servers and business applications; 

Taking advantage of key market opportunities in the consumer space with emerging businesses such as MSN, devices and games; 

Partnering with developers around the globe to create next-generation XML-based software applications, solutions and experiences; 

Capitalizing on the enormous potential of services delivered over the Internet and across an expanding range of devices. 

Major product developments in Fiscal 2002 will include the launch of Windows XP – the most significant new desktop operating system product since Windows 95, and Xbox, Microsoft’s future-generation videogame system. We will extend and advance the range and abilities of Microsoft’s Windows .NET Server operating systems and .NET Enterprise Server applications, and deploy new solution offerings that help businesses connect with customers, integrate seamlessly with partners, enable employees and extend into new business opportunities. We will see continued adoption of our flagship Office XP suite for knowledge workers, and expansion of our Great Plains® business applications. The developer community is eagerly anticipating the release of Visual Studio® .NET, Microsoft’s rapid application- development tool for building next-generation Web applications and XML Web services. And we will continue to see significant growth in MSN Internet access and network services. 

Microsoft .NET and XML Web Services 

In addition to these major new product launches, Microsoft is laying a solid framework for the future with a projected investment of approximately $5 billion in research and development in fiscal 2002. At the center of our R&D efforts is Microsoft .NET, an innovative effort as significant in the development of computing as the graphical user interface and the introduction of the Internet. .NET is Microsoft’s platform for a new computing model built around XML Web Services. Just as the Web revolutionized how users interact with content, XML is revolutionizing how applications communicate with data and how computers and devices communicate – by providing a universal data format that lets information be easily shared, adapted or transformed. .NET will create new opportunities for Microsoft and for thousands of developers and industry partners by enabling constellations of PCs, servers, smart devices and Internet-based services to collaborate seamlessly. Businesses will be able to integrate their processes, share data and join forces to offer customers much more dynamic, personalized and productive experiences – across the PC and an expanding universe of devices – than are available today. 

In 1995, Microsoft’s primary business and revenue stream was from our desktop products – Windows and Office. In 2002, desktop products will still provide the majority of our revenue, although our server and enterprise business is a rapidly growing contributor to our overall revenues, and MSN, Xbox and other emerging businesses continue to expand our foundation for the future. Over the next five years, as we infuse XML Web Services into all our businesses, we see the opportunities for growth continuing. This transformation is key to expanding our revenue