Microsoft Corporation (MSFT)

Analyst Day 2015

← View all transcripts

Apr 29, 2015

Good afternoon, and welcome to the 2015 Microsoft Financial Analyst Briefing. I'm Chris Sutt, General Manager, Investor Relations. Thanks for all of us thanks for all of you for joining us in person today. And I also want to extend a warm welcome to those joining on the webcast today. It's an incredibly exciting time for Microsoft and our industry. That's why we chose to do our event this year here in San Francisco at our Build Developer Conference. We wanted you to experience the energy and enthusiasm firsthand alongside the thousands of developers as they heard from CEO Satya Nadella and our engineering leaders this morning share their incredible innovation we're working to deliver. I also want to acknowledge and welcome several members of our Board who are in attendance today, alongside a number of our business division CFOs. So welcome and thanks. I will start with the forward looking statement. Today's presentation contains forward looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in the Risk Factors section of our Form 10 ks, Form 10 Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward looking statement. We have a great agenda for you today and I'll cover that briefly. First up, you'll hear from Satya Nadella, Chief Executive Officer, who'll share his thoughts on our company's transformation. Next up, Kevin Turner, Chief Operating Officer, will share the great momentum we have with our customers. Finally, Amy Hood, Chief Financial Officer, will share her thoughts on our economic transformation. And then we'll have some time for Q and A, followed by a short Thank you, Chris. I think I have mine. All right. Good afternoon and welcome to our Financial Analyst Briefing. And for those of you who also made it this morning to build, thank you for being there and all of you joining on the webcast as well. So I thought I'll kick it off today by talking about 3 things, talking about the market transition, talking about our own transformation and what that means in terms of our growth going forward. Now talking about market transition, you all in this room and those watching in fact are better at writing about this than any of us. You are the analysts who cover this, who cover our industry and have a great feel for what's happening. But qualitatively, the way I describe the world that we live in and what it will be in the next 5 years is this mobile first, cloud first world. But we have a very particular point of view when I say mobile first, cloud first, in which I think I've said many, many times, but it's worth repeating because that's where we are going. The first when we say mobile first, we don't mean the mobility of the device, but it's the mobility of the human experience across devices. The fact that already in the developed world people have more than 1 device, In fact, it's estimated that 4.3 devices that each individual has means by definition, you need to care about the mobility across all of those devices and that's where the control plane of the cloud becomes the most strategic important battle going forward. And so that's why I think about mobility, mobility of the experience and cloud together. Even on the cloud, it is important to note that we actually have a broader vision than just thinking of this as some one time shift to a couple of data centers run by a few North American company. The world is much more complex than that. The geopolitical state, the regulatory state are all going to change. Distributed computing will remain distributed. It's going to take a very different shape. So for us, we don't think of our servers as some legacy. We think of our servers as the edge of our cloud. It is where you will still be able to run workloads while taking advantage of a cloud infrastructure that's fundamentally more distributed. And those two points of differentiation will in fact play out a lot more clearly in the years to come. That's our worldview. And of course, again, when I read all of your reports, I'm told that there's lots of money in transition. There is $2,300,000,000,000 at play. And so the question is, what's the posture? And my love for German philosophers comes across as saying we should show courage in the face of reality. But perhaps more importantly for us, it is showing courage in the face of tech business is all about. The tech business is about being able to know before it is conventional wisdom that that is where the market is going, that is where the users are going, that is where the organizational customer is going and knowing that you can get there, get there first, get there with the best innovation. And that's the entirety of what tech is. Our mission is to empower every person and organization on the planet to achieve more. That was the foundation when Bill and Paul got started writing a visual basic or rather a basic interpreter on top of a PDP-ten targeting an Altair microcomputer. Obviously, in the last 40 years, a lot has changed. A lot of technologies and a lot of devices rightfully so have come and gone. But what has remained at our core is that empowerment. And this morning, of course, we talked about what that means to empower developers with our platforms. Our strategy today is to be a productivity and a platform company in this mobile first, cloud first world. Productivity is about being the best when it comes to productivity and platforms in this mobile first, cloud first world. That is what we want to excel in. That's what's going to drive our growth. That's where we want to make sure we serve our customers, partners the best. That manifests in 3 core ambitions, 3 core product efforts, 3 core go to market efforts and they all relate. But it's also at the same time each one of these has its own market potential and it's got its own competitive landscape. So I want to talk a little bit about each one of these. But first, it's about more personal computing. So when I think about Windows and Windows 10 in particular, it is about a new era of personal computing that we describe as the more personal computing era. And the core to that is what so those of you who this morning had a chance to see some of the Windows platform capabilities is about that mobility of experience. It is about being able to have Windows run on a Raspberry Pi or on a holographic computer and to know that you have a unified platform that supports the mobility of the experience. It is also about having those natural interactions. Hopefully, you got a chance to see the holographic inputoutput. What really the input there is your vision, the output is the hologram and gestures. And you now can have pretty much your desktop anywhere you want on any wall, in any place. So the natural modalities of touch, ink, speech, mouse and keyboard, as well as things like the holograms are all part of the future of Windows Devices and that's what Windows 10 is all about. One of the other things that's built into the core of Windows is this notion of trust. We believe that increasingly trust, trust with users, trust with organizations is going to be at a premium, especially when you have experiences that are more personal. And so therefore, building that into the core of the system is very important and that's what we are doing. Everything from authentication to how we do how we take care of the password problems with Windows Hello and there's a lot of core capabilities that are built into Windows 10. The 3rd the second ambition we have is about reinventing productivity and business process. Office today is used by 1,000,000,000 plus users. We have a growing Dynamics business, but our ambition is to bring together personal productivity, group productivity and business process to transform the very nature of work. Because we know that a lot of the exceptions are handled outside of your business process applications. They're handled in email and in other collaboration tools. So we want to be able to bring these things together. And lastly, we want to be able to build that intelligent back end for the world's applications. The currency that's going to be at a premium going forward is data and how applications become intelligent because of the data and that's where we want to differentiate. And this morning we showed some of the capabilities we have in our Azure Cloud when it comes to things like machine learning. So those are the 3 core ambitions. It's about Windows 10, it is about Office 365 and our Dynamics, it is about Azure and our server business. That's it. It's as simple as that. Those are the things that we are focused on. That's what we mean when we say we want to be a productivity and a platform. The actual transformation itself from an economic standpoint, and Amy is going to come talk a lot about the details of this, is about moving from what I would say is a transactional relationship that we've had with many of our customers, both on the consumer side and as well as in the organizational side to more of a lifetime value. That matters on the device. It matters when it comes to a user and it also matters when it comes to an application. That is all possible because I believe because of the shift to this mobile first, cloud first world the way I described it, but that's what we want to achieve, which is a real transformation of our fundamental ability to deliver value differently. So let's take a look at each one of these areas in a little more detail. The first one is on devices. It's probably important for us to start with some numbers that represent the strength of what we have, the foundation of what we have today because sometimes it gets lost as we talk about the future. So as we speak today, this month we will have 858,000,000 machines calling home to Windows Update. That is the number of devices. And of course, you remember most Windows devices inside of the enterprises do not call back directly to Windows Update. We have 16,000,000 applications that mostly mostly refer to applications and application usage. So these are active apps that we saw in the last month that got used on a Windows socket. And this, of course, counts Windows 7 on up, but this is active usage of Windows. We also now have some new capabilities that are developing. One of the things we talked about recently at our earnings release was the fact that we crossed 20% in terms of U. S. Query share. It's been a long journey, but it is a worthwhile journey to get to this. Now that we have 20% share, we now have new capability of monetizing the Windows PC in the United States. We have a growing social network, in fact, the most thriving social network for gamers. And remember, gamers are the people who make app stores on all mobile phones today. Most of the liquidity of app stores on iOS or Android is fundamentally driven by gaming. We have the most thriving social network of gamers that is growing. We grew in the last quarter 18% in terms of subs and we grew engagement by 30%. And that is something that's coming to Windows 10. As you know with Windows 10, Xbox Live spans both the PC as well as the console and also we have a mobile presence. Now the last one is also a new capability. We have now our own hardware capability and in Surface Pro 3, I would claim that we have our first device that has achieved real success. It is there in the quarterly results that you all track, but more importantly to me, it is the ability to create categories. That is what is important to us strategically. Being in the software business is fantastic, but we do not want to leave it to chance when it comes to being able to complete scenarios. We, in fact, want to stimulate the market, create the demand, and that's what Surface has done. If you look at the number of designs from our OEMs now, which we are thrilled about, that are going after the 2 in one form factor. That's all because we took that leap, we made that category and now we have others. And you see it even in that OneNote usage. The fact that OneNote's got the kind of usage intensity on a tablet that can replace your laptop is something that we set out to do and we are achieving success. So that gives you a little bit of a flavor for what we have today. So now let's dimensionalize where we're going. I already talked about the ambition, how it's about the mobility of the experience. It's innovation in new hardware and creation of It's innovation in new hardware and creation of new categories, both from us and our third parties. But perhaps one of the most important transitions from a product perspective is this notion of Windows as a Service. In some sense, you could say Windows is already a service because of Windows Update and the fact that 800 +1000000 devices are served by Windows Update. But we want to take that many notches up in terms of having a vibrant install base that's current because that's the way for us moving forward when it comes to lifetime value. Let's dimensionalize it a little bit in terms of the product transformation. So we are moving from a product that is perpetual to something that is always up to date. We think that that is strategic in terms of delivering value to the customer 1st and foremost. It is important for the developer because they have then a fresh unfragmented target base, and it also gives us an opportunity to be able to have the kind of impact that we want to have on a continuous basis. We go from just participating in PCs. A lot is written and said about what's happening to the PC demand, what's happening to the PC growth. We're in a family of devices that go beyond PCs. We've grown our tablet share. We are in large screens. We're going to have some very big innovations with Surface Hub. We're going to enter new categories like the HoloLens. Windows goes beyond the PC. And so for us to have that family of devices, both first party and third party is very critical. We never had in fact, we never had an app store capability. We never monetized an app store and we are going to have this one application store that unifies Windows across all of our form factors from Xbox to Windows PCs to tablets to phones and to the holographic computer. So that's what's happening in the product transformation. Let me give you a little bit on the economic transformation and I've sort of segmented it by consumer and business. And when you think about the consumer, we had revenue per license, it was transactional, It's OEM revenue. We will have revenue per license going forward. We also now have device gross margin. You have noted the device gross margin growth in Surface. We have Search. We have store, which of course is going to really take on a much more central meaningful role in Windows 10 just based on the design of the store. And we have gaming. We have now in Minecraft the best selling PC game ever, one of the best selling console games ever and one of the and the highest selling paid app on iOS and Android in gaming. When then you go into the business side, we always had revenue per license again and then we had multi year agreements. So now going forward, we will have revenue per device, we will have device gross margin, we have the multi year agreements continue, we will also now have the capability Windows update in fact has some very cool new features that we will talk about at our IT conference Ignite in a week's time, where we are going to start the journey of how we go beyond Windows Update to something called Windows Update for Business. And we want to add more capability. There are going to be capabilities around management, security, control because the key is for us to have IT be able to have both the compliance and governance and yet for the users to be able to have the devices they love that are current. And the store is going to be as relevant even inside the enterprise and we have some great capabilities in the store for both educational institutions as well as businesses that are going to be coming. So that's the economic transformation. And our goal or our ambition is to have a 1,000,000,000 active Windows 10 devices in fiscal year 2018. We believe that is what will help us deliver more value, it will help developers come to our platform, it makes the entire ecosystem of Windows much healthier. So now let's talk a little bit about our work and life experiences or the future of Office and Dynamics and Office 365 and Dynamics. Again, I talked about some of these numbers in our last quarterly call, but it's important to remember, today we have 50,000,000 monthly active users of Office 365. These are commercial customers of Office 365. And there's vibrant usage. There is this 60,000,000,000 requests of exchange, there is the 70,000,000,000 transactions of every action, And there are 830,000,000 meetings that are being logged into Office 365. And this is growing on a daily basis. And by the way, this is what we now have exposed Stephen as a developer platform with the Office Graph, which we're excited about. We also have 7,000,000 paid seats of Dynamics under maintenance. We have over 100,000,000 office downloads. So this is again a foundation for us. So what is our ambition? It is about being able to design and build these apps such that you can use it for your personal life and your work life. We have been making tremendous progress on everything from OneDrive to OneDrive for Business, usage of between Outlook and Exchange, Skype, Skype for Business. That is what we mean by dual use, building out our experiences such that they appeal to the end user so that they choose these services and they use them inside of the organization. We're also going mobile, social or collaboration is being built in and intelligence is being built in. Perhaps one of the most interesting things that will probably illustrate this point is if you want the best email client on your iOS device for your Gmail account and exchange its outlook. And that's what we mean by I think the entirety of the Office strategy in some sense gets captured in that very statement. We are going to also not only have that client, but we are going to also have that be a managed IT client when it comes to identity management, when it comes to data loss protection, when it comes to all the things that IT cares about even in a BYOD scenario. We have new applications. We are faster to work on new scenarios. This is not just about Word, Excel, PowerPoint. In the last year, we've had new things like Cortana, which I think is going to be fundamental to how people are going to interact in fact with that Office graph. What we're doing with Sway, which is a new way to write interactive documents. What we're doing with Dell, which is a new think of it as a feed structure for your work. So this is like either Facebook News Feed or Flipboard for work. Power BI has culturally changed Microsoft in can go look at information and make decisions. In a world of big data, small insights matter and Power BI is the instrument of that. We are fundamentally wiring in, as I said, business process as well as productivity. That's where we have been making tremendous amount of progress with Dynamics and Office 365 coming together, but we are also opening that up as a set of APIs for all of the world's business applications to integrate. You saw some of that from Salesforce, Workday and many others. And this point about people centric IT or this notion of having security and compliance built in to each one of our experiences is core. And now when you look at Office 365, it comes with device management and identity management built in and we also have a complete suite with Enterprise Mobility Suite that goes on top of that. So to give you a feel for then the product transformation, again, it's the move, which I showed by the data we talked about from going from a perpetual software license to a service. It's going to be available everywhere, offices on iOS, offices on Android, it's on all the Windows devices. It's going from these individual applications to this very rich platform that's built on data. In the past, when we sold just licenses, that data was elsewhere. But now we have the user data in a tenant. It's the customer's data. It's not our data, it's not Microsoft's data, but it is a developer platform that developers can use to add value for our customers. So that's the product transformation. The economic transformation is the move from again one time purchases, which were 5 to 7 years to these annuities or subscriptions both monthly as well as annual. We are also transforming on the business side from one time purchases and multi year agreements to having subscriptions, multiyear agreements and perhaps one of the more interesting things which I talked about even in our results last quarter is we always in all the years that I've been at Microsoft dreamt of selling a lot of servers that went with Office to a lot success. But now we are having real success with small businesses adopting what are some of these more sophisticated capabilities of Office 365 like Skype for Business, like SharePoint Online, things that they never used because they mostly used Office client software. That's happening for the first time. So that means we're reaching new customer segments. And the same thing is also opening up new capabilities. We now have rich e discovery and compliance capabilities in Office 365. Again, because of the fact that we have all this usage, we can add value in categories that we never participated in the past. So this is not a one for one shift is the main point I want to make. There is actually a pretty significant expansion of the value we can deliver to both the number of customers, the depth of it, as well as categories. So let me talk about the cloud platform. Again, here we have a very strong foundation. I mean think about the number of instances that we count today of Windows Server and SQL Server. So we have 100,000,000 Windows Server Instances, 20,000,000 SQL Server Instances and they are the share leaders in those categories. But now we also have 5,000,000 organizational tenants in Azure AD. It's 5,000,000 distinct organizations that are already populated inside of Active Directory that now runs in the cloud. Because always everyone knew that Active Directory was an amazing asset on premise, but this is in the cloud exposed as modern APIs to every developer. We have 50,000,000,000,000 objects in storage. We have 1,400,000 SQL databases on Azure. 1 in 5 virtual machines that get spun up on Azure today is a Linux virtual machine, a category we never participated in the past. We have 3,000,000 developers using Visual Studio Online. Now think about the number of people who used our Team Foundation Server to the number of developers who are using the service. We have 13,000 enterprise customers within the 1st year of Enterprise Mobility Suite. So this is new growth, new ways for us to add value. When I conceptualize what's happening in our cloud, we are transforming the data center. So this is the boundary less data center in some sense. You can have you can stand up your own cloud with our software. You can extend your cloud to our cloud by tiering. You can use our public cloud. You can use partner clouds. We are the only company that has that capability. And the way we do that and this is perhaps against and make it available. And we are the only ones who have the scale and that capability. We're driving new kinds of application innovation. This morning for those of you who attended the build developer conference, you see what we're doing with Visual Studio in terms of not just what it has historically done, but look at what the new capabilities of Visual Studio and our TFS online capabilities are when it comes to really doing the new DevOps cycle and the agility we can bring into the core of either an enterprise developer or a startup. Unlocking insights. This morning's announcements were pretty profound. We have not just the database business, which is doing super well across all of the workloads, but we now have new workloads. We have a workload around machine learning and advanced analytics, which we never had. We now have a new workload around big data with our data lake service, which we never had. We have a data warehouse at scale business, which we never had. So those are all things where we are growing our database business and Power BI to unlock the insights. I've talked about our enterprise mobility. It's perhaps the most strategic buy for any enterprise IT professional because it really helps them have a coherent control plane for identity management, device management and data loss protection. And we have tremendous traction with the Internet of Things. This morning in Scott Guthrie's presentation, you saw some of the early wins, but we have some great capabilities, everything from event collection to streams processing to machine learning. That's the underpinning. When people say Internet of Things, ultimately it's about custom app dev that every business that has a thing and they're trying to transform that thing into gross margin on a service. They need software And we have the most capable software that any one of those businesses can use, and we have many customers already using it. So again, on the product transformation, this perhaps is the most comprehensive list. I tried to trim it down and I always again I failed. But we have our server management that's now becoming operations management in the cloud for any cloud. We have our Windows Device Management that is now becoming device managed not just device management, it's about becoming identity management, device management and data protection across all devices. We had databases. We now have databases plus a data lake, plus analytics, plus ML. We had just business intelligence, but we now have with Power BI a SaaS service for business intelligence. It's not just left to you to go finish the scenario. We had an embedded device operating system, but we now have a rich cloud service and a device operating system. And then can be decoupled. In other words, you can use Linux on the device and you could use our cloud. And we had developer tools for Windows and we now have a DevOps service for all development across all platforms. That's a fundamental shift in terms of both the lens through which we view the opportunity and what we get to deliver to customers. And then when it comes to the business model, we have revenue per license and multi year agreements and going forward we'll have revenue per license and multi year agreements, but we have all these new capabilities. We have paper use and PaaS services, that's a new dimension, so anyone can come up to Azure and use these services. We have SaaS subscription for IT infrastructure. So SaaS subscriptions And perhaps one of the things that is not as well understood, And perhaps one of the things that is not as well understood is these hybrid offers. When you buy stores simple, you're not buying cloud storage, you're actually substituting on premise storage with cloud tiering, which is a very different margin game. When you buy versions of SQL with high reliability through the cloud, it is a it's a software license with cloud entitlements. So these hybrid offerings are another capability that we never had that we now have. And I try to conceptualize this because one of the things that I use as a metaphor is you of course all measure us as rightfully you should on what was your performance this quarter. But really the question is what is the power that you have for performance in the out years? And when I think about that, in this new changing landscape, what becomes important is what are the organizational tenants, What is the organizational relationships? And for us, this directory relationship is probably at the core. Active Directory was an amazing asset. And as I said, there's 5,000,000 organizations that are part of Active Directory or Azure Active Directory is at the core of a lot of what we do. We also have data about these organizations that spans all of our services. They're using Office 365. They're using Dynamics CRM Online. They're using EMS. They may be using IaaS, Path. All of that is tenant data. It's their data. It's their customer data. We get to build new products that reason over all of that and provide intelligence back to those customers. We get to open up that as a platform to 3rd parties. So that's one of the fundamental reasons why when someone asks me, hey, what's your margin or what's your strategy or what's your revenue on any one of those layers, it sort of doesn't matter because our capital expense, our pricing structure, our offerings and bundles is about having the capability to serve customers across all of this. That's the cloud that we want to build. That's the cloud that we want to lead. It's not about participating in any one individual category, but it's really in fact leading with some of our SaaS applications and having the IaaS PaaS capability and our servers, which are the edge of our cloud. That's our vision. That's why we believe that we get to participate in future growth. So we have an ambition to get to $20,000,000,000 of annualized run rate in the cloud by FY 2018. So that's our target and that's what we're going to pursue with the strategy I just laid out. And this by the way is about really the combination of what we today have in Office 365, Dynamics, EMS, Azure. Left to me myself, I probably would have used a German poet or an Urdu poet, but I've learned a lot about racing. The idea that in tech you are going to exhibit this power and performance means how do you tackle both the straightaways as well as the turns. It's a perpetual race. This is not about I have real performance on one straightaway and it's the prize is won and it's done. You're at it each day, each week, each month and you've got to time those turns right and you've got to come out of those turns with the right kind of speed so that you can accelerate. And we feel very, very good about how we're doing in terms of our performance, but most importantly, how we are going boldly forward in our transformation. And this morning's keynotes at Ville were all about the platform innovation that's firmly directed on the future of Windows 10, Office 365, Dynamics and Azure. Thank you very, very much. I'll come back at the very end for Q and A and I'll now flip it over to Kevin Turner. Thank you. Thank you, Satya. And it's great to be able to see the energy and the momentum and the optimism that we have relative to what we have in the marketplace today. It is absolutely a new day at Microsoft. And as he said eloquently, we feel good about our performance. We feel even better about the pace of the transformation and what's happening at Microsoft. And so what I want to talk to you about is really about some insight into what we see in the marketplace with our customers and in our execution of our go to market model. I want to talk to you about the strength and momentum and the opportunities we see relative to growth. How do we grow? But one of the big changes that we've made reimagine their businesses, how to help the customers find success in their business models. And the other big mantra we have at Microsoft, particularly for our field and our go to market model is transforming while performing. And working on those things simultaneously is a very important part of our rigor and our discipline and what we bring to the table relative to focusing in on this customer success. So I think all of you are aware how exciting it is, not only at Microsoft, but also in the marketplace because this is a very unique time. It's a real inflection point as it relates to companies in the landscape thinking about how to think about their businesses differently. There are massive disruptive models out there. And we see customer after customer thinking about how they transform their business, becoming more customer obsessed and really making that transformation to digital. The other thing that I think is very apparent to us is that every company in the world is becoming a software company. And almost all those companies have a divine aspiration to become a software as a service company. The CIO role is also massively changing as we see the landscape in terms of what they're able to do from a digital standpoint and the amount of IT both in the business and within IT is also changing from a landscape perspective. So I've got some great customer stories and examples today that will really bring where we are in this transformation to life with you and I'm excited to be able to jump in and share those. The 3 big ambitions in our mission statement that Satya set up are really important for us. Empowering every person and every organization on the planet to achieve more certainly is bold. But the thing that's really resonating with our customers and our partners is specifically around creating more personal computing, reinventing productivity and business processes and building the intelligent cloud. Those things are enabling something we haven't had at my time at Microsoft. And that is we're in a different level of conversation today with our customers and with our partners, specifically about how to reimagine that business, how to completely think about the disruptive world that all of them work in. And it's very well documented about how some companies and upstarts have come along and truly disrupted entire industries. Think about SpaceX and the aeronautics industry and what's happened there. Think about Airbnb and the hospitality industry. Think about Uber and the transportation industry. Those are easy to also think through. But it's not just emerging companies that is driving the disruption. That groundswell we're seeing with small, medium and large businesses as well as great partners is happening at a high velocity rate. And that is huge opportunity for us as we map these 3 big bets against that market inflection in that point in time. And so I won't go through the technical aspect of each of these three ambitions. What I'd like to do is double click on the go to market aspect. What does that mean in terms of how we land these with customers and with our field? Creating more personal computing. When you think about it, there are a few facts I'll start with. Our collaboration with our big OEMs on new devices and new form factors has never been better. It's extremely strong right now. We've created new categories, ladies and gentlemen, of 2 in one devices and other new tablets and form factors that have never been out there before. You think about the Lenovo Yoga and a whole host, the HP Aspire and other lines of products that are out there with our big OEMs, that collaboration remains strong and we continue to see more and more innovative device designs come out into the marketplace. Our Surface adoption has also been extremely strong, 44% revenue growth year on year and we're going to continue to see that continue as we develop great and innovative products in this line of business. 46 Shenzhen new hardware partners, how exciting. We had we basically started this initiative a year ago and put some folks and put a team in Shenzhen to live there to work with that emerging OEM ecosystem that happens there. And as a result of that, we've been able to explode into some device categories that we've never operated or participated in before. And I'll show you a couple of examples today of where that's really added to the Windows platform and ecosystem. The Windows as a result of that, the Windows tablet growth is up 71% on the back of that Shenzhen investment that we made a year ago, 18% growth in Lumia this past quarter. Our search advertising revenue grew 21%. We're over 20% in share for the very first time in the U. S. And a lot of strength and momentum on the Bing platform. And believe it or not, in a very challenging and declining PC market, Windows activations have grown each and every quarter this fiscal year. That's not without a lot of hard work and a lot of diligence, particularly in light of the PC market. So I feel very good, very confident about these things setting the table for what is to come because it's really about what happens next. And what happens next is around Windows 10. And from a Windows 10 perspective, when I think about this opportunity that we have today with this new release of Windows, I'm sort of struck by a couple of things. 1, Windows 95 was a seminal moment for the company 20 years ago. This is the 20th anniversary of Windows 95. Windows 10 is another seminal moment for the company as it relates to the Windows ecosystem. It is not just another release of Windows. It is actually an entirely new way for us to think about a hardware OS. The exciting part about that when we think about it is one application platform. So our developers have one way to write a universal application, one store. So there is a way for applications to be discovered and purchased and actually used and updated across devices And one experience across all devices, the fact that a developer today can write an application once and with minimal changes have it run across that entire family of Windows devices, doesn't exist on any other platform. No other operating system on the planet does that today. That is exciting for us. So one experience for one for every device, for everything in your life. But one of the big changes and inflection points that we will see with customers is certainly windows as a service. When you think about the fact that for the very first time in history windows and the operating system will always be up to date. You can also do in place upgrades and you will no longer have to device wipe and reload the scenarios and that becomes an obsolete motion. It is truly transformational for our Windows ecosystem Because today we actually we know a lot of the devices that we put into the marketplace, they actually become an island and they don't stay connected to us. As we're able to keep the updates, the security patches, the refresh, the new functionality, as we're able to keep those things going, how exciting it's going to be for us to unveil and stay connected to those Windows users so that we can help them stay contemporary in the marketplace. That is a new day for Windows. The other thing that you might have heard this morning, but if you not, I'll touch on it here is the importance of the continuum technology. Think about it, your phone can now become your laptop, your desktop, all you need is a place to have a big screen and a keyboard and you have all of your technology, all of your data with you wherever you go. What an opportunity for us to again expand that ecosystem in a very profound way. The other big innovation when you think about adding Vibrance to the Windows platform is really about HoloLens. Think about it. It's just a Windows 10 application that you're going to be able to do 3-dimensional holographic images that not only change incredibly rich entertainment consumption experiences that we're shown today, But think about it in the use of industrial design. Think about it in automotive and healthcare. Think about it in real estate and construction and architecture. What an opportunity we have to land that platform to completely add Vibrance to the entire Windows ecosystem. But Windows as a service is a gigantic change for our customers and our partners. And it's one that we're going to have to work diligently on to make sure we do a super job landing it going forward. But the opportunity we have is really about adding 1 point 5,000,000,000 devices that we already have in our ecosystem. It's about moving them to the new and modern world. We've never had that capability with any other Windows release until today. So that's an exciting and new and different day. And so when you think about the free update that we've got for a year, the fact that we've got that large Windows 7 install base and the run rates that we put out with Windows 8 deployment, we have a huge opportunity to bring both small, medium and large business customers as well as all the consumers out there across the world into the modern world with Windows 10. That will be a gigantic focus for us as a company going forward. The other thing that I think is interesting when you think about the new windows opportunities is how our customers embracing the platform. Well, let me give you an update on Alaska Airlines. Alaska Airlines wanted to reimagine their flight experience. They went out and changed and bought some new planes. They went out and did some upgrades and remodels. They upgraded their food, they added power outlets and other things around their seats. But one of the things we work with them on was the re imagination of their entertainment experiences. As a result of that, they bought thousands of Windows tablets that came from Toshiba, the Encore 2. And as a result, we were able to bring content from multiple partners directly to consumers on a single platform that is completely secure and refreshed before every single flight. So now for a new small fee about $10 or so, you have the ability to see movies that are in the theater and the security was important because they didn't want to they wanted to make sure that there was no opportunity for piracy there and it's built into the Windows ecosystem. And so the ability to allow consumers to play a game, listen to music, do things in a multitasking way and have rich content and experiences now within the Alaska Airlines fleet exists because of the Windows ecosystem. The other thing that came from that, it was a great business model for them. Think about it, dollars 10 a shot for every single flight that they're able to do. That's about business reimagination and how technology is really playing a key role in that. Let me also talk to you about the New York Police Department. The New York Police Department wanted to connect all of their officers with real time information. That seems pretty intuitive and straightforward. When you think about what the opportunity is, we were able to work with them on something called the Tough Pad. The Tough Pad is something that we helped design with Panasonic that the Army actually uses out in the field. It's ruggedized, it's tough, it's weatherproof, dropproof, all the things that you would expect from that. They also gave 41,000 Windows phones out to each of their officers for a couple of reasons. 1, they wanted the ability to really help officers in the field access 9 11 calls. They wanted the ability to really share photos of wanted criminals and they also wanted the ability to help do fingerprint recognition in real time. This is absolutely transformed how the NYPD has been able to send information to each and every one of the 35,000 officers simultaneously, a capability they previously didn't have. So this makes a huge difference, particularly in high risk situations that are encountered from time to time. This is a great example of the Windows ecosystem showing up in a new way. Next, I want to talk about new partner opportunities within the Windows ecosystem. Walmart came to us and said, look, we want to be a bigger player in devices. We worked with them this past year using our Shenzhen ecosystem, helped them develop 2 new tablets, an 8 inches and a 10.1 inches Windows tablet that could be sold in the Walmart stores. As a result of that, in the condensed holiday selling season this past year, they sold 200,000 units of that product. And as a result of that, they're now the number 2 Windows tablet seller in the entire U. S. This is a new partner, a new ecosystem that's enabled by the new way that we're approaching our partners and the ecosystem in total. The second area I'll touch on is reinventing productivity and business processes. When you think about the opportunity we have with reinventing productivity, certainly this has exploded for us as a company, led by Office 365. Here are the facts. Office 365 commercial seats are up 84% year on year. Our premium workloads make up over 50% of the Office 365 install base. And by the way, ladies and gentlemen, that's up 10 points year on year, great execution there. Over 80% of our Office 365 enterprise customers now have 2 or more workloads. That's a great number that continues to improve. And we have 65,000 Office 365 Partners now worldwide really getting out there to help us get the message out to improve our reach. Office 365 Consumer added an average of 1,000,000 users per month this past quarter. And this is a number I'm really proud of. It shows the transformation progress in the field in a big way. Over 50% of our enterprise agreements signed during the quarter included cloud services. That is and that number is exponentially growing quarter on quarter. Dynamics CRM online, enterprise paid seats more than doubled in Q3 and our Skype for Business revenue grew more than 25% this past quarter. We have a lot of strength in this particular productivity area and it only continues to build. When you think about the opportunity we have though, it's much broader than Office 365 in terms of just Office and Exchange. It includes Power BI, it includes Yammer, it includes Skype and Skype for Business, and certainly it includes Dynamic CRM Online. So when we sit down with a customer to help them reimagine the productivity in their company, we bring an end to end solution to the table today. And that is something we've never been able to do in the past. And again, it's opening up giant opportunities for us. Let me share one of those with you. Henkel, most people know Henkel as the large global company behind many consumer brands, Dial, Right Guard, Lock Tite and a whole host of others. They hadn't upgraded their productivity environment in over 10 years. The reality is they wanted to use technology to really facilitate different collaboration across their very disparate divisions that they had located around the world. And they really wanted to promote innovation and speed the market when they do so. As a result of that, we were able to partner with them and win the business. So from an Office 365 standpoint, now we have that completely deployed. In fact, they thought the deployment was going to take over a year for 47,000 employees located throughout the world. We did it in less than 9 months. And we now have the opportunity where many teams today have digital hubs where they can find and share documents, where they can collaborate on project plans, calendars and training. Teams are now collaborating much better through conferencing and sharing of collaboration and files. And the other thing that was really exciting was to see how they used our collaboration technology within their R and D centers where they could really look at product quality metrics and measurements across the different disparate divisions and really collaborate in the R and D side and change their business model. The other thing that was quite compelling was to look at the finance. They had a bunch of disparate finance organizations out there in their company. Now today, collectively, they now have one hub for all their financial information, all the reports which are tied directly to their BI solution using our Power BI solution to easily find, use and share information and oh, by the way, they're always up to date. Very exciting rollout with Hinkle. The next example I want to share with you from a customer perspective comes from a midsize business. This is one of my personal favorites, a company called WASH. WASH is a multifamily laundry system. You may not know them today, but they have over 5,000,000 customers. They actually have 500,000 machines in 70,000 locations. We actually partnered with them because they actually were growing so fast, they couldn't figure out how to scale their business from a technology and infrastructure perspective. As a result of that, we were able to work with them with Power BI, Dynamics CRM Online and our machine learning technology out of Azure, all on the backbone of Office 365 and help them really implement and pinpoint issues on any machine. So we were able to connect up to each and every machine and really help them with parts, with maintenance, with service availability and truly change and transform their business. As a result of that, they had the ROI on this particular implementation in less than 12 months. The productivity in Wash improved over 40 percent since they began using Microsoft. And so it's a very exciting opportunity regardless of what size of business we're talking about. Next, I'll touch on Ingram Micro, one of our very big partners that we have in the world that happened to be the world's largest technology wholesale solutions provider. They were facing a very challenging time in their industry where customers needed technology solutions much faster in the marketplace. In the past, it was okay to wait 6 months or so to be able to build up the infrastructure so that they could onboard more services or products. Today, customers demand that in a much more real time sense. These marketplace realities meant that Ingram Micro needed to reimagine its infrastructure completely And they wanted to continue to give customers a new responsive way that they could actually change their business. And so as a result of that, they turned to dynamic CRM on CRM and to help them, it gave them a solution that connected their entire technology ecosystem together in one unified manner. Its entire ecosystem is now available to view the same consistent dashboard with their customers in a very inclusive way. More than 200,000 value added resellers around the globe in 170 markets enable them to connect with them in real time. That helped them dramatically this past year. And so we were able to do this entire implementation in 66 days with one of our largest and most important partners and it's truly helped them transform their business. Thirdly, I'll talk about the intelligent cloud. And when we talk about the intelligent cloud, again, let me start with the facts. Our commercial cloud revenue grew 106% year on year for the 7th consecutive quarter of triple digit growth. We're very excited about that. That's an awesome we have awesome momentum in this particular area. Our customer usage of Azure Compute more than doubled in the Q3. Over 85% of the Fortune 500 have at least 1 Microsoft Cloud Enterprise Service and nearly 60% have at least 2. That is big time transformation. The other thing that I'm really excited about is the premium versions of Windows Server and System Center and SQL have all grown and continued to grow 25 percent or higher. That's important because what you must realize is that we're actually making better on premise products today because of the public cloud that we have and customers that want a private cloud have truly given us credit for that and adopted that. The next metric is probably one I'm most proud of, of all the ones I've shown you. 82% of our commercial revenue this past year or quarter came from annuity revenue streams. That's up 5% year on year. 82% of the commercial revenue came from annuity stream revenue streams. That's fantastic. And we see that's headed in the right direction. And certainly we've got a huge, huge opportunity to continue to drive the depth and breadth of that number. The last area I'd touch on is probably the hottest product in Microsoft right now, the Enterprise Mobility Suite. The Enterprise Mobility Suite, which runs on Azure, grew 700% over the last year and we have 13,000 enterprise customers now on this particular platform. The opportunity we have there is we're able to go to customers today and de install 7 or 8 or 9 point solutions that they have to try to manage BYOD and all of the device configurations that they may have because our enterprise mobility suite, ladies and gentlemen, is one SKU, one contract from 1 vendor that allows them to manage across iOS, Android and Windows, extremely exciting and a lot of upside opportunity that we have for that particular area and product. Now when I talk to customers about the intelligent cloud, this is the slide I use. I talk about our point of differentiation. Every technology company on the planet claims to be a cloud company today. The reality is this, there are only 3 hyperscale cloud companies in the world today. We happen to be one of those. Secondly, of the 3 hyperscale cloud companies in the world today, we're the only one that offer private, hybrid and public cloud. And we're the only one that offers an enterprise grade incredible cloud. And that is really important for us. And then I tell customers about the and truly and truly resonates with customers as we get in there to talk to them about reimagining their business and seeing where the future can go. And it's extremely exciting. And Scott and his team deserve a lot of credit. The reality is there's only one company in the world that is the Gartner Magic Quadrant leader in 4 distinct categories. And thanks to Scott and his team, that company is Microsoft. And so we use and leverage that extensively in our go to market opportunity as well. And the Azure wins continue to pile up. And it's certainly it's infrastructure as a service and platform as a service, but it's also our Azure Directory service on Azure. It's also helping companies reimagine their business with great apps, standing up their dev and test environment in Azure, being able to help them connect to every on premise server that they have in their shop so that we can help them do backup and recovery. And so we actually have baby steps that companies can take to get onto the cloud. And then we've got complete rewrites and transformational services like our data services, our IoT services and our machine learning services. Those are extremely exciting to be able to talk to customers about and bring the breadth and depth of the innovation extreme strong suit as it relates to our future to be able to continually transform Microsoft. Now let me touch on some of the customers that we've really had some success with that are doing some unique things. Let me talk about AccuWeather. AccuWeather was faced with a situation where they had to make a significant technology investment in order to keep up and scale to their business. They started out as a company doing 2,000,000 requests a day on weather and weather patterns. The reality is that grew to 4,000,000,000 in just 4 years. So it exploded for them in a very rapid timeframe. As a result of that, they chose the Windows Azure Cloud Platform for on demand scalability, reliability and improve access to real time weather information. As a result of that, AccuWeather has also transformed its business to be a SaaS provider. It now provides multimedia content to 1 180,000 websites for other companies that design and customize solutions for government, for media and other business types. That's an exciting huge opportunity. And today, they were able to cut their IT costs by 40 percent using Azure and as a result of that today we service over 10,000,000,000 requests for weather every 24 hours a day. That's an exciting transformation for their business, all enabled on the back of the Azure platform. Now let me talk about Thyssenkrupp, one of the biggest elevator manufacturers in the world today. We've had a conversation with them at the highest level in their company about reimagining their business. How do we connect all your elevators to a service so that we can help provide you predictive analytics, so that we can work with you to be able to help connect to thousands of sensors and systems using the Microsoft Cloud and the Microsoft IoT Services, allowing them to monitor everything from motor temperature to shaft alignment to cab speed and door functioning, all the things that are important in the operation of an elevator. Today, they capture the data, they transmit it to the cloud, combine it into a dashboard and it serves 2 types of data. First, alarms that indicate any immediate issues that they need to dispatch service to. And second, any events which are stored are used for the management and proactive maintenance that they can do going forward. So just an incredible way to use Azure Machine Learning to truly reinvent your business, create a service and give predictive analytics at the hands of all of your employees, a huge opportunity to be able to help them transform and take advantage of the new world. Last, I'll talk about Delphi. Delphi is an auto parts manufacturer. They have all kinds of parts and all kinds of cars. They wanted the ability to turn even the oldest cars into connected cars. They created something called Delphi Connect to address the need for older cars to have the latest technology. Fortunately, we were able to work and partner with them and use Azure to power it. And now Delphi Connect give drivers many ways to remotely monitor and control their cars. Delphi Connect offers functionality once that was only available in luxury cars or at the high end of the market. Today, you can actually use the Delta the Delphi service and Azure to develop the product and the uses the Azure cloud and move data between cars and drivers. It's truly an exciting and revolutionary offer that we were able again new business model that we were able to work with Delphi as it relates to changing and growing into the modern world. So when you think about these 3 big ambitions and these 3 big bets that we've got as a company, we're in different conversations with our customers and with our partners than we've ever been. That creates new opportunities, new opportunities for deeper share of wallet, new opportunities to help people reimagine their businesses, new opportunities to work with startups to create new disruptive businesses. And truly at the heart of that, again, is this heavy focus that we have on how to make a customer and help a customer be successful. And in partnering with Amy and Satya, we've also took a look at our go to market opportunity and the field and said, hey, look, we're going to have to transform and reinvent ourselves as it relates to that. And to be able to do that, they've given us a new envelope to work in. And that new envelope says that we're working more with the product and engineering groups about more self-service, viral, fine, try, buy solutions, which are really important from a seeding perspective. We've also implemented something called role clarity, where we changed the jobs of 6,000 of our people in the field this past year. And now we have appropriate roles on sales, appropriate roles on deployment and appropriate roles on consumption. This was a massive change that we undertook. Next was readiness. We took a look and said, hey, the speed at which the technology is coming at us is changing in a very rapid way. We've got to continually evolve our readiness. So now all technical roles in our field are required to go through certification. And we're also hiring a lot more data specialists and cloud specialists. That's where our future lies in helping these businesses reinvent themselves. We've also changed our compensation principles so that we're no longer focused on just revenue quota, but we're now focused on a balance of revenue quota and deployment and consumption as it relates to the uses of our technology. That's been a big shift for us to get the use of our technology. We've changed our focused, to be more contemporary and to be more usage and deployment focused as well. We've also changed our contracting and I'm proud to be able to tell you today that as it relates to the cloud and working with Brad Smith and his team, we now have the most elegant and simple cloud agreement for any enterprise customer out there in the market today relative to all the major technology companies. I'm very proud of that particular change. And our offers and offerings continue to change. We continue to look and re examine opportunities to take existing on premise customers and elegantly move them into the modern world by helping take advantage of their current install base and what they have and own and helping them transform that to the cloud. And I'm also very proud of the fact that we now have a global cloud. All three cloud services, Office 365, Azure and CRM Online are in 131 countries around the world. That is a significant opportunity for us and a competitive advantage that we So we're transforming our customers, we're transforming our products and solutions, and we're transforming our field all at the same time and doing so in a transform and perform world. That's how we view the marketplace. Satya talked about 1,000,000,000 active Windows 10 devices in FY 2018. That is a real achievable opportunity for us around the opportunity we have with the free upgrade, the Windows 7 install base, the Windows 8 install base and the run rate. If we do our job well there, this is one we should be able to achieve and really create a vibrant and healthy next generation Windows ecosystem. When you think about the $20,000,000,000 annualized run rate in commercial cloud that he talked about in FY 2018, the sky's the limit as it relates to our ability to partner with customers and really and truly help focus on their success and help them reimagine their business. So those two things certainly are strong ambitions that we have going forward to shape our business. So in closing, we're going to continue to stay focused on driving the strong customer success. We feel very good about our performance. We feel even better about the pace at which the company is transforming. The thing that I'm most proud of is the progress we've been able to do transforming while performing. And the last point I'd like to leave you with is ladies and gentlemen, as it relates to these new conversations, these new big ambitions, the new change in culture we have at Microsoft, we're just getting started. We're in entirely new conversations. It is a new day when we show up at a place of business to be able to share what we're actually doing in the marketplace. Everything I shared with you is what we have today. It's not a 3 year roadmap and that's exciting for us to be able to do that. So we're thrilled to be able to have this opportunity and excited to be able to share it with you. Thank you very much. Next, I'd like to bring up my business partner and also a trusted confidant and somebody that I work very, very closely with. Please give a warm welcome for Amy Hood, our CFO. Thank you. Hello, everyone. Nice to Hello, everyone. It's nice to see all of you. It's my honor to be here to be able to talk after both Satya and Kevin in terms of bringing really the future that Satya has talked about with our real momentum that was really the speech Kevin just gave. We're really focused on 3 key areas as we transform. The device platform and devices, digital work and life and our cloud platform. So today in each area, I'm going to walk you through transition we talked about to customer lifetime value. The idea of being able to build our business from transactional to a more consistent base. And ultimately, this transaction drives growth here at Microsoft. It's been about 18 ish months since we had our last financial analyst briefing and I use this exact slide. I think a lot of things have changed in those 18 months, but this one has not. And our leadership commitment using these 4 core principles to create value for our shareholders. If you look at each of these, I think we've made progress in all of them and I think we continue to make progress every quarter. And this is about continuous improvement, which I think is a principle we've heard actually in the prior two speakers and frankly in all three hours of the keynotes this morning. With that backdrop, let me move to talk about our first and important business, which is Windows. Windows is about a $15,000,000,000 business in FY 2015. I think it's important we're framing Windows a little bit differently here. And there is a growth strategy behind And there is a growth strategy behind windows that I'm excited to talk about today, which has the 3 components that we've listed: maintain our strength in business, increase share and units through both our SKU strategy as well as our first party devices, and grow our customer lifetime value across both business and consumer. You heard Satya talk about earlier in his economic transformation slides moving to that model. So let me spend some time talking about how we've already been doing that. This is our OEM Pro revenue and our revenue per license for the past few quarters. It has been very exception of the benefit from the end of XP, which we've been pretty transparent about and maybe long winded on our earnings calls. But it is an important concept is the importance of windows to people running their business. It's about enterprise grade features, management and security. This combines that OEM Pro revenue with our VL business. This is about our ability to convert what is more transactionally thought of through the enterprise features we will launch with Windows 10 to attract more annuity attach to our pro business install base. You can actually see it has been growing over a 2 year period when we think about that transition. But some of the features advanced protection against modern security threats, flexible deployment in Windows 10, comprehensive device and app management add value. There's biometric and security functions. There's enterprise data protection. All of these innovations have added value to both our pro and enterprise value prop. And I think for that reason, we're very excited about our trajectory. Now I'm going to talk about consumer usage. Just for a second, I want to make sure we changed the access. It's licenses in this view. You can see when PC consumer shipments got weak, we adjusted our approach. We adjusted our approach in terms of SKU strategy, making sub 9 inches devices free. We had a new pricing strategy for opening price point devices and we had programs to drive with genuine windows attach in high piracy markets. It clearly had an impact on our revenue per license, but also had an important impact in driving unit growth. And it is that balance that is important. And let me for a second now pivot to revenue. When we talk about why we are upgrading the Windows 10 install base, why is that upgrade free, Why is it important to get to a modern environment? And why when you look at the Windows 10 interface this morning did you see search built into the experience? You saw gaming built into the experience. You saw a unified store. These are all new monetization opportunities once a PC is sold. What this chart does, right, is take the revenue from those key franchises and add them together to show that the mix of our consumer monetization has already pivoted and has the opportunity to pivot and grow further. You won't see 2 things on this chart, the store, which we're anxious with the Universal Store to make significant progress. You also don't see surface. I couldn't make myself add gross margin to revenue. It's just a financial margin That is additive to our consumer health and opportunity for profit growth. Now, let me spend a second on rev rec. This is the only thing that to me isn't really about the lifetime value. This is when I get down to tactics, otherwise known as me talking about accounting. Windows 10 does provide new features and functionality over time. This is illustrative, different devices have different device lifetimes. The RPL is different by product. The cash flow will look exactly the same, but we will have a deferral impact that will impact both the and L as well as the balance sheet. For this, we will provide a comparability bridge on every earnings call and in our results materials. We'll have a conference call much like we've done with other transitions as we get closer to the impact to share the exact details along with life cycles, how long the time will be and the exact impacts we expect. But I did want to go ahead and say this is the accounting impact that we would expect to see once Windows 10 is in the market this summer. Now back, next, Office and Office 365. This is another slide that I showed at the Financial Analyst Meeting 18 months ago. The strategy has not changed for monetization and our confidence has frankly grown. But I think the consistency and the logic is what's important. Not surprisingly, we're going to talk about some examples about where we are in this transition. But I'll use these terms over the course of the next few slides reach, new customers, new users. Frequency, think about that primarily as effectively improving renewal rates and yield, selling more things on top of an installed unit. I'm going to start with consumer and where we are in the transition. We've talked about this a lot. I'm incredibly proud of the progress we have made in our office subscription with 12 point 4,000,000 subscribers as of Q3. This actually does show a projection into 2016 meant to help people understand where we are in the transition of revenue on our P and L. And frankly, the biggest transitional impact in FY 2015 wasn't the subscription transition, It was actually the impact of Japan in the year, which we've talked quite a bit about on the conference calls. But the trajectory importance of the value of that subscription. It's cross device, right? It has a mobile first. It adds value consistently, progress we've made as a team, adding lifetime value, progress we've made as a team adding lifetime value here. We move on to talking about where we are in our installed base. We've always talked about in the Office 365 transition that mail, email was the 1st workload to move. This is what we're talking about. By the end of this year, we do expect approximately 35% of our installed base will be cloud units in Exchange. While the mix is incredibly important, the other message on this page is it's the best proof point in terms of reach. 11% CAGR in the installed base. We're selling to new users, while we sell and move our existing. A lot of this growth has been in the small business, but it's also been across all segments. But this does allow us to reach new people and move them. This is where we expect to be in FY 2018. I expect both the pace expect to continue to see the impact of increased reach. Next to office and our commercial transition. We're about 25%. As I said before, this often is the second, it's a little bit behind our email workload. But right now, our 25% of our installed base units of office are sold this way. And importantly, again, we've seen 8% unit growth in our office commercial business adding seats, adding users and increasing our footprint. I think frankly that's something that has been lost in terms of our progress, in terms of our ability to add seats not just by servers that weren't available to small businesses before. This growth is actually across all of our segments. And we would expect on that same trajectory to have moved and sold roughly 50% of our installed base over the next 3 years. As you might imagine, these are the core components that build up to our ability to reach the $20,000,000,000 annualized revenue run rate. And it's also the key component of the commercial KPI that we've added for our annuity mix. We will still have non annuity customers, but it's about growing and transitioning in this process. Now, let me talk about lifetime value of the movement of these workloads. I put 3 examples on the board, but let me talk primarily about the first two because they're more common. The first is taking a transactional customer otherwise known as non annuity in our language and moving them to what we consider our standard SKU, which is E3, that's our nomenclature. It includes Office as well as our core workloads across Exchange, SharePoint and Skype for Business. Over the lifetime, the increased reach, the increased frequency in this example as well as some yield adding some incremental services results in a 1.8 times lifetime value of that user in the transition. The next example, which is pretty frequent, is moving an existing EA customer to the cloud. And that results in a 1.4 times increase in the lifetime value of that same customer. These transitions and transparency don't include our ability to add on many of the interesting products you just heard Satya, Frankly and Kevin talk about, not EMS, not Power BI, not our voice and investments in Skype for Business into the infrastructure. So there is additional yield opportunity in our language to add lifetime value here in addition to adding users. Now I'm going to move to the last bucket that we talked about, which is the cloud opportunity. Think about this as our server and tools business that we used to talk about, right? And I think there's some important takeaways from this slide. First, we have growth across 3 key delivery mechanisms. We have growth in core server. We have growth in hosting and we have growth in Azure. They are not substitutes. This has been an additive business to us and additive TAM. And that is an important criteria as we think about expanding our footprint and our ability to add lifetime value here. And maybe more importantly, our differentiation. We do expect our premium on prem products, they've grown about 25% as you guys know we talked about, will become an increasing percentage of our profitability, right? And I think I'm very proud about our differentiation here and our ability to go across all these components. But let me talk about where we are in profitability. You heard Satya talk about it. We think about our commercial cloud as having all the components. It's IaaS, it's PaaS and it's SaaS. It makes us Our pure cloud commercial revenue is what's represented here. And this gross margin improvement has been, I think, one of our proudest achievements over the past 2 years. Our ability to grow a differentiated cloud at a high pace, adding new workloads and increasing our margin. So let me briefly move on to FY 2016 before we open it up to Q and A. Revenue, we've already talked about the windows deferral and about the conference call and our ability to do comparable data, which we will certainly do. We also will continue to experience headwinds from foreign exchange. If rates stay where there are, that headwind is bigger in FY 2016 than it was in 2015. COGS, of course, will continue to be impacted by the mix of our revenue, but we continue to expect to make positive margin improvement especially in our commercial cloud. OpEx, I expect that to be flat year on year even as we continue to invest aggressively in our key growth areas. Capital return will continue with our ongoing buyback program and guidance we gave in January. And on capital expenditures, I do expect ongoing investment to support this cloud growth. In closing, I think and I appreciate you all being on this journey with us as we've transformed both the company itself, but maybe just as importantly how we talk about it. I think we've changed our KPIs. We've changed our communication around our progress. And I look forward to continuing to make progress with you all in the broader investment community in terms of communicating what I think is our real differentiation. Satya and Kevin to come back out for Q and A. And I think we're bringing the stools too. And I think I'm not moderating, so I'm guessing I'm not the Q, I'm the A. So I think we'll invite Chris back up to do that as well. Okay. So we're going to go ahead and open it up to questions. If you have a question, please just raise your hand. We have members of the IR team who are out here with Mike that will go ahead and get you mic'd up. And so with the first question, let's start right here in the middle. Thanks very much. Ross MacMillan from RBC. So clearly a very vibrant, energized Microsoft today. There's a lot to talk about. I had maybe 2 things in particular. So I haven't been able to do all the mental gymnastics and what Amy just went through. But the high level question is, you've got about €6,000,000,000 in commercial cloud today and you're talking about that going to €20,000,000,000 You've got about a €40,000,000,000 business commercial licensing. And obviously, there's some conversion of office, but some perhaps growth ongoing growth in the classic server business. Any way for us to think about how that trajectory of that commercial licensing business will play out over the next few years? And maybe the real question is when does it inflect so the combined business really starts to grow on a combined basis? Why don't I start and then you guys can add on. I think when you think about the combination, part of what you saw in the installed base slide was actually we do continue to see some of the non annuity selling, right, continue. So it's not an immediate conversion that I think many people have in their minds thought about occurring. It's actually been more additive in terms of structure, right? So while you have some deferral, a lot of our business was annuity before, right, in terms of going to the balance sheet and that standard transition. So I think if you when you go back and have time and I appreciate I did a lot of new numbers today, it's that we are continuing to the non annuity will bleed down a bit, especially in the office business, right? We add units across the board. Those tend to be more annuity like. But I don't expect some trough in the way that I think many people have discussed the topic, especially in office commercial to your very direct question. Now in the server business, most of the conversation that I wanted to have on the putting the 3 components together in a way to talk about the cloud platform was our ability to grow all of them, frankly. I mean, I think our roadmap that's coming where it really does and I think Satya talks about it, in terms of our on prem server is as much the edge of our cloud and the entry point into Azure and possibility as anything else. So structurally, I don't see a reason why there would be a trough in especially in the cloud platform components either where it's tended to be more additive where new scenarios are more possible than it is that I'm transitioning a one to one user base. Thank you. Okay. Let's alternate and we'll go over to the question. I think you're right. Hi. Also congrats on a great day and so much exciting activity around developers who Microsoft has been so strong with over time. So a question on the consumer side. You pointed out the 16% or 18% decline over time in the consumer OEM business. So any thoughts about how we should think about that business as you continue to cut prices or as you have been cutting prices over time? And in terms of the other monetizations especially search whether that will be impacted or not by the new Yahoo! Agreement? The new what? The new Yahoo! Agreement. Yahoo! Agreement. I'll start and then you can add to it. Yes. See, when we think about even the PC market and what is required in the student as well as in the consumer market, we want to be able to compete in the opening price points and that's what led us to make some pricing changes because even what is a PC in terms of the hardware configuration participate in all segments of the PC market and that's what we will keep adjusting our OEM pricing to be able to successfully do that. But it is also important for us to have these other levers. One of them is this post sale monetization. We have search in the United States. We have our own share. We have amount of magnitude has got certain amount of magnitude. It's no longer just something that we have in the future, but in the United States in particular, we do actually have 20% search share with RPS growing. But on top of that, we also have device gross margin. And we're very, very squarely focused on especially in the PC segment and the premium band of it. So those are things that we look to focus on. I mean in some sense, I don't think of when I think about the device business, I don't think of just the PC business and what's happening to RPL, but what's our ability to compete across all of the device categories with multiple levers. Great. Thank you for that. Let's go to the left side of the room here. Great. Thanks. Walter, Pritchard, Citi. Just one definitional question, Amy, on cloud. You talked about a third have moved over. I think on Exchange, it was more than that. Is that in production actually using or is that sort of licensed for it? It's how we sell into the installed base from a license count perspective. Okay. And then just on the numbers, same challenge that Ross has had here, which is trying to process through it all. But you talked about, call it, 10% unit growth, 8% 12% on Exchange and office, CAGR. You've talked about a third of the base having converted over and that third is paying you 40% to 80% more. Is that because the 1.4% to 1.8% on that chart? Sort of. It feels like 10% unit growth, a third of them paying you way more. It doesn't seem like we're seeing that in the numbers either billings revenue if I add commercial licensing, commercial cloud. I'm just trying to understand how we should be seeing it and how we will be seeing it in the numbers. Right. I think I'm following along. So let me try. So part of this is we saw a lot of SKUs of our which is just true of exchange is the very best example. When people first moved over, they actually didn't buy the suite. They actually bought Exchange Online like Office 365 Exchange Online. And so they would move simply one workload, right, at a small step up price or add new seats in small business that could be a different price point through partner. But again it's net additive. And the lifetime value right would take a period of time over which to recognize. The important components are changing the lifetime value, our inherent change in churn, right? Because the framework ultimately in the transactional business, if you thought about an effective churn rate of 5 to 7 year life cycle, right? And then you change that when it moves to the cloud is an important transition to lifetime value. Again, that's earned over a number of years. So I get the math you're trying to do. I think you're trying to put too much of it into a 1 or 2 year period of a transition. But that's actually a good time to we can happy to spend more time on it. But that I think you have a timeline issue more than you have a not summing issue. Okay. Thanks Walter. Okay. Let's go back to the middle here. Hi. Thank you. Karl Keirstead at Deutsche Bank. Satya, a question about Azure. I'd love to get your sense for how Microsoft plans to close the scale gap with Amazon. And in particular, we do hear from some customers that they view Azure as being somewhat Microsoft centric. So I'd love to get a sense of your vision to opening up the platform to 3rd party technology. If you happen to be a VMware centric shop or a Red Hat Linux shop, how do you make that leap to Azure? It strikes me as an amazing opportunity that Microsoft has and I'd love to get your thoughts on that. And then Amy, a sense for what the timeline is to get Azure to breakeven would be interesting too. Yes. First of all, we have made tremendous amount of progress. In fact, today's conference was a lot about that. Maybe even sort of thinking about, hey, we've got to open up, would have been even a front and center sort of strategy piece, maybe even 3, 4 years ago. I mean, we are well on our way. I mean, 1 out of 5 VMs is a Linux VM. We definitely have to get more distribution supported. That's something that we are actively working on. But even there's Java 1st class from Oracle on Azure. We have all of the workloads from IBM on Azure certified. We have SAP. We have a very comprehensive set of third party technology. I mean we had a bunch of yes, I talked about IBM. We had Docker. I mean we have now Linux containers, Docker containers on Azure. We have basically 3rd party systems from Cloudera to Data Stacks that are available on Azure. So at this point, I would say as far as opening up of Azure, we definitely have done it and we So it's not as much in the startups, especially in this zip code. We would love to change that, but at the same time, we are also very, very focused on commercial customers and worldwide, because in some sense, this thing is about a worldwide. In fact, even I've learned a lot of lessons even thinking about competing against VMware on Hyper V. It turned out that it was a great smart thing for us to focus on Hypervisor share growth in other geographies like in Japan and other markets where we were able to turn that around. So I look at the world, I look at the segments, I look about the profitability of the revenue and go at that opportunity. This is not going to be 0 sum between Amazon and us. If you look at even the past era, there were many successful enterprise players. There was Oracle, there was us and there were some others. I think in the cloud era, we clearly are one of them and we have momentum in what I would claim is the more profitable segment of the cloud infrastructure and PaaS base, because I don't want adverse selection. Quite frankly, I don't really necessarily need one big streaming vendor giving me a lot of revenue, which is I know exactly what that revenue quality is. And so therefore, I want us to be in businesses that actually have long term potential. So I feel good about that. And to your question, I'll answer that because I actually do not think of Azure gross margin on its isolation. What do you call Azure Active Directory? Azure Active Directory powers everything. EMS is fundamentally a function of what we have in Azure Active Directory. So to me, even the way we make capital decisions, utilization decisions, bundling decisions, pricing decisions is not to go compartmentalize each one of these segments because it's really the combination of IaaS, PaaS and SaaS that I think is long term power for us. I want to retain the flexibility to subsidize for an enterprise customer's lifetime value storage because I know that there is nexus to SaaS that I think is strategically very, very important for us. And so we want to retain that flexibility. And I might add one point on the partnership side. If there were partnerships to present themselves that were compelling to us, we'd certainly continue to examine those as well. So it's we've made tremendous strides and I think we it's an evolving market and we're continuing to examine each and every opportunity we have to continue to broaden the platform. Okay. Thanks, Rob. Okay. Let's come back to the how about here in the front? Thank you. Amy, I wonder if we could just make sure that I got the messaging correct here. I think overall, we're happy, right? It sounds like business should be accelerating from here. You used the word trough in Office. I think of Office as troughing because it's negative right now if you add it all up. But all the slides suggest it's kind of up into the right. So if that's accelerating, server and tools sounds like it's pretty stable business, Azure is growing, Windows secular decline. But if you add it all up, it would appear to me that what you're saying is we should expect the business to accelerate going forward, right? What I believe is the fundamental business trends that we see across cloud platform, digital life and digital work experiences, I feel very good about where we are. I feel that's if that's the message, I feel very good about our competitive position. I feel very good about our execution. And frankly, a lot of the good work that's been done in our field. And I think as we head into Windows 10, I think we're changing a lot of things and I look forward to frankly seeing the difference that that can make. Yes. I mean, when you think about what does it mean for any one of our businesses to grow, we have to reinvent and transform each one of these businesses. I mean, in in the office transformation and now you are seeing the results of that. We then got started in the transformation of the server, but we also noticed that it need not be 0 sum on the server, which is you can go to the cloud. By the way, even in the office, there's some of that because you're now able to sell essentially office servers to small businesses more than Office 365, which we never were able to do. So some of this transition is in fact TAM expansion and transition. But we got first started on the Office journey, then we got started on the server and cloud journey, and we're getting started on the Windows journey. Or you could say in Windows 8 was when we got started by first making sure that Windows was not just for the PC. It's a much more competitive market, no denying that. And so therefore, it's about getting these transformations to land in product first. The product truth has to be there, then to land in revenue and then to land in contribution margin. Those are sort of the things that we look at. What are the leading indicators of change? That's why I'm sort of obsessed about what's the engagement, what's like even with Windows, is there active usage of Windows? And how do we think about doing more with that usage? And that's when I look at the in fact, if somebody sort of did the GDP of Windows, that's definitely not Microsoft's revenue with Windows. So what does that mean? So there's a plenty of different ways for us in what is considered a secular decline, a secularly flat or secularly increasing markets. And those are the ways we look at. Okay. How about we go back to the left side of the room? Excellent. This is Keith Weiss from Morgan Stanley. Thank you guys for taking the time. So as I'm watching the presentation, taking my notes on my Surface Pro 3 in OneNote and using my iPhone to check my email, using the Outlook client and using Office Lens to take pictures of the slides, it kind of dawns on me that I don't need a Windows phone to do any of this. I'm still using a lot of Microsoft product. And I also noticed there's no Nokia slide in the deck. Do we need or do you guys need a handset to get this done, to get mobile first, cloud first done? Do you need to own the mobile OS to get it done? Or do you have enough of the other parts that this can still come to fruition even if you write off Nokia? Yes. So let me take that. First of all, again, this is a little bit like the cloud analogy that goes even into the device analogy. Take our operating system. We really don't have a phone OS team. We have the Windows team. This is one of the big changes that has happened inside of Microsoft. In fact, a couple of years ago, you could have sort of said, hey, look, you have different efforts, different stores, I mean, lot of duplication. But now we have 1 core, 1 store, 1 UAP, one way to write apps. So a better way to ask would be, are there going to be devices that are only touch and they're going to be 7 inches 8 inches I think they are for sure today. And so therefore we want to be able to participate in those. Is that going to be the only category? No. So that's one of the reasons why this universal everything matters to us, which is we want to have a device family. You're absolutely right in today's market and that's what we are focused on. We have success in value smartphones. We don't have success on high end phones. We have success in Surface Pro 3. And so I want to build those that strength, keep get all my apps on to all the other devices because to me an application endpoint is the beginning of a customer relationship. But think about the enterprise value that we could create when there is new invention because 3 years from now the phone that we love today, which is 6 inches is going to be very different. This input output changes in our history have proven to be the biggest enterprise value creation. And you got to go about it smartly. You can't go about it in an undisciplined way. You can't go about it in a fragmented way where your OpEx is thrown to the winds. You don't have a good strategy of really being able to get maximum leverage. So I feel that yes, it is important for us to be in the handset market. We in fact have some traction in the value smartphone market, but we've got, as I said even in our quarterly results, a cost issue given the segment we are participating in. And I want us to be able to take action by looking at the entire device portfolio I'm participating in. So that's how we'll manage the portfolio. Okay. Thank you, Heath. Okay. Let's come back to that all. How about you, Mark? Thank you. Appreciate it. And thanks for all the information today. Satya, today you discussed this morning the support for Android and iOS on Windows 10. Android is containerized, while iOS is recompiled at least for the Objective C part of this. What are your expectations on products appearing on the App Store? How long do you think it will be? Or do you think you're going to pay us the other guys in terms of apps on the store or at least that number? How should we think about it? And then Amy, given how different the monetization of the different platforms are, how should we think about the monetization as this works through in terms of the App Store? Yes. So first of all, I would say the concept of the Windows App Store is perhaps the really new concept. We had the Windows App Store in Windows 8, but one of the big changes in the design of Windows 10 is to make sure that the App Store is front and center where our usage is, which is the desktop. So we are going to where our strength in usage is and making sure that the user experience highlights applications. And then once you start with that strategy, we've also gone to the next step and said, let's have the broadest set of bridges for all developers, starting with the web. I think if you have a website, because most people say, I'm on the desktop, I use Office and I use the browser. We say, well, the browser more sticky. You will get more out of it by just doing the few things that make all of the JavaScript and HTML that you have on the server really in the App Store because now you have a live tile, you get notifications, and you can get this pin. And so to me, it starts with the web. We've already extended we are also extending it to getting your APKs into the store and there's Objective C. To me, these are all just tools to get more developers to be able to leverage their core assets as they come. And we want to really in the first 1 year of Windows 10 as we upgrade this installed base, as we learn how to merchandise the store as part of the start experience, that's when we will have much better data about what the engagement is. So that's why we're very focused on why did we do the free upgrade to get the users, to get the store in front of them, get the engagement going and that's the entire thesis. And I think that's actually the answer to your second question too, which is how do I think about the App Store and its contribution is that I think we're going to learn a lot. I mean that is where we are, that we'll learn a lot in terms of engagement. We'll learn a lot in terms of our ability to tune that engagement through lots of and you've seen from us historically. I think we've got a lot of learning that we'll do before I'm probably ready to share financial aspirations. Learning and hard work. That's the other one. There's a lot of work involved in that too. Great. Thanks. Okay. We'll come to the right side of the room. You want to go to Brent? Thanks. Brent Thill with UBS. Thanks for having us. My question is around the $20,000,000,000 cloud target you're setting for 2018. Maybe you could just walk through some of the assumptions of how you get there. I would assume roughly mid-forty percent growth rate from here, which doesn't seem unreasonable given your 7 quarters of triple digit growth. And then ultimately, maybe for Amy and Kevin, is this a higher margin business over time than the perpetual business? If you listen to other software companies that are making transitions, they talk about it being potentially higher margin and you could potentially cut out a lot of your middlemen and the reseller relationship where they would just come direct to you. So do you see a change in business small as going to market as you move through that transition? Why don't you start on GTM and I can take the Sure. The way I look at it is, it's a share of wallet increase for me more than it is today's margin. Certainly there are efficiencies to be gotten with the cloud and I'll let Amy get into the mechanics of that. But the way we look at it is when we get a cloud customer completely deployed and get utilization and consumption, it opens up with the first service, it opens up the ability for me to get the other services in there. So it's really a tip of the spear as it relates to the momentum that we get from a customer. And we've seen that. We've seen dramatic share of wallet increases when we've been able to successfully entrench that first service into a customer. So that's how I look at it. And I think when you think about the mechanics of our our cloud across Azure, Office 365 and CRM, which is how we segregate it today, the Azure opportunity is a lot. I mean, Scott had a slide today that had 8 or 10 different services on it and he's creating them very, very rapidly that are premium services that we can drive on top of just the commodity compute and storage, which is very exciting. So staying attentive to those and watching the traction on those, I think it'd be is clearly what we're driving and the thing he showed today was SQL Data Warehouse, a whole new frontier for us to be able to say, hey, let's spin up a data warehouse in a cloud and do it in seconds, minutes or hours versus weeks and days of a POC. So there's a whole new set of opportunities where we're again retooling our field, retooling our models, retooling the offers and the share of wallet opportunity I think is very bright going forward. And in terms of $20,000,000,000 number, I am with you 40% a year with our portfolio and our investment in the channel and our ability to execute our installed base are feels like a good start. A lot of hard work. And a lot of hard work. And a lot of quota setting with Kevin and I. A lot of hard work. Thank you, Brent. Okay. Let's actually stay here in the middle. Sorry, Raimo Lenschow from Barclays. Thanks, Zack. Quick one. I wanted to stay on that subject in terms of cloud and the opportunities. I can clearly see PaaS because you have the installed base. IAS makes sense. If you go a level higher to the SaaS model, at the moment, we talk a lot about productivity. If you look at the current portfolio that you have, do you think is that enough in terms of monetizing that? Or do we think about Microsoft in a few years' time in terms of being broader? I'm thinking about the health app and the health plan you came out with. Do we need to think broader? Or is the portfolio that we're seeing, it's that's what it is and we just kind of need to execute on that one? Thank you. Yes. I mean we already have when we think about even the SaaS portfolio there is the end user SaaS which is Office 365. We have business process SaaS with Dynamics that's growing pretty nicely for us. We also have Enterprise Mobility Suite, which is a SaaS service for IT infrastructure. We also have Power BI, which is a BI SaaS service. So we are growing new areas, where to me when we say productivity, that's why it's about individual productivity, group productivity and business process. That's the area that we will focus on and keep then I just give you some examples of things that are already in motion. Okay. Let's go ahead and go to here. How about in the front? Kirk Materne with Evercore. Thanks very much for your time today. We've talked you talked a little bit about the expansion of the markets through the shift towards a service model. I was curious if you could talk about you talked a little bit about small and medium sized businesses. Was wondering if you could talk about that from a geographic basis. Obviously, you guys have had very high piracy rates in a lot of regions over the years. I guess, are you starting to see some benefits of going to market through more of a service model around piracy benefits? I guess, can you just talk about that a little bit and give us sort of your thoughts on how that might progress over the next 2 or 3 years? Thanks. Do you want to take it, Scott? Go ahead. I mean, Mike, definitely, I mean, you should add if there's any color on the geo stuff. But for sure, the ability, like if you ask me and say what is at least traditionally classified as emerging markets, I mean take India, in fact Kevin just came back I think last week from India and he was telling me this, which is, it is hard selling servers. I mean, whereas now with cloud, we have a real opportunity in India. And so that definitely is the transformative thing. And of course by design, it also has the anti piracy built into it, which also is very helpful. But I really think it's the ability to deliver new value to more organizations and end users in even what are emerging markets is clearly another TAM expansion. It was ostensibly something we could have targeted in the past, but the ability to go get it done was much harder. We didn't have the channels, the customers didn't have. Even if they were willing to pay the price, the sophistication required, because that's the other thing, the IT sophistication required consume some of the things that we had in the past was just not possible. And now it's not it's not One of the big levers we have now that we've never had is our anti piracy efforts used to be around license collection. Now it's around annuity conversion, which is a massive change for us as a company and think about that operator. I mean that's huge and with Windows as a service, you can only dream about what the capability might be over the long term there as we develop that and it matures. So I think Satya is exactly right. You're going to see these emerging markets skip a generation in many instances and jump right to it and we won't have all the mechanics of antivirus that we've had in the past. You. Okay. We have time for one more question and we'll just go here with that. Ed McGuire from CLSA. One of the things that's really struck me walking around your partners' pavilion at the event today is just how much open source there is. And it's you can see a sea change in the organization, your embrace of the open source model and open source partners. And what I'm interested in is how you're looking at open source projects that may be competitive or may be deflationary to competitive technologies you have, how you're prioritizing them, how you're thinking about embracing them and looking forward ultimately how the increased ecosystem is driving the real value creation particularly in the cloud business? Absolutely. So first thing is when we participate first of all, I would even sort of make sure it's understood that we participate in open source. We've made sure that dot net is open source. We are obviously the contributors for it. Little known fact is we are some of the biggest contributors now for Hadoop. We even contribute to the Linux kernel because we want to make sure Hyper V supports it well. So we, 1st of all, have engineers inside of Microsoft who are contributing to open source because it's very important for us about being true participants in the community. Then there is the commercial aspect. Whenever someone says we are an open source, we also have commercial open source and we compete against them. We've always competed against them. Windows Server competed against commercial open source distributions of Linux forever. And you do that by adding value. And when you do that, you don't necessarily need to have your platform only support your workloads. So to me again, it's a non zero sum because customers who want to choose some open source workload in IaaS on Azure versus a PaaS service that we have, they probably are non zero sum. In fact, most applications what happens, especially in the enterprise, even in a start up is it's a combination of everything. There is no such thing as a pure thing. I mean, all of our if anything I've learned spending all the time I've spent in my enterprise business is every enterprise is heterogeneous. In fact the interoperability surface area of Windows Server is the best when it comes to dealing with all the different Linux distributions because we learned it through just the school of hard knocks, which is by making sure that we respond to customers and their requests. The same is true in our cloud. In fact, when I think about it, what is the definition of open? Perhaps the definition of open should be something that supports all open source and Windows. And if that is the definition of open, then we are the only open cloud out there because we actually have this and we have the choice. You can use anything that you want to choose in our PaaS. You can use some Windows, some Linux, some Hadoop, some of our database services. And that to me speaks to the realities of our customers. And that's where we're going. And that's I'm glad you noticed that that's what you see even at an event like this. Great. Well, thank you. Thank you for that question. That wraps up our event today. Thank you for joining us in person and on the web. As a reminder, today's presentations are already posted on our IR website, so the slides and the webcast. So please go grab those if you need additional details. And thank you again for joining us. Thank you very much. Thank you very much.

• Slides