MR. GATES: Thanks (Todd). NT 5 is going to have more applications than any other operating system has ever had. And that's because of the commitment to backwards compatibility. In fact, 60,000 applications is a world's record. And we'll also have a lot more applications optimized for NT 5 than we've had for any other Windows launch, even including Windows 95. We'll be three times ahead of that. So we're very pleased at the reception we've had from the development community, and they're moving to use the things that have been built in there.

Now, when we think about NT 5, it's important to remember that it's a very broad product. It advances scenarios on the desktop and the server in very substantial ways. Because we've been putting so much into it, it's easy for people to just think about the top two or three features. But, the product has an incredible amount of depth. Now, we've designed it so that customers can move either all at once, so they'll roll it out to all their desktops and servers, or they can move a desktop at a time or a server at a time. And that's why we want to make sure people understand why it's worth it for every one of those machines.

It will be an advance in the Windows user interface, things like personalized menus, the way that we integrate in the Internet Explorer. We're taking even further steps than we did in Windows 98. The power of Windows NT, fewer reboots, higher speed, the better security, it is a superset of Windows 98. That's the first time we can say that about an NT release, compared to the high-volume release. And there's lower cost of ownership. And that will be very concrete with the fact that you don't visit desktops, the fact that you get the mirroring, those are directly addressing what customers said would change the TCO picture for them.

Moving up to the server level, again, there are specialized servers in the world. If you're just using NT for file and print, it is a big advance. The performance, the use of the directory make it the best choice there. As a work server, it's a huge advance. It takes the latest IS, the latest component technology, and integrates those things together. Likewise as an application server, communication server, or infrastructure server. So the role in some cases would be incremental adoption, but that would be fueled by the fact that in each one of those areas we've done things that make it compelling.

MR. GATES: The distributed world is really redefining what we mean by application. In 1990, an application was something used by employees. If it was used remotely, it was a class lease line, mostly character-based. Development was done, a big version at the time. And having it run all the time was an unusual thing.

Today, applications are an incredible spectrum that has to incorporate support for the entire customer base across the web. The connection paths could be any Internet connection, including virtual private networks. The user interface is not only graphical, but multimedia.

It's got to be part of the application, because that's the competitive edge, to get your application to be more attractive than anyone else's. Development has got to be very rapid. New updates have to automatically flow across the network without a lot of effort. And being up all the time is simply an expected feature of the application.

Now, a key approach that allows this to happen is to build applications using end-tier approach. When we say "end-tier" we don't mean that all these tiers always run on separate systems. In fact, we think a very key scenario is the offline case, where you have a portable machine, and all the tiers are running on a single system. And so, the uniformity of the programming model from that portable machine up to super high-end servers is a very key part of our strategy.

The world has been moving to this NT model year-by-year. First, the step towards client server. That certainly is on the path, because it talked about separating out the presentation piece from the rest of the application. Now, we're going the full way of separating out the data access and making these applications fully web-aware. All the new electronic commerce applications will use this architecture.

Well, Windows is the applications platform. It shouldn't be necessary for software developers to go out and get an expensive runtime and get their customers to buy that for all these applications. There should be an integrated approach that ties in very directly to the security, the directory, the user interface, all of the administrative tools that are in the operating system itself.

Particularly if you look at the very broad market, for people who are developing applications, they don't just want to sell at the enterprise level. They want to sell to organizations of all sizes, organizations that simply want to put in a Windows system and have that be the foundation without other pieces.

Windows NT was designed when client server was becoming important. And so a lot of the features, the remote procedure calls, the security approach, really were designed around the needs of client server. With Windows NT 4 and fully with NT 5, we built into the operating system itself support for end-tier applications. And many of the areas, like the integrated transaction capability, we've certainly been the leader in saying that should be there for all elements of the system.

Transaction support is really only valuable when all the subsystems participate, because when you want coherent state, when you want to use that transaction capability to make the application run across a cluster, it's got to work with all the different systems. And so, building it in is really the only approach.

If you look at the distributed application technology in NT 5, we've been investing in these pieces for many years, starting with the web server itself, IIS 1.0. We've had very rapid updates to that, most recently with IIS 4.0. But the version that goes into NT 5 goes even further building on the feedback we had from 4.0.

Likewise, COM itself has evolved very rapidly. The support for distribution, integration of the transaction capability and queuing, all of those come together with what we call COM+ in NT 5.

Database access, making that a separate thing so that you can be independent of what kind of data you're going after, that's a big very important trend. And it's not just relational data. It's data that's structured many different ways, hierarchical data as well. That's why we moved up to OLE dB, and we're now enhancing OLE dB with an understanding of schema using XML standards to allow for rich semantic level connections.

The base services have also had to improve for all of these capabilities, whether it's moving the security now to a public key infrastructure, or making all the capabilities of the system fully scriptable, so you have the kind of customization capability that high-end systems have always had in the past.

Now, this diagram represents the end-tier model. You see the databases and legacy systems being separated out from the business logic. This has been amazingly popular with our corporate development customers. They see, for the first time, that they can move their development from the mainframes onto the Windows NT system, and still leave the database or at least major portions of the database up on the mainframe. And so the time frame for migrating the data can be different from the time frame for moving over and using the modern tools in the NT environment that let you build these applications rapidly, give you the simple Internet-type interfaces. That can happen now.

So the leading-edge customers, people like Merrill Lynch, a number of the big banks, have been pioneers there, and this is a model that will spread, I think, very, very rapidly.

The presentation level is one where you've got to have incredible flexibility. People talk about a thin client. Well, there's been a lot of claims and talk about how you create a thin client. If you want a client to be thin, it can't have the browser running in the client, because the browser is a very large-size application, larger than any productivity application, and requires the full-blown PC hardware. So the myth that you could somehow run a browser on something cheaper than a PC, that was exposed.

The way you get a thin client is to actually take that work and offload it to the server, and for a class of users that have worked with terminals in the past, this is fantastic. The Windows Terminal Server is a key part of our strategy, and it's proving to be very important to customers because they can decide for any users whether to give them a Windows terminal or a Windows PC without any impact on their application development. The APIs are the same, the user interface is the same, the productivity tools are the same. And if that user is making heavy use of the system, they can move up from the Windows terminal to a full-blown PC with all of the rich peripherals and portability without changing any of the learning that they've done. They just get lower latencies, more power at their fingertips without any software adjustments whatsoever. And so that flexibility at the client level is unique to what we've put together.

We took all the work we're doing here and put it under this Windows DNA umbrella, and at every tier there's got to be integration and innovation. These tiers, you move code back and forth between these tiers, and you sometimes run all the tiers on a single machine. So, you've got to have the same object model on all the tiers. You have to have rich tools. And it's our belief that you've got to have a language neutral approach. There will be many new languages that come along, particularly in areas like world-based programming, rich data binding with the object stores that will be standard in the future. And there's a lot of code out there and a lot of expertise in languages like C that let you develop very, very efficiently. We're going to support all those languages, including Visual Basic, Java, and anything that comes along with the powerful DNA platform.

At the presentation level, we have many levels that you can connect into the system, from HTML to DHTML to scripting, all the way up to writing your own components, or calling the Windows APIs directly. We give you those choices because different applications have different requirements.

Now, one of our drawbacks was that if you use the component or Windows layer that your installation was very difficult. And so that made it unattractive despite the benefits that were there, and that's what we're changing with the Windows installer capability. So, whether it's .exe-based or page-based, you get that simple installation.

We also believe very firmly in rich programmability, letting the business world to the presentation be easily customized, and we've had over 100 developers who put the hooks in for Visual Basic connections for the Visual Basic for Applications, or VBA. That was thought to have been fantastic, and it has become a kind of standard. In fact, every month, we've got new people signing up for that. Just in the last week, Corel, who of course have been focused on a different language customization approach, decided that their customers wanted VBA and made a commitment to include that in the future versions of their product, which is a great thing, and we're very pleased to be working with them.

At the business logic level, there are a lot of rich capabilities that should prevent you from having to write complex systems code. In our dialogue with the enterprise planning application vendors, we're amazed how much of their code related to things that were really systems level that we ought to do for them. And so, with their help, we're making sure that the way we build these capabilities really does simplify their life, starting with the rich Internet servers, the queuing, and now the COM+ services that ship with NT 5, they're also available back on previous versions as add-on capabilities. So that's queuing, directory, security, all of those things done in a holistic way, so you don't see a different programming model for them individually. You don't see a different performance model. You don't see a different security model.

The data server services, those are evolving very rapidly. This XML work that we'll incorporate into OLE dB, I'm very enthused about that. The idea here is to give you a programming layer with ADO, and a data server connection level with OLE dB itself that connect up to all the different data sources.

Electronic mail is a good example. It's organized hierarchically. But we need to bring the electronic mail systems and database systems together. There are applications that do collaboration that need to talk to both of those. And, instead of forcing the mail store to do everything, a common API for the applications gives you a way of storing things the way you want to, and yet bringing together a user interface that pulls in information from both areas.

COM has been evolving in a upwards compatible way. COM, we've been at this over five years now. There's a thriving industry of people who offer these components. The transaction server was a great step in this. But COM+ brings it all together, and that's really the model that we're promoting to people today, and that you'll see as a continuing evolution.

Let's go ahead and take a look at some of these capabilities that come to applications that use COM+. So, I'll ask Todd to come back out and give us a look at that. (Todd Nielsen makes presentation.)

MR. GATES: Super. Thanks, Todd. (Applause.) There's an exciting future ahead. The role of software, the ability to really surprise people by using software advances to build in simplicity; the ability to surprise the world by showing them how scalable the PC model is going to become, going far beyond what even the expensive systems have been able to do in the past; the ability to surprise people by creating new natural interfaces, like speech and handwriting, that will make the PC far more pervasive. All of these things are ahead of us, but they build on the Windows foundation, and the really incredible level of R&D that not only Microsoft but the industry to put together.

So Windows today is the strongest Internet platform, ubiquitous, and a distributed application platform. And looking forward our commitment is to make sure that simplicity is there, and to take your feedback to make it even better, taking advantage of the new communications and the new form factors. So there's a lot of opportunities for all of us, and it's a very exciting time. Thank you. (Applause and end of presentation.)