Financial Analyst Meeting
Q&A
July 29, 2010
BILL KOEFOED: Thank you.
Okay, if you have a question, what I'd like you to do is please raise your hand and someone from
my team will come over with a paddle and a microphone. Emily.
SARAH FRIAR: I was a little worried you were going to swat me with the paddle.
BILL KOEFOED: It depends on your question. (Laughter.)
SARAH FRIAR: Hi -- good point. Sarah Friar from Goldman Sachs. I really appreciate the
format and I like the questions on the board, and I think you have gone a long way to answering
a lot of them. But I know you have been bombarded all day with questions about tablets and the
iPad, and I still don't feel we're hearing a clear articulation of what is Microsoft's strategy to
address that impact. So, is it a third way, a new operating system, that will go to that? Are you
going to support our architectures different? You did the architectural license a few weeks back.
I mean, it feels like right now you're not completely clear, which is why we're not hearing that
message. Or I just want to give you another chance to maybe give a succinct, “Here's our
response.”
STEVE BALLMER: No, that's actually helpful. I would have said I thought we were
completely clear. We're coming full guns. The operating system is called Windows. No -there's -- let me be unambiguous. A new Windows Phone for screen sizes that, let me just say,
are, you know, sort of bigger than three or four inches -- the answer is Windows Phone. We are
in the game. We're all in the game today with Intel architecture machines. We've got
improvements coming from Intel. We're driving forward. We're unambiguous about that. Now,
where we'll go and what's going to matter -- I said also in my remarks that in no way will we
allow hardware to be the impediment. We will embrace what we need to embrace over time in
terms of hardware evolution.
But you say to me are we going to see slate? Yes. What processor are they going to have? They
are going to have an Intel architecture processor at least in any foreseeable future. Are they
going to run Windows? Yeah. Will it be tuned? Yes! And we are going to sell like crazy. We
are going to market like crazy. We have devices that will run more applications, that have as
much content, that have anything you want on the planet. And we have an ecosystem of
developers that know how to write applications for that thing. Believe me, as I think everybody
knows, you can buy two PCs for the price of one iPad -- two netbooks today for the price of one
iPad. So, people are sitting there over-celebrating bomb costs and blah, blah, blah. We and Intel
can get our job done and know how to make money. There's good money for everybody in the
ecosystem to go make. I talked about power. We've got work we have to do with hardware
partners, with Intel. There's certainly some work to be done there. And over time where we go
is where we go. But at least in the timeframe that which anybody does these models, for
example, let's go. Let's go and we'll be in market as soon as we can with new devices, whether
that's, you know, really, really soon or just really pretty soon. I'm going to wait until I have the
device that I want to hand you and tell you to go use, or a collection of devices. I think that
would be the appropriate time to say it is time. But it ain't a long time from now. Pardon my
English.
BILL KOEFOED: We'll do paddle two again. Brent.
BRENT THILL: Hi, Brent Thill with UBS. You protected the balance sheet in the downturn
and significantly improved the cash balance, and there's a lot of questions that we get from
clients around what your strategy is now with the cash back close to 40 billion, the balance of
buyback dividend and acquisitions, which has obviously dropped significantly over the last year.
PETER KLEIN: Yeah. So, -- I can start -- if you have an idea. We'll take that up this fall with
our board, as we always do. I think what I tried to say is we've had a pretty consistent
philosophy of pretty aggressively delivering cash back to shareholders in the form of dividends
and buybacks. And we continued the buybacks pretty much this year. We've actually raised our
dividend every year since we've had a dividend, except for last year during the downturn, and
we will take a look at that and we'll consider all the things that we've always considered when we
talk to our board about capital structure in terms of what's our operating income doing, what's the
environment look like. But I would imagine that our philosophy and our operating principles
will be consistent with what they have been in the past.
STEVE BALLMER: I think our capital structure is a little bit more complicated than we've got
40 billion in cash. Just I'll give you the mind-set of this shareholder. I take a look at our balance
sheet, and when I think about it I would think about three things. We do have cash -- cash is
good - -got that. I know you guys wonder how much we should have with cash -- that's okay.
We have debt. We didn't used to have debt. I'm kind of an old-fashioned guy. I usually take the
debt out of the cash and think about what you really got. Otherwise it's kind of is like a perpetual
motion machine -- you just keep printing one side and doing something on the other. So, I think
about it a little bit netted. And then we have some big , frankly, long-term liabilities, particularly
on the tax side, that show up on the balance sheet, and I think of that as kind of something that is
there for us at some time in the future. So when I think about what we have for buyback, for
dividend, for acquisition, I tend to think about all three of those pieces. We talk about all three
of those pieces with our board. So I just encourage a little richer dialogue than look at the one
number. I encourage you to look at three numbers and certainly listen to what Peter just said.
We've had, I think, a pretty consistent pattern both on dividend and dividend plus buyback. You
know, if you take the -- we had antitrust problems and we didn't return much cash to
shareholders. Then we did when we got through our antitrust issues. I can't say it's been exactly
consistent, but you know 15, 16, 17, 18 billion dollars a year coming back to our owners. Not
bad.
BILL KOEFOED: Who has our next question? Paddle 3.
HEATHER BELLINI: Thanks. Heather Bellini with ISI.
Peter, I appreciate your commentary about the cloud. I was just wondering, you know, as you're
building your base of cloud revenues, as the company is building it, how should we think about
the time period it takes for you to build up the revenue to scale given while you are also
increasing probably your COGS in order to be able to deliver those services to customers. So
how should we think about that time period to get to scale? And, also, how should we think
about the impact on operating margins during that transition period?
PETER KLEIN: Yeah, obviously the time period to scale is going to -- you know, I mentioned
that there's a debate on pace and timing, so it will depend on sort of how fast the adoption is. But
in general I would say I think the transition period will be pretty smooth. We spent a lot of time
thinking, both from a sales and revenue perspective, and a sort of build-out perspective, how do
we smooth out the impact of that. And I think we've got -- we've done some great work on the
sales side for our customers in particular to provide a smooth transition from sort of our existing
business models to the cloud model.
And from a margin perspective in terms of the COGS, I think, number one, we're able to sort of
leverage all the investments we make across the company in datacenter technology, which
provides good scale for us and ability to smooth. And we've done a lot of work to plan out how
we think about datacenter build-out, how we get really smooth about how we just get it right in
front of sort of the demand. So, we've done a much better job in forecasting demand and then
making out build plans on datacenter. So, both from the revenue side, I think we've got some
good licensing plans to make that smoother, and then from the COGS side -- unless there's sort
of just dramatic spikes, which of course I think will cause COGS to go up. I think we can
smooth that out pretty well.
BILL KOEFOED: Great. Who has the next question? Paddle 3 again.
ADAM HOLT: Hi . It's Adam Holt from Morgan Stanley.
You all had done a terrific job on costs over the last really number of quarters in what's been a
difficult selling environment. If we wanted to take a glass-half-full view of demand and say that
the next several years are going to be a lot better, your product cycles do tremendously, you
really execute well so revenue really accelerates -- can we believe that you are going to continue
to hold costs, therefore? You know, they are not either directly tied to revenue or we'll see
revenue upside flow through to the bottom line?
And then, I guess, the second sort of broader question is, and I don't know if this is for Steve or
whoever would like to take a shot at it, but you're now in a number of very large market
opportunities. Have you made the right big bets in terms of costs and markets?
KEVIN TURNER: I'll tell you, from a leveraging standpoint, I like the model we are
continuing to evolve as it relates to selling costs, as it relates to overall OP-EX and how it relates
to revenue. I like the progress we're making. I wouldn't call us a mature company in this
capacity at this point, but clearly there's a rigor, there's a discipline, there's a model, there's
intention behind it, and across the company in all divisions that's become a very important thing
that we're watching. And there are some costs. So, the higher revenue goes up, we will have
some selling costs that are revenue-associated, and clearly we'll have to make sure that those
track accordingly.
But, I believe we've got good rigor, good discipline, and the results are the best indicator for you
in terms of where we've been, and what we've gone through to do that. And I like the model, and
I think we'll continue to evolve the model. And it's been very healthy for us as an organization.
And, clearly, we think it's how to build a better Microsoft at the same time of making sure we're
doing the best job we can to win in the marketplace. And I feel very good about that, where
we're at today, and how we're going to position ourselves long-term.
You all taking a glass half full would be great. So, if you want to do that, I highly recommend it.
I'm glad you brought it up, because I think you should. We have a whole lot to be proud of,
particularly with what we're doing in this cloud space, and where we are today. Not three years
from now, but right now in what we have in market. We're very excited about it.
STEVE BALLMER: I do think you can think of the OP-EX, COGS tends to look more similar
to revenues than not, although we had to build a big PC infrastructure around search independent
of volume, which is interesting, but that runs through COGS. R&D and brand building tend to
look more like what you're trying to do, even if it's not happening this year. Sales expenses are
going to tend to look more like revenue than the rest of the ad costs and the brand building costs,
let me say, and R&D.
In terms of the portfolio, I think we've got plenty of footprint in which to innovate, to make a
difference, and to grow our business. I think we have -- it doesn't mean we are not
experimenting. It doesn't mean we're not going to try some new things. It doesn't mean any of
that. But, in terms of primary places to invest, I like the eight we kept hammering away on the
slide with pretty darned well. And I see a lot of opportunity to drive innovation and drive
revenue. And there's not a one of them where I sit there and say, well, you know, some things
were radically out of whack, we just don't have enough ammunition, we don't have enough
resource to go after the opportunity. There are some where I'm sure we'll scale up. Kevin and I
were talking about the chicken and the egg in terms of enterprise sales. We've got some great
stuff, but sometimes you've got to sell, but that shouldn't have an infinitely long payback, it
should have pretty tight payback. Kevin always believes in that more strongly even than I do.
The stores, the stores don't make money the day they're open, but Kevin is not opening up stores
that can't make money. And so, you know, I'm not giving some long-term outlook on where we
go with OP-EX. That would be nutty. On the other hand, we've got a portfolio, a set of places
that we're investing. And we always have opportunities to also be more efficient, more
economical. We'll look at those. And we'll continue to pound away building kind of
incrementally from where we are investment-wise around those eight businesses.
QUESTION: Hi, Kash Rangan, Merrill Lynch. I wanted to just drill into the unearned revenue
trend in the June quarter, which was actually pretty strong. Both the on-balance sheet unearned
revenues, and the off-balance sheet backlog, both worked out to be quite high. Can you give us
some insight into what's driving that? Is it just a Q4 end of the fiscal year sales rush
phenomenon, or is there something deeper that's happening by way of enterprise renewals, and
increased customer confidence? I don't want to put words in your mouth, but let me just stop
there and get your insight into how sustainable this trend is, because some people seem to think
that it is just a Q4 phenomenon, and it's going to drop off. But I'm just wondering if you think
this is more sustainable to the off-balance sheet and on-balance sheet?
KEVIN TURNER: Look, there are a lot of factors. Economically, from an IT spend
standpoint, it looks much better than it did a year ago. So, just customers are, where are those
things, and where you can create value, customers are looking for those opportunities to be able
to help change and evolve their business. And I think that's -- we're right front and center in that.
So, clearly, the recovery on IT spend is helping us some.
We still see pockets as we look at our geographies, if you take a look at, of course, Portugal,
Ireland, Greece and Spain are very tough, but the rest of the world there is a recovery going on.
Now, it's coming at different paces. That's helpful as well. So, there are some economic
indicators, and some customer indicators that are better.
Our positioning in Q4, which puts the 2010 launch wave on the map with new releases of Office,
new releases of Exchange, new releases of SharePoint, new releases of Visual Studio, some very
important aspects that we had coming out from a product standpoint, and the momentum of
Windows 7, I mean, was a really nice opportunity for us to ride that momentum.
And then you throw on top of the fact that in January, beginning in January, we really got
focused on this idea of leading with the cloud. And we've trained, right now I've got about
13,000 sellers. We've trained almost 11,000 of those on the new cloud services opportunity that
we have. And we deeply trained them to the point where they had to take an examination and
pass the exam to be able to continue working productively in their role. And so, that's a big
opportunity as you go out is how we're landing those messages.
So, we're much more proactive today with what we have around the cloud, and the ability to get
our existing customer base comfortable, hey, we know you guys have a good cloud story, and
we're going to bet with you, whether they're ready to go with us now or not, it's been a big
enabler of our business.
The second part that's been super helpful to us is the opportunity that we have now to go get
business that we never had before, 70 percent of those cloud deals, I'll remind you, in the fourth
quarter were new business opportunities. They were not on the Exchange workload. And so
what a great opportunity it is for us in that space to be able to go get even more additional
business.
I feel very good. The team performed very well and executed well, and Peter talked about that
some on the call. We felt very good about our execution. The momentum is good. The morale
is good. We had all of our sellers -- not all of our sellers, we had a large part of our sellers
together last week. They feel very good and very confident, because of the strong portfolio that
we've got to bring to customers. And the proof is in the pudding. We've got to execute in Q1.
We'll have to execute again in Q2, and Q3, and so on. But, clearly I like the momentum, because
of what we have to offer our customers right now and how we can help them create value.
BILL KOEFOED: Let's stay with paddle two and move to John.
QUESTION: Thanks. It's John DiFucci from JP Morgan.
Steve, a follow-up for Sarah's question, it has more to do about timing, though. You talked a lot
about hardware, and talked about what's called Oak Trail that will be out after the holidays.
We've heard a lot about Android devices, tablets or slates, whatever you want to call them, that
are going to be out in -- by the way, clarify what the difference between those two is for me?
But, it's going to be out some time in the fall. You came to the netbook market not right away.
You didn't rush into it. We all realize you have to measure time to market versus quality, and
customer satisfaction issues, but Android is going to be out in the fall with a bunch of tablets.
You had the iPad out there now. It is somewhat incremental, but it's also somewhat
cannibalistic. You're not dealing with netbooks with a company called Ubuntu. You're dealing
with Apple and Google. So, just how do you think about that, these things get out there soon and
you're going to -- it sounds like you're not going to get out there until later?
STEVE BALLMER: I didn't say anything about when we're getting out there. You can draw
any conclusion you like. We're not waiting for Oak Trail, I'm just highlighting. So, we've got
kind of more coming from our ecosystem, not just our company. We'll come when the time is
right, the goal is, I think I've repeated a few times, that would be as soon as we can, and it's not
going to take a heck of a long time, but when we can show you some devices that you'd like we'll
talk about that.
Brad did a demonstration on the Hanvon, you haven't heard of Hanvon, but they've got a nice
machine that they're shipping today in China. But, we've got partners who are moving ahead and
will come to market. Now, yes, you'll get an Android this, but who knows, you could get a
Chrome that, who knows. I think that's going to be the most -- bring it. We and our
applications, and our partners, bring it. I relish the competition. Apple's got a little different
allure. I'll let Kevin jump in.
Let me finish off on netbooks and then you can take it up on Apple. Look, we've competed with
a whole lot more in that netbook space. I mean, there was mobile, and there was a whole bunch
of different versions that we went after. One of the things that we learned from that, from our
retail partners, was that when customers bought those things they felt tricked, and they brought
them back, and return rates on those things were much, much higher. Okay.
So, again, where we are with Windows 7 Starter, which runs beautifully on those devices, and
how we continue to compete, where we're going to continue to go in that particular space, again,
there's a lot of activity going on, but we really like the momentum we've got with Windows 7,
and in that space we're not ceding any ground to anyone, including Android.
STEVE BALLMER: On the netbook, nor the slate, if it's two weeks one way or the other, or
it's a month, I mean, let's not speculate, let's merely say when you get your Windows 7 machine,
it will print. Let's just start with that. I mean some people actually like to print every now and
then. Ours will print. I'm not trying to say that other guys aren't doing good work. I'm not
saying that. We've got to -- come on, every day. Every day you come to work you have to prove
yourself, prove yourself, prove yourself. We'll prove ourselves.
I relish the competition. I relish holding up those couple of machines today that I wanted to hand
you. It's not today. I'll relish doing it tomorrow. Bring on -- particularly if with the application
base, with the tools that we have, with the user understanding and momentum and everything
going on, we can't compete with -- particularly whatever the weird collection of Android
machines is going to look like, shame on us.
Apple is Apple. They're always a little tougher to compete with. They're a really good
competitor, and tend to be a really high-priced competitor. People worried a little bit about our
bottom costs. They've got a lot of margin in those devices, which creates a lot of room in which
to operate. Okay. We've competed with Apple before. I talked about that.
We've been competing with Macs, and I notice in this audience you get one profile for the 93
percent of people almost who agree with us every day about laptops. We're going to have things
that should be interesting to them. That doesn't mean it's not going to be exciting. That doesn't
mean you're not going to have to pay attention to shareholders. It certainly means we've got to
pay attention. But, at the end of the day kind of what makes life kind of interesting, kind of fun,
and you're going to see very interesting things.
We've got a lot of OEMs doing designs. You ask, what's a tablet, what's a slate, in a way it
doesn't make sense to even answer this discussion, but the guy who is out there today has got a
machine that takes five minutes to turn into a laptop. We'll have guys who have all kinds of
machines, and that will be good.
KEVIN TURNER: Our goal is not 3 million units a quarter, or even 15 or 20 million, or
whatever high estimate you want to take. That's not our goal. That 400 million, that's the goal.
And that's where we're going to go. And there's going to be some of those units, and we're not
ceding any of those spaces at all. Stay tuned. We're in it. We get it. And clearly we're going to
continue to compete. But, the touch capability -- the fact of the matter is the touch capabilities of
where we are with Windows 7 today, that is the best OS in the market. And that's a whole lot
different platform for us to do different things with our hardware manufacturers than we've ever
had before, at least in recent times. And that's what we're working hard on.
BILL KOEFOED: And let's stay with paddle number two.
QUESTION: Hi, Walter Prichard with Citi.
My question is for Steve on the phone side. So, I think probably when we reconvene here in a
year we won't be where you ultimately would like to be on the phone with market share.
STEVE BALLMER: Probably right.
QUESTION: Well, congratulations if you are, but I guess what I'd like to understand is how
should we judge your progress say when we reconvene in a year on the phone side? What would
be a fair sort of whether it's models shipping or maybe this year but it's not where you want to
be? I'm just trying to get a sense of how we should look at that.
And then I had a follow-up.
STEVE BALLMER: Yeah, I'm sure. I mean, that's up to Koefoed about the follow-up.
I think we've had a downward trend for a period of time here in share. I would hope we'd have
an upward trend, that's important. Reviews, initial customers’ experiences are important. We're
already getting some first looks and reviews and our ability to sort of make whatever we need to
make in the way of adjustments. Our next release will be our next big release, but we'll get
feedback. We're adjusting here during the beta process, but we'll see what we need to do, if
anything, for adjustments.
The actual physical hardware will be part of how people will talk about these things. It won't be
all about, quote, the OS. So, I'd say reviews, some market progress. You're right, we're not
going to have whatever I would dream about as our ultimate share in a year, but I think if you
look and you say did we make a year of progress on Bing? I'd feel pretty good about that,
despite the fact that certainly the financials still have a lot of work to do, and Qi's working hard
on those, but we're investing for the long run while we look at the financials. I think mobile
we're going to go through something that's more similar perhaps than different in terms of market
progress, starting with good reviews to market share uptake, and then accelerating financials
after that.
BILL KOEFOED: Let's go do paddle number two.
QUESTION: I just have another question on the cloud offering. So, if you look at what
Amazon has done, they have very basic services and pretty much welcome any application on
their cloud. If you look at what SalesForce has done, people aren't going to go on their cloud
unless they integrate with SalesForce. How are you thinking in terms of Microsoft -- how broad
are you going to be in terms of accepting people who may not be your applications, your own
apps? Are you thinking of targeting everything in the market, or just ones that tie into products?
STEVE BALLMER: Our value-add isn't either one of the two extremes that you laid out. I
mean, if all you want to do is run things that -- you never want to build new things that are
architected for a new approach to management, if all you want to do is take a virtual machine
and throw it in the datacenter, there will be plenty of good approaches because the truth is it's not
a lot about the software value add. Doesn't mean we won't do some of that, on the other hand -PARTICIPANT: We will.
STEVE BALLMER: -- that's not our primary stream. At the same time, it's not all about
integrating with one application that we built. I mean, if you write to Windows Azure and SQL
Azure, you're writing to a platform where you can integrate with some of our application
experiences if you want to, but you don't have to either. So, I would say we're not just -- sort of
say "throw us all your apps." That's not the starting point for us. We start with -- we've got a
model for new apps, we'll accept today's virtual machines. That's a feature that we're bringing to
Azure here, what, in the next month or two.
PARTICIPANT: Something like that.
PARTICIPANT: That's right.
STEVE BALLMER: So it's neither -- and actually I think we've got the right answer too.
Amazon sells a lot of Windows Server. They pay us every time somebody pops a Windows
Server or SQL Server application and we kind of welcome that revenue. But when it comes time
to really saying, hey, look, there's a better way to build applications for the future -- I mean, if
you look at the chart Peter put up about kind of how you save money, it's not by just taking
today's virtual machines and throwing them up in the cloud. That's necessary, but certainly far
from sufficient.
BILL KOEFOED: Paddle number two, Phil.
PHIL WINSLOW: Hi, guys, Phil Winslow, Credit Suisse. I just have a question back on the
Xbox division. We've seen the margins improve in Entertainment and Devices over the past
couple of years here, but then just this summer you released the Xbox Slim and this fall you have
Kinect coming out, two hardware devices. How should we think about margins this fiscal year
in this business? And then with the Xbox Slim device, does this actually extend the life of the
Xbox 360? And if so, how do you think about margins over the next multiple years there?
Thanks.
PETER KLEIN: I'll take the margin question, maybe somebody can take the platform question.
Yeah, I mean, obviously the economics of that business I think are pretty straightforward, right?
You build an install base of consoles, and then you sell software and services and Xbox Live on
top of that in the marketplace. And you've seen the benefit of that this year.
Now, with sort of the launch of the new console and Kinect, you'll see sort of a flurry of activity
around the hardware side. Obviously, that's a great thing long-term. In the short term, it will
have an impact on margins as hardware versus software and services goes up. But it doesn't
change the long-term model, and in fact, it improves the long-term model because the more you
get a critical mass of your install base, then you sell more Xbox Live memberships, more
software titles -STEVE BALLMER: More titles, yes.
PETER KLEIN: Yeah, exactly. So, ultimately, that makes the margins better, the bigger your
install base and the more services you can attach to that.
I'll take sort of the platform question too. I do think it extends and energizes the Xbox 360
platform. I think both the combination of the new console and the sensor technology will have
legs.
KEVIN TURNER: We outsold Wii for the first time last month that we've done in a very long
time. And the momentum on the new platform is strong, really strong. And Kinect is not even
in market yet, so we have high expectations there.
BILL KOEFOED: Yeah. Let's stay with paddle number two, Katherine?
QUESTION: Thanks. Steve, you've been in the embedded and the phone OS market for a long
time. You're now in the number-four position. Windows Phone 7 is about to arrive. What
happens if it doesn't work? What happens if it's another Windows Vista? Then what do you do?
STEVE BALLMER: It won't be. I want to say, it won't be. I'm not contingency planning. We
have a good product, it's been well executed. There's still a lot to do to land the ship and make
sure that the hardware and software come together. I mean, we're not done. In a lot of ways,
we're not done. But you'll be pleased to know there's no structure called "the contingency plan."
We're all in.
BILL KOEFOED: All right, let's take one final question.
ED MCGUIRE: Hi, Ed McGuire from CLSA. As you move more of your business to cloud
services, this is going to change the nature of your partners' businesses. Could you talk about
what you're doing to ensure that you don't have conflicts and also help them evolve their own
businesses and practices to ensure that they can be profitable as well?
STEVE BALLMER: That's timely. We just had our partner conference two weeks ago where
we brought in close to 9,000 of our partners from a couple hundred countries. And when you
look at what we're doing with our partners, you know, turns out we had a very successful
business model for 35 years where partners could sell licenses and some services around that and
get paid up front whether they were ever deployed or utilized or got the value from it. And
they're hanging on in some cases for dear life for that business model of yesterday.
One of the big calls to action that we had at our partner conference was, okay, look, this cloud
opportunity, you will actually sell more on-premises software because people are -- right now,
it's holding up purchasing decisions because they aren't sure. So, you're going to have to help us
embrace the model. And so by partner type, we came out with profitability models and revenuesharing models and opportunities for them as it relates to how they can embrace cloud services.
Now, we're getting good uptake so far and we feel good about the momentum, but there will, in
fact, be some partners that don't make the shift. And in that instance, we're going to have to
create new partner types and bring new partners into the ecosystem, and we're prepared to do
that. So, it's something we're working through. It's a big unit of work. We had a very successful
Worldwide Partner Conference a couple weeks ago. The momentum is pretty good, it's getting
better each month, but clearly it's got a ways to go to get all 640,000 in our ecosystem embracing
proactively -- not reactively, proactively -- our cloud services, and we're going to keep working
on that. And if we ever run into capacity problems in any way, shape or form with partners,
we're going to open up opportunities for new partners. We told our partners that, we shared that,
very transparently, with them a couple of weeks ago.
BILL KOEFOED: Great. So, thank you, everybody. Before we adjourn here, as I mentioned,
for those of you who completed the survey, by the way, thank you. If you haven't completed the
survey, even though you're not eligible for the prize, if you would do it, we really value your
feedback. But the winners are Jonathan Goldberg from Deutsche Bank, and Chris Emmanuel
from Oppenheimer Funds. We will hold onto these outside, but you've won an Xbox 360, one of
the brand new consoles. Thank you very much for coming.
STEVE BALLMER: It's a sales opportunity to each of you to spend $150 extra to get your own
Kinect.
BILL KOEFOED: That's right. (Laughter.) Thank you, everybody. (Applause.)
END