Bill Gates' CES Keynote Insights

| About: Microsoft Corporation (MSFT)

The underlying theme of Bill Gates' CES keynote was connectivity, or the relatively seamless integration of consumer entertainment technologies. Some highlights include:

Xbox Business:

* 10.4 million Xbox 360 consoles were sold across 37 countries as of December 31, versus the company’s projection of 10 million.

* Attached rates for the Xbox 360 are at 5.3 games/console, versus 4.7 for the Xbox at this juncture.

* 160 high definition games have been developed for the Xbox 360, and the company expects that number to double by the end of calendar 2007.

* 2.7 million copies of Microsoft’s video game, “Gears of War” were sold in the first 8 weeks of its availability.

* Xbox Live now has about 5 million members.


* 80% of the PCs sold during the holiday season included the Media Center Edition of the operating system. So far, about 30 million copies of this product have been sold, with more than 20 million in the last 12 months.

* Zune is on its way to selling 1 million units by the end of the fiscal year.

* Microsoft believes that PC games could offer opportunity to accommodate the estimated 200 million PC gamers.

* There were several demos, including: Vista (which offers impressive graphics capability), Sports Lounge (a live feed of sports info and video), among others.

* Mr. Gates noted that the new user interface of Vista would help users find and use features that Office has always had.

* Microsoft has partnered with Hewlett Packard to develop a Home Server (to be released by HPQ in 2nd half 2007) to connect and automatically backup all the devices of the home. It was emphasized the importance of simplicity when it comes to this product.

* Windows Mobile is “reaching a take-off point.” But analysts continue to question whether this business can move the needle at all even if it does “take off.”