portion of the company’s revenue growth over the next five years will come from Microsoft’s .NET architecture, which holds enormous potential to connect information, people, systems, and devices in fundamentally new and important ways. Using common industry standards based on XML, a universal language for describing and exchanging data, our goal is to enable seamless sharing of information across many platforms and programming languages, and over the Internet, with XML Web Services.



The potential of Web services is gaining wide support among software developers and leading technology providers. For example, the Web Services Interoperability Organization, formed by Microsoft and other industry leaders in early 2002 to provide guidance and best practices for developing XML Web services, now has more than 120 companies as members.



To provide software developers with the tools and infrastructure for building and deploying XML Web services and other .NET-connected solutions, we launched Visual Studio .NET and the .NET Framework in February 2002. In fiscal 2003 we plan to launch Windows .NET Servers, which will provide the most compelling platform for developing and hosting Web services and business solutions.



Companies that are helping to test the promising beta version of Windows .NET Servers foresee many benefits. JetBlue Airways, for example, plans to use it as the platform for a new reservations system and to secure access to its computers and facilities with fingerprint biometrics embedded in smart cards. The young airline has achieved a “paperless cockpit” by providing pilots with electronic versions of flight manuals that are automatically updated with an application that JetBlue developers wrote using Microsoft Visual Studio .NET. JetBlue credits Microsoft technology with helping it to limit spending on information technology to about 1.5 percent of revenues, in an industry where the average is about 5 percent.



DELIGHTING CONSUMERS



Our strategic investments in new consumer businesses brought gratifying results this past year, with more to come in 2003. In the eight months after our Xbox video game system launched in November 2001, 3.9 million consoles and 20 million Xbox games were sold. MSN, already the most popular portal destination on the Web, is now also the leading provider of broadband Internet access.



Microsoft and more than a dozen leading electronics manufacturers have developed a new line of flat-panel, cordless displays that enable consumers to extend their Windows XP experience to anywhere in the house. These Smart Displays will start appearing in stores in time for the 2002 holiday shopping season, as will PCs running our new Windows XP Media Center Edition, providing remote-control access to digital music, movies, and a built-in personal video recorder. 



INVESTING IN THE FUTURE



We are focused on long-term success for Microsoft as a business, for our 50,000 employees, our shareholders, our industry, our customers, and the communities where we do business. Looking to the future, a few developments are noteworthy.



Antitrust Lawsuit

In November 2001, Microsoft and the Department of Justice announced