just scratched the surface of what can be done. And Microsoft has some amazing strengths that we bring to this. The digital revolution is just at the beginning and we can use our software to improve people's lives. We can make people more productive and we can make them make it easier for them to communicate and organize their personal lives. So we're going to transform a lot of things, even reading and writing itself, interactive documents, the way you think about your collection materials, the way you annotate, The way we think about communications, getting a group of people collaborating together will make that very different. The whole idea of a business meeting and how that can be Technologically enabled. So all our customers, businesses, governments, even non profit groups like the Gates Foundation We'll be able to be far more effective. And for individuals, they can control their information, what they share, what they don't share, The whole way that they network in social communication. So we've got a lot of assets as a company to pursue these things. Some of them Our long standing assets, a lot are things that are new to the company. And that's the foundation that we can build our future on. Now at the same time, we have a process going on with the Board of Directors to select Steve's successor's CEO. And the Board established a search committee. So I thought I'd say a few things about what's going on with that process. I'm a member of the committee working closely with the lead, John Thompson, as well as the 2 other members, Chuck Noske and Steve Lusso. Together with the Board, including Steve, we've been doing a lot of meetings with both internal and external candidates. And we're pleased with the progress. In fact, we met last night and talked a lot about where we are. As John Thompson said at the Financial Analyst Meeting in September, It's a complex role to fill a lot of different skills, experience and capabilities that we need. It's a complex global business that the new CEO will have to lead and I'll have to drive fundamental across fundamental transitions to create new growth and to I'll track and manage top talent. We'll have to build on our strengths while addressing areas that we've got weaknesses or challenges. The person has to have a lot of comfort in leading a highly technical organization and have an ability to work with our top technical talent to Seize the opportunities. We're looking at a number of candidates and I'm not going to give a time line today, But we're pleased with our progress and feel we're going through the process that will get the best person for the job. As has been mentioned, this is also a milestone for Steve. It's his last shareholder meeting as CEO. And we'll have time later for goodbyes, but I do want to recognize and thank Steve for the leadership He's shown over the last 33 years, including the past 13 as CEO. In our entire 38 year history, We've had only 2 CEOs and that alone makes us quite unusual. Steve and I really appreciated all the joys and challenges that came with being CEO. It's a real privilege To lead the incredibly talented group of employees we have, it's a privilege to work on the technology that's changed the world And it's been exciting to deal with the problems that occupy the CEO's day. We clearly shared 2 other things as well. Now we've got a commitment to make sure that the next CEO is the right person for the right time for the company we both love. And We share commitment that Microsoft will succeed as a company that makes the world a better place. So thank you for your support. Thank you, Bill, and good morning, everyone. Before I begin the procedural part of the meeting, I'd like to introduce myself. I'm Amy Hood and have been in my role as Chief Financial Officer a little over 6 months. I'm so honored and excited To be a part of the leadership team at Microsoft, an incredible company doing incredible things. And today is really the first I've had to meet and talk with many of you. So thank you for joining us today. Let me start with a quick recap of our financial results. In fiscal year 2013, we grew revenue to a record $77,800,000,000 This reflects Strong demand for our enterprise and cloud offerings and increased consumer demand for services like Skype, Outlook.com and Xbox Live. During the year, we paid $7,700,000,000 of dividends, representing a 15% increase over the prior year and bought back 4.6 $1,000,000,000 of shares. While still early, fiscal year 2014 is off to a strong start. In July, We announced the realignment of the company to 1 Microsoft. Subsequently, we also announced the proposed acquisition of Nokia's devices and services business, Which we believe will accelerate our mobile strategy. Importantly, we did all of this while delivering record first quarter revenue. Our enterprise business continues to be very strong despite a macro environment that some of our peers and competitors have characterized as tough. We are driving our business forward with industry leading solutions in key areas like collaboration, unified communications and cloud services. As a result, we're seeing high satisfaction among our enterprise customers, which is driving high enterprise agreement renewal rates. At the same time, we are making meaningful progress in our consumer business. We're seeing growing engagement and adoption across our major consumer services Including Office 365 Home Premium and Bing. And the new Windows provides high value experiences for our consumers That allow people to use our devices and services all day long, whether at work or at home. With Office 365, we're also moving toward a subscription model. This means that we'll be able to deliver innovation quickly to our customers. They will always be on the latest and greatest version of Office. We launched Office Home Premium, our consumer version, earlier this year And already have over 2,000,000 subscribers. They can use Office 365 on up to 5 devices and they also get additional services like Skype and SkyDrive, Two great Microsoft products you saw in the demo earlier from Ryan. As we look ahead, we'll need to keep focused on making investments on our long term growth In areas like the cloud, it's critical we continue to make investments in data centers and servers to increase our global footprint, To be able to take advantage of Azure, Office 365 and all of the cloud opportunities ahead of us. In addition to services, We're also focused on bringing great hardware to market. We'll continue to work with our partners on exciting third party devices and this holiday We'll have a wide selection of Windows 8.1 devices available, including tablets and PCs, many of which were demoed today For less than $300 At the same time, we continue to focus on Microsoft devices like the Surface and Xbox gaming and entertainment consoles. During the Q1, we also announced a 22% increase in our quarterly dividend to $0.28 per share and announced a $40,000,000,000 share repurchase program. We returned $3,800,000,000 of cash to our shareholders, the highest quarterly amount since the Q2 of fiscal 2011. Clearly, our company is focused and delivering and we're doing so as we strategically position ourselves for the future. With those updates Out of the way, I'd like to call the 2013 Annual Shareholder Meeting to order. I'll be serving as the Chair of the meeting and Brad Smith will be serving as Secretary. Now, I'm going to ask Brad to report on the notice of a meeting and the proxies received. Thanks, Amy. The The notice of the meeting and a notice of Internet availability of proxy materials were mailed by Broadridge Corporation beginning on October 7, 2013, To all shareholders of record as of September 13, 2013, and as a result, the meeting is being held pursuant to proper notice. Proxies representing more than 83 percent out of the approximately 8,400,000,000 shares of the company's stock eligible to vote have been received. And accordingly, a quorum is present and the meeting is duly constituted and should proceed. As Chair of the meeting, I have adopted an agenda That will cover the order of business at this meeting and the rules of conduct of the meeting. Copies of the agenda and the rules Are available at the reception table outside the meeting room. The rules of conduct will also cover the Q and A session that will follow the adjournment of the meeting proper. We now come to the part of the meeting where shareholders consider the matters set forth in the proxy statement. Voting on all matters is by actual count of the votes cast In person or by proxy at the meeting. The first item of business is the election of directors. The following 9 people have been properly nominated By the Board, Stephen A. Balmer William H. Gates, III Dina DuBlanc, Doctor. Maria Clave, Stephen J. Lusso, David F. Marquardt, Charles H. Noske, Doctor. Helmut Pankaj and John W. Thompson. The Board recommends a vote for each of the directors on the ballot. The second item of business is a vote to approve material terms of the performance criteria Under the Executive Officer incentive plan, this proposal is discussed in the company's proxy statement. The Board recommends approval of the proposal. The 3rd item of business is an advisory vote on executive compensation, the say on pay resolution. The secretary will read the resolution. Resolve that the shareholders approve in a non binding vote the compensation of the company's named executive officers as disclosed in Part 4 of the company's proxy statement. The Board recommends approval of that proposal. The 4th item of business is the ratification of the company's independent auditor, Deloitte and Touche LLP for fiscal year 2014. This proposal is discussed in the company's proxy statement. The Board recommends approval of that proposal. The discussion of matters for shareholder consideration is now closed. Please be advised that the polls are also now closed. At this point, the voting tabulation has been completed, And we will report the preliminary results of the matters voted upon today. Proposal 1 is the election of directors. As provided by the majority vote standard in our bylaws, a director or candidate must receive a majority of votes cast in order to be elected. Brad, please report the vote. The following 9 persons have received the majority of votes cast, each with votes in excess of 90% of the votes cast: Stephen A. Balmer, Dina DuBlanc, William H. Gates III, Doctor. Maria Clave, Stephen J. Luzzo, David F. Marquart, Charles H. Noske, Doctor. Helmut Pankaj and John W. Thompson. The 9 directors I'm sorry, the 9 nominees are elected directors to serve until the next annual meeting of shareholders And until their successors are elected and qualified. Proposal number 2 is the vote to approve material terms The performance criteria under the Executive Officer incentive plan. The proposal has received affirmative votes representing more than 97% of the votes cast. Thank you, Brad. The proposal is approved. Proposal number 3 is the advisory vote on executive compensation. The proposal has received affirmative votes representing more than 95% of the votes cast. Thank you, Brad. The proposal is approved. Proposal number 4 is the ratification of the company's independent auditors for the current fiscal year. The proposal Acquires the affirmative vote of a majority of shares voting on this matter. Brad, please report the vote. The proposal has received affirmative votes representing more than 98% Of the votes cast. Thank you, Brad. The proposal was approved. We expect to post the details of final voting results on these matters our Investor Relations website by tomorrow and we'll also report the results at a Form 8 ks filed with the Securities and Exchange Commission Within 4 business days. We have completed the business of the meeting and our shareholder meeting is now adjourned. With that, let me hand the stage over to our Chief Executive Officer, Steve Ballmer. As you know, Steve announced his retirement in August and will leaving Microsoft sometime in the next Several months. I'm incredibly thankful for the opportunity to have worked with Steve. And with that, please welcome Steve Ballmer. Well, thanks everybody very much for coming today. And thank you very much for your investment in Microsoft, a company that we all share passionate interest in. This is a unique meeting, fun meeting And hopefully from the demonstration Ryan did, you can get a sense of some of the exciting things that have been going on. It's certainly been a pivotal year for Microsoft. We delivered strong financial results. And as you heard from Amy, we're off to a strong start this financial year. We also advanced our family of devices and services And I really do think Ryan showed just how spectacular our family is becoming. One experience On every device for everything in your life. We're doing great work with our partners across all of the Screens that are important in your life from phone to tablet to tablet to PC to TV to wallboard. But we're certainly very, very hungry to do much more. Last year at this meeting, I talked about the fundamental shift underway at Microsoft From a company that expresses its software creativity directly in software To a company that expresses its creativity and software through a family of devices and services. Our leadership team and the Board of Directors have spent a lot of time over the past year working On this strategy and honing a differentiated point of view in terms of the high value experiences that we really can bring to life that make people more productive, that make businesses more productive And make people who really want to have fun be able to do it in unique ways. To that end, in July, We announced a sharpened strategy and a far reaching really a very far reaching realignment Of how Microsoft operates, we are focusing today on this family of high value activities Implemented and delivered through devices and services for individuals and people sorry, individuals and businesses around the globe, Empowering people at home, at work and on the go. A key part of the strategy Is this focus on what we call high value activities? Think about the things that matter most in a person's life. And I'll admit it's different for everybody and one person's truly important thing may not matter to somebody else. But the questions we ask ourselves are what do people really need? What is most valuable to them? Everybody who works, whether it's in the home or at in a large enterprise or at a not for profit, everybody who works Has a real need to be productive. My wife and I would say having a face to face conversation with our sons When they're miles apart is really valuable. And for many people, Skyping and bringing their world closer together He is of incredible value. Unfortunately, sometimes when my sons would say is high value He's going down and beating the game in Xbox and I'm sure we'll lose my 14 year old for the better part of the next weekend. Is it high value? I don't know, but he works really hard at it. Therefore, it must be important to him. At other points in time, I would I know not just hope that my sons would say, hey, look, we really need to have the technology That lets us do the research for this important project that we have in our school work. Small business owners certainly say That connecting with their customers, attracting new customers, gaining unique insights into their customers from the ever growing World of data is a high value activity. And as I said at the beginning, any professional, but certainly professionals who spend a lot of I'm, for example, in meetings with colleagues in the room and around the world would say that the ability to collaborate digitally, To share information is an incredible high value activity. The real point here is that Microsoft We'll focus in on a set smaller than 100 and more than 1 or 2, but a set Of high value activities to both individuals and to businesses, to people as people, IT professionals who are trying to deliver value and we will offer a family of services Of devices, devices built by Microsoft as well as devices built by our partners to help people really realize The most important experiences in their life. We clearly have big upside opportunity in devices. Just take a look at Xbox 1, which is launching in a few days. No other company could have delivered what we're delivering with Xbox 1. It is a reflection of what's possible when the company, our company is unified under a common vision. It brings together hardware and software. It brings together these services, machine learning services through Bing that Understands you and who you are and learns about you. It runs at a scale that people think about As large because we serve millions of consumers to deliver unmatched gaming and entertainment experiences. New Windows devices of all sizes are also hitting the shelves for this holiday season. Earlier you saw some of the amazing new Windows 8.1 tablets, 2 in-1s and all in-1s, Including the Surface 2 and the Surface Pro 2, those are devices that I would tell you deliver the best productivity experiences, The most productive tablets on the planet. If you want to work and live, there's no better product for you one of our 2 Surface products. We have strong momentum with Windows Phones. The Nokia Lumia 10 20 Delivers category defining innovation with the 41 megapixel camera and the newest device That Ryan showed you earlier, the Lumia 1520 and the 1320 will challenge any device in this so called phablet, that's a phone tablet by the way, phablet category. So from the smallest greens to the largest ones, we are in the game. We're accelerating our participation. A significant part of our approach to device success is differentiating With the software that delivers these high value experiences, consumer services, productivity services, Including Bing, Skype, SkyDrive and of course, our Office 365 product. Make a Skype call to your grandkids from your living room on an Xbox One or show a family slideshow to your friends With the photos and videos that you've stored in SkyDrive, Bing's another important example and fundamental to our strategy. We're growing share and we are also enabling new scenarios. With the Bing Smart Search that we've built into Windows 8.1, You can find anything that you're looking for, whether it's on the web, on your device or stored out in SkyDrive. These advancements all reflect our investment in and focus on big data, Machine learning and serving individual customers around the world with the capabilities that were built up as part of Bing. We're also delivering new capabilities through Office as a cloud service with Office 365. You can access photos, notes, documents across devices. I have grown to really love being Paperless, I love not having to slap everything around. My whole life is either on this device And we're accessible to device. Anything I want to create, boom, I can do it on this device. My briefing materials, my speech are on my tablet. My digital handwritten notes, I just sit up here. I left my pen over there. Sit and You want to borrow yours? 97% was the tally that Brad said. Boom! It's right there available to me, roam through SkyDrive and forever available. I can also read and access these things On my phone, where I basically need to have things in my pocket on the go, All of these consumer services differentiate our devices. They can generate revenue through subscriptions, particularly with our enterprise customers And advertising, particularly with Bing, and in general feed the incredible Enterprise capabilities that we have as a company. We also learn from running our consumer services at Scale and we can apply those learnings to what we're doing in the enterprise. That's why we like to tell our customers that Windows Azure, Our cloud Windows cloud service is battle tested. It's battle tested because it builds on the same foundation as outlook. Tom and Bing and all of the other technology that we've built for these high scale consumer services. Our consumer services make our enterprise services stronger and our enterprise services have proven Or should prove to be again the major revenue and contribution margin driver that they've been in the software world. Customers tell us that we're helping them solve their biggest challenges as enterprises, managing securely a growing number of devices, Harnessing the big data that they have as companies, embracing new social networking scenarios and choosing the right cloud solution, Helping customers to move to the cloud, our business customers move to the cloud on their terms Remains one of the single biggest opportunities available to this company. To be the leader in the next era of enterprise cloud, A company will have to do 3 things well. 1st is to offer best in class first party applications of its own. In the industry, we call that software as a service. And Office 365 is the flagship for us in that dimension And becomes sort of the major driver of where we're going. 2nd, you've got to be able to operate a public cloud at massive global scale, Which is certainly not easy nor is it inexpensive from a capital investment standpoint. And third, we have to deliver True what we call hybrid cloud capabilities that allow our customers to balance between what they run-in their own data centers And the ability to move those things to the Microsoft Cloud. I don't think anybody's going to succeed doing just one of those things. You have to do all three and our company is making incredible progress in all three of those significant areas. Customers are flocking to our first party cloud applications, Especially Office 365, but also Yammer and our Dynamics CRM offer. In fact, last quarter, our commercial cloud services revenue grew more than 100% year over year. We are delivering at scale a public cloud platform in Windows Azure. Windows Azure continues to accelerate At an amazing pace in the enterprise with more than 1,000 customers signing up every day, A 1,000 enterprise customers signing up every day. We're delivering true hybrid cloud capabilities today With our Windows Server, System Center, Hyper V and Windows Intune offer, We are the only provider, bar none, that is delivering in all three of those key areas. None of our competition is. So I'd say we are building a real and important differentiated position in the market today. And I saw Kevin Turner as our Chief Operating We're here today. Certainly, our field teams working with our customers are just seeing amazing surge of interest in our cloud services. To deliver better products faster, we're taking significant steps forward on our strategy. The realignment of the company that we announced in July is underway. We have moved and are now consolidating from a collection of business groups to an organization that's aligned by function. We're operating with a single strategy and starting to work as a single team towards a common shared set of goals, High value activities expressed through devices and services. In September, we announced our intention to purchase Nokia's devices and services business. This is really a signature moment In the transformation of the company and we'll bring together the best mobile device work from Microsoft and Nokia. The deal will really accelerate our position in phones, strengthening our share, strengthening not only The ecosystem for Windows Phones, but also Windows Tablets and Windows PCs and is an important economic opportunity for the company. As we sit here today, the Nokia shareholders have gathered and they will vote today on accepting this deal. We have to go through that process and then we are expected to close the deal on the Q1 of calendar year 2014 Still pending appropriate regulatory approvals. Clearly, there's a tremendous, tremendous amount of opportunity ahead for Microsoft. Our industry is in a period, as Bill said, of incredible innovation and Microsoft is uniquely positioned To drive and define the next big thing, we've had incredible success And people don't always remember that we built Microsoft 1 business at a time, 1 product, One market, one customer, 1 by 1, individual initiatives. We made big bold bets. We made a bet upfront on being in the software business, a bet on graphics, user interface and productivity. And then the last 24 years, just an incredible bet on being an enterprise IT supplier. Today, we're also making big bell bets. There's no way for this company to succeed unless it is willing to bet. And we're embedding On enabling high value activities, it's easy to focus in actually on the things that are simple and casual. We're betting on amazing cloud services, which require real invention and innovation to propagate And we're betting on our ability to conceive and drive the future, the next generation of what important devices look like And deliver those to the market. We've driven phenomenal results over the past decade with more than 200 $200,000,000,000 of operating profit. As the CEO of Microsoft And personally as an investor in Microsoft, I'm optimistic. I treasure my Microsoft stock As I know everybody in this room does, I'm confident that we have the right strategy in place. We have the financial assets That allow us to take the risks, the bold bets to invest in new areas that will lead to Transformation of how people work and live and economic success for Microsoft. And we do all that On a foundation of world class people, world class talent who will drive this next generation of world changing technology. There is no question for me that when we look back 10 years from now, we're going to say, wow, I can't believe how Primitive Technology was wow, I can't believe how great a company Microsoft has become In running global cloud services and delivering the next generation of innovative Hardware, devices and experiences and we'll look back and say, hey, weren't we a small company back there in 2013? Thank you very much for your support and we'll look forward to your questions. Thank you, Steve. We'll now proceed to the Q and A session. An Investor Relations team member is in each aisle with a microphone. We'll take as many questions from you as possible as time allows. In order to maximize the opportunity to address as many questions as possible, please do limit your time to 1 minute and one question of interest to all shareholders so we can take as many as possible. We also solicited questions via e mail on our Investor Relations website so those who cannot attend in person can also ask a question. We'll be addressing several of those questions submitted electronically. And for those submitted but not answered as part of today's meeting, we will reply to you directly via email. So while the question lines are queuing up, I'll start with the first question submitted via the web. In Q1, the PC market seemed to perform better than you expected. Can you provide a bit more insight into what's happening in the underlying dynamics And any expectations looking forward? Why don't I take that one, Chris? Sure. We did make good progress in our device And our Windows business broadly, both the consumer as well as the business segments were better than we expected. And we've begun to see some stabilization especially Across the business environment and we're very excited as we look forward in this quarter to holiday and the wide breadth of products From small screens all the way up to the largest screens that you heard both Ryan talk about as well as Steve in our comments. So I do think that overall we were encouraged in Q1 by the results. Thanks, Amy. Okay. So let's go to the live questions. We'll start with paddle number 2. Thank you. My name is Dan Farris. From the point of an outside passive minority investor, this is just about the best Business I could ever want to be in. Super high returns, gushing cash flow, margins you can drive Excuse me, a fleet of trucks through. It's wonderful. And it seems like we take Money out of that wonderful thing and so far three times in the past 6 years, we've put huge chunks of cash into What I will simply call less wonderful things. The latest one is Nokia. Sales down 32 Percent the first half of this year hasn't made a profit in a while. And frankly, it's not the thing we're great at, which is software. All those things you said Steve that we built 1 by 1, that was all internally. We didn't acquire it. It was just Things that Microsoft did because it's the greatest software company on the planet and acknowledging Xbox too in the same way. And even the IP part of the Nokia deal, because we're great at that too. But I just I don't get from wonderful business to these Big acquisitions that are shall I say less wonderful. Yes. I think it sounds like there's 2 parts. Maybe I'll comment on 2 things. 1 is, hey, what about software versus other things? And 2 is, what about Building versus buying. In terms of software versus other things, our world is evolving. The notion of being able to deliver a DVD to somebody and call it a day, which is beautiful. It's a beautiful economic model. I love it. That day won't be there 10 years from now. There will be a cloud service that requires a level of capital investment etcetera We go forward. Whether there's a business of delivering a DVD to somebody who makes hardware and then having them pay you for it, remember we have a competitor In the operating systems business in Android that's entirely free, so maybe you can deliver the DVD. The question is how do you really drive and monetize The value. I do think there's a transformation in our future and it's great to invest to sustain our present, But I do think we have to make the bets for the future. In terms of acquisitions, I would say a lot of our past has been built on the back of Acquisitions, albeit much smaller ones than the 3 you cited. PowerPoint came to us originally with a smaller acquisition. Outlook actually came to us first sort of or at least our e mail system Exchange and Hotmail came to us through acquisitions. So we've never been afraid to do acquisitions. Now bigger acquisitions should be done with great thought and caution. Certainly, our Quantum acquisition is not going to go down on the record books as a success. It wasn't. And I take responsibility for that. I think that we should be mindful and thoughtful and cautious and yet I don't think we should be fearful about doing Somewhat larger acquisitions. The NUCI one is particularly interesting. Brad told me it did get approved today by Their shareholders 99 plus percent of them voted for it. But a lot of what we're acquiring there is rights to intellectual property, Which will be important to us no matter what as well as the ability to continue to execute on our Windows Phone strategy Through a team, a hardware team that we already know how to work with. So I appreciate actually the admonition which Says use caution. I do believe my successor will have to continue to look at Occasionally larger acquisitions, not just smaller. And certainly, I hope the company remains open to bolder plays If they're necessary to keep the company great. Thank you. Thanks. Let's take one from the back of the room. Paddle number 3, please. Again, I hear you touting your stock buybacks. I'm a long term buy and hold investor. The stock price is meaningless to me. Buybacks are meaningless to me. The only thing that matters to me is dividends, but you continue to give our money to the sellers. Okay. I want some of that buyback money, so I've moved some of my shares from Amstock to the broker. And when the opportunity moment appears, I'll sell it. And I'll repeat that until my stuff is gone. Today, and in Saturday's Wall Street Journal, Steve Ballmer said he plans to keep his shares. Well, maybe now he'll support my plan to stop those buybacks and just give us the money in dividends. You want to say something? You're welcome Yes, we actually have we do return the majority of our cash today To shareholders through dividends as opposed to buybacks. And we did increase the dividend 22% this quarter. So hopefully, you and Steve can remain aligned in that goal. If you look, it is different than where we were 10 years ago. Go back far enough, I would say we were predominantly returning cash to shareholders through buybacks 10 years ago And now we're at least 2 thirds, 1 third through dividends in the numbers reported for last year. So there's certainly been a transformation. Amy will continue to get a lot of good input on the topic where there are people who are divided on it and we appreciate the input. Thank you very much. Let's go to panel number 1 in the front please. Hi. My name is Jim Postma. I have comments on 2 applications, one of which you're doing now And one in which nobody is doing. I got interest in becoming a Microsoft stockholder because I was very enthusiastic about Skype. I use it as my telephone system. I would love to call anybody in the world with video. But this is kind of like I feel like When they first invented the telephone, people said, well, why would anybody want to talk to anybody on the telephone? Why would anybody want to talk to anybody on earth With this great streaming video and audio, it just it isn't going. And when Microsoft bought Skype, I bought Microsoft and I thought you were going to do great things with this, but all I see is Skype belongs to Microsoft. Now I don't see it Being the focus of a company, which could take over all the telecommunications on earth with this system. So I'm kind of baffled Well, you don't do something more with it. And I kind of like maybe an answer from that first. And then I've got an answer an idea on another application I'd like to talk to you about. Yes. Well, I don't know what our protocol is. Probably you get the one question, I think is Chris' protocol. But what I would say is We have moved to do 2 or 3 things and we're trying to pick up the speed of progress. First thing we want to do is really make sure that we got Skype and our business communications product, Lync, interoperable. The final significant piece of that will happen in the next 3 to 6 months something like that. That's not some, which I say commitment to the press. It's just about what we've said before. But next 3 to 6 months, we'll finish getting those things to work together. The second big thing we had to do was continue to add new capabilities so that you can Actually not just see each other and talk, but have something that's a richer experience with more support for the meeting. We think we've got a lot of great work in that area, some of which you've seen, some of which you haven't. We have to make sure that while we keep Skype on non Microsoft devices, That's very important Apple, Android, etcetera, etcetera. We have to do a great job on our own devices. And you've seen us move to do Skype on Windows Phone really well, on Windows Tablets really well, On Windows Phone really well, on Windows Tablets really well. But probably the most fun, the most interesting and the most revolutionary Will be what we've done with Skype built into the Xbox 1. Ryan didn't demonstrate it today, but I got to tell you, it is really phenomenal How the cameras and microphones track you and know where you are and can identify people in the room, it cries out For us to bring that capability, the Xbox capability back into businesses, because believe me, we could use all that same stuff in terms of helping with business meetings. So we're driving ahead. I don't want to get we all would like to be moving a little faster. We've just taken one of our veterans. We've been using some of the Skype team. We now put one of our Microsoft veterans, significant guy. He's moving back to London to really drive that with extra speed and I Feel pretty good about it. Thank you, Steve. My other comment is on an application Hold on, sir. I'm going I think one is all everyone can ask. I apologize, Steve B. I'd love the suggestion. Stevebmicrosoft.com, shoot me an e mail and I'll get back to you myself. How's that? Thank you, Steve. Thank you very much. Let's go with paddle number 4 please in Hi. My name is Joe Danz. And it seems as though there's a lot of uncertainty in the economy, especially with things that are Planning in government, the Affordable Care Act, what's your perspective on how, if you agree with me or not that there is uncertainty, it's going to impact the sale of A lot of the devices and software we're talking about. Well, look, the first thing we do is we look at the globe. 96 Percent of the people live outside the United States. A solid majority of our business is outside the United States. At any one point in time, We're always grappling with uncertainty in lots of different parts of the world. What we Look at beyond is just sort of what are the business trends? Are businesses investing? Do they see the value in information technology? What's happening in the consumer market? If you look at our Q1 results, what you see by and large is that on a global basis, Enterprises are recognizing the value that we bring to them. They're investing. We see differing levels of Consumer spending around the world, but we're very enthused this holiday season between what we're doing with Xboxes, what we're doing with Surfaces what Nokia is doing, what soon we hope to be doing with new Nokia devices. And beyond that, We sort of try to stay out of the middle of the health care debate, let me just put it that way. I'll tell you my son is already looking forward to the He's placed an order with me. Thank you. That's great. Thank you. So I'm going to jump to another question submitted from the virtual shareholder meeting. This one's a few of our shareholders have asked about our marketing efforts. What sort of marketing improvements will Microsoft make over the next few months? Steve, I think this one's for you. Yes. Well, there really are 2 dimensions. There's the part that Most people see and the part that most people don't see. The part that most people don't see is this incredible sales and marketing machinery we have That goes in and calls on developers and IT people that markets to them through the publications that they read and That's roughly 2 thirds of all the money that we spend in sales and marketing. And certainly, We have spent a lot of time and are accelerating the speed with which that organization can really drive the Focused high value activities and services and devices. I would say top priority amongst all things for that people is Success of our Office 365 product as an anchor tenant to the strategy we talked about. On the consumer side, I would say there's 2 investments. Number 1, we're investing with our partners, retailers and hardware partners to make sure that The product line gets well presented to the consumer. And number 2, we continue to invest in advertising That tells the story. I would assert that our advertising is better than it has ever been. It tells the story of the products more directly and more clearly. The notion of 1 Microsoft and a family of devices and services that Come together for the customer, I think has never been clear. Our ability to measure and monitor the success of our advertising And marketing efforts has never been better. The kind of real time feedback we're getting out of that is really impressive. It's a big investment for us and it's one that certainly we have we continue to add talent to make sure that we're getting full impact. Great. Thank you, Steve. We'll go with the gentleman at panel number 3. Yes. My name is Leslie Ellis. And I'm not as pleased with the marketing activity as you are Mr. Balmer. You have a Powerful set of software and we'll just talk about Windows 8 as an example. I assume the software is being utilized to put the conversation on the screen. If not, I'd like to know what it is. But within Windows 8, you have a lot of capability that is not Being advertised, I don't think the message is getting out as to the capability That is available to the average Joe. I guess I'll let you respond. Well, Beauty is in the eye of the beholder and in the results. And since I personally would also like us to be selling more Windows devices, I won't argue with you that I would of course Like everything we're doing to be yet more effective. But The specific approach is how do you characterize the need that people have and where Windows 8 really fits And tell that story. Certainly, the number one sentiment that we hear from consumers and that we Express then back in our advertising is people want their lives to be in one place and there's some things People care a lot about in terms of how they connect with others, how they find information and how they get their homework and jobs and other things done. And if you watch where we're headed, we are talking about those things. Are there capabilities specifically in the product we should be advertising? Again, I'd love your thoughts. Please send me a piece of e mail. We're always open to do that, but we try to do it relatively statistically based upon what we're hearing from consumers. Is this voice recognition part of Windows 8.1? There is voice recognition. I know there is, but what is being used right now, which is It's being demonstrated, seems to work quite well. Person writing a document, be it homework or A real manual of some sort. People can talk faster than they can type and I think there's a message that needs to be got out in department. Appreciate the input. Thank you. Thank you very much. Okay. We'll go to panel number 2 in the front please. My name is Suzanne Migaleko and I'm from Montana Whitefish, Montana. I have a couple of comments and a question. One comment is that I've been bellyaching and waiting for the fab lit for the phone tablets. Rather than carry 2 or 3 devices, I can have 1 in my pocket. Very good. And I'm thankful for that. The second comment is working Microsoft working with the children of the world. I'm finding and feeling that the average child is left being left behind as the more advanced children and the disadvantaged Children are being addressed more carefully than the average child. The average child will grow up To be the rulers of this and policymakers of this global earth. And my third one is a question. The question is about security. All of us in the past have been hearing about the government listening to us On our phones, watching what we're doing and companies can do that also to their employees and other people. How is that being addressed by Microsoft for all those people that are careful about their security? Why don't I address that? First of all, thank you for coming from Montana. And thank you for your comments both about the phablet. We're very excited about the Nokia 15/20 that goes on sale on Thursday at midnight as well as your comments about children. Just as an aside, a year ago, we launched our new YouthSpark Philanthropy program, our focus is youth. That's really people aged 14 to 24. It's a group of the population that globally It has an unemployment rate that's twice that for the population as a whole. And we're excited about the fact In our first year, we were able to reach over 100,000,000, 103,000,000 youth around the world to try to help them Obtain the skills needed to be more successful and get jobs. With respect to governments and privacy, I think there's 2 things worth noting. First, We're very focused on the issues with respect to government intelligence gathering, whether it's this government in the United States or governments around the world. We all want to live in a country and a world that's safe and secure, but it is a business imperative that we retain the customers' Trust in every country around the world. Hence, we've sued our own government so we can publish more information, share more about What kinds of processes we do have to respond to and our track record in doing that. And we're focused on engineering improvements That will further strengthen security, including strengthening security against snooping by governments. But there's another important part of your question and I appreciate at the end you talked about how do companies Behave as well. We take a lot of pride at Microsoft about the care we take to respect the privacy Concerns of our customers. Across our industry, there are some customers that seem rather bent on trying to use every single piece of personal information they can get so they can target you with more ads. And there's a lot of things we don't do. We've said we don't read your e mail so we can send you ads. We don't scan your files on SkyDrive and use that to target ads. And I do think you're going to see from Microsoft What we all hope will be a continued commitment and a strong track record that makes clear to consumers that if they want to look For a single provider with whom they can trust their most personal information, they can look to us and they can trust us. And that would include the cloud system where we store all our information and things like that that other people, companies and governments cannot access It absolutely includes the cloud. We are committed to ensuring that people will have as much Confidence putting their information in the cloud in the future as they do putting it on a computer, on their desktop Or in a paper file in their desk drawer. That is an imperative for our success. Okay. Thank you. Thank you. Thanks very much. Let's go with Paddle number 4 please. Hi. This is a question directly for Steve. You've now entered the autumn of your hands on career at Microsoft. And of course, you'll still be the 12th man at Microsoft team. And my mic I'm loud enough. So I'd really like to ask you just an anecdotal question. If the federal government wants to create and develop a new cabinet position of say Department of IT, If asked, would you accept the secretary of that cabinet position? First thing I think you'd have to ask is does the job really make sense? The government actually is so broad. There are entities in the government that are like huge enterprises on their own and they do need to have their own focused IT departments. When it comes time to buying productivity, I would say they should buy it from commercial companies like Microsoft. When it comes time to building Applications. There's nobody else who needs to build a health care exchange technology. That's not right now Kind of an application that makes sense for 3rd parties to write. You really that's a big huge effort. And there are 10 of those in the government. You look at what the military needs is different than what the tax authority needs is different than what the health care authority needs. And I think in some senses looking to put all the IT and government together maybe more of a May not be as much a help as people believe. So that would be my first bit of counsel. My second bit of counsel is make sure they're not appointed positions that rotate every 18 to 24 months because no great IT projects They're going to be well run by people who are rotating in and out of their jobs. Okay. Thank you very much. But thank you. Thank you for trying to help me find work. Okay. It looks like we're down to our final question here. Paddle number 1, please. Thank you. My name is Lonnie Luzardo. I've been a Shareholders since 1987 and I've watched the company grow and I come to almost every shareholders meeting And I've commended the Board and the company on many things over the years. As I sit at this meeting today and hear all of this phenomenal potential, I have a simple question And I hope I get a simple answer. Why is the stock price dead? It is just not going anywhere. I checked my stock holdings with Google, Amazon, Other tech companies and they're soaring and maybe a dollar change here and there occasionally. Over the couple of months, a little bit of change. But why is this stock price so pitifully Stagnant. You want to start? Year to date, actually, we've had a very good year from January to this point and the stock has moved quite a bit. But I do Take the spirit of your comment, which is that we all believe that the potential we have and you're hearing about, That if we execute on, I do believe that we'll see the results in the stock price. It's For us, what drives us every day is to build things that I think you heard both Bill and Steve say, change the way every person in this Room and across the globe lives and uses our software. I believe that if we continue to do that, everybody will see the result Of that over the long term in the share price? Hard to predict share prices. But at the end of the day, they have to have something to do with profit. Our stock price is 60% maybe what it was when I took over as CEO. And our profits are 3 times what they were when I took over as CEO. So I don't know how to answer your question. But what I do know is, If we continue to make the investments that lead to valuable products that people will pay for in a way that generates profit, The stock price responds to that. It's the only big sustainably anybody should think the stock responds to. Profits are up 300% In 13 years, even if the shares are off 40%. And I trust the company will continue to focus in on what's real, Which is long term profit creation. If we can create new technologies that generate new profits, The share price will resultantly go up. I feel confident about that. At any one point in time, Very hard to say. So let's have our company stay focused in on the innovations and value creation that should create profit growth. Great. Thank you, Steve. Thank you. So thank you for your interest. For those of you that still have questions after the meeting, Amy, Brad and I will be around to answer questions informally around the stage. And that concludes our Q and A session. Ladies and gentlemen, thank you very much for attending and for your continued support and interest in Microsoft and have a great day.