with new technologies and services such as Office SharePoint Portal Server 2003, Windows SharePoint Services, Office Live Meeting, Office Online, Office OneNote 2003, and Office InfoPath 2003. We are also providing our partners with new tools, through the Office Solution Accelerator program, that enable them and us to jointly bring new productivity solutions to customers. There is an enormous market for further improvements in individual, group and organizational productivity through advances in collaboration, communication, business intelligence, planning, and analysis.



Business Solutions.    We are strongly positioned to provide software solutions tailored for the vast number of underserved small and mid-sized businesses. Our integrated applications enable these companies to accelerate growth and increase profits by more effectively managing their finances, supply chains, customer relationships, and other key business processes. Several years down the road, we envision powerful new capabilities from the development of a common platform for a new generation of business solutions highly integrated with Longhorn.



Online Search, Services, and Advertising.    Our MSN business achieved its first full year of segment profitability in 2004, as advertising revenue increased 43 percent, exceeding $1 billion for the first time. This growth was driven by our MSN.com network’s success in attracting visitors by offering rich information and communication services—including news, sports, entertainment, search, MSN Messenger, and MSN Hotmail. We are investing in many new MSN services, including breakthrough search, communication, and music technologies that we believe will deliver superior customer benefits and provide us with significant revenue opportunities.



Smart Mobile Devices.    The market for devices that combine a wireless phone with a handheld PC is expected to grow significantly over the next several years. We are vigorously pursuing this opportunity with strategic investments, to ensure that our mobile offerings provide the greatest benefit to consumers and device manufacturers. Our Windows Mobile software is the basis for new Portable Media Center devices from leading consumer electronics companies.



Entertainment.    In the huge videogame industry, Xbox continues to show strong momentum, with 15.5 million consoles shipped since launch and more than 425 games published for it. Xbox now ranks second in units sold in the North American and European markets, and is gaining on the market leader. Xbox Live, our interactive service with more than one million subscribers in 24 countries, has revolutionized the online gaming business. Looking ahead, we see myriad opportunities to create other entertaining digital experiences via platforms such as Xbox, Windows XP Media Center, and Microsoft TV, a product family that supports a range of digital video services including interactive programming guides, digital video recording, high-definition TV, and on-demand programming.



Operational Excellence and Citizenship



As we innovate in technology, we are equally focused on crisp execution. In particular, we are working to deliver an