I wanted to share some additional context and perspective on Steveb’s email, and congratulate the new SVPs and CVPs in the Platforms & Services Division that were announced today.

First, thank you all for your great work in 2007, and for a strong foundation and momentum as we start the new year.

Your efforts are delivering results and I wanted to share some thoughts on key priorities and actions that we are taking going into 2008. We clearly operate in a dynamic, fast-moving marketplace with many great competitors including Apple, Google, and several open source offerings.

In December, we completed our annual strategy review which outlined the strategic priorities across our business as we look to continue our growth and compete in the market. In the Windows business, we have surpassed 100M units of Windows Vista, and Windows Vista SP1 has released to manufacturing. We are seeing an uptick in enterprise licensing, along with great progress on IE 8 and Windows 7 engineering plans.

The online services business has experienced growth in online advertising revenue above the industry average, the Windows Live suite has seen good adoption, MSN is growing depth of usage, and we have signed up many publishers to our advertising platform.

Even with this progress though, there are many areas that we must improve on. Coming out of the strategy review, there are three key areas that are top of mind for me:

Transforming how we connect with consumers
Given our dynamic marketplace, we must transform how we connect with consumers. I can point to several areas where we can do a better job of delivering experiences and creating an emotional connection with the consumer. We have revamped our engineering approach and the team is making progress on key user scenarios across the PC, phone, and Web. As we look to the future, we must reinvent our approach to consumer marketing, the pre-sales experience, the way we work collaboratively with our PC partners, and how we communicate our brand and what it stands for. To do this, we will make changes to bring all consumer audience marketing across PSD into a single organization. This will enable us to align marketing resources, eliminate silos, communicate the end-to-end experiences, and better connect with consumers.

Taking the next step in our integration plan with aQuantive to increase value to advertisers and publishers.
We announced our acquisition of aQuantive in May 2007, and closed on the deal in August, forming the Advertiser & Publisher Solutions Group (APS). Since that time we’ve signed over 60 publishers on our advertising platform, and shown progress on Microsoft’s commitment to online advertising.

Now, we are able to progress naturally from this first phase of the aQuantive integration. For advertisers & publishers, we must develop focused marketing and value propositions, and this is a key mission for the APS team.

Our goal has been to align the Microsoft Digital Advertising Solutions (MDAS) and all publisher business development with the APS organization to better serve our advertiser and publisher customers. In all cases, our advertising platform must scale to serve both first party Microsoft properties such as MSN and Office Live, as well as third parties including Viacom, Facebook, Dow Jones, CNBC, and Digg. Building and operating this ad platform must also include focusing on customer satisfaction through better alignment of our sales and service capabilities.

Enhancing our global focus on consumers, advertisers, and publishers
Today, looking globally, our sales and marketing organizations are not as well aligned by customer segment as needed, particularly as we compete in the consumer segment with companies such as Apple and Google.

Our online advertising sales and marketing capabilities are strong in North America and Western Europe. As emerging markets and Asian markets continue their growth in technology usage, the online ad opportunity in these markets will grow as well. In our field organizations, we recognize a need to align resources across our consumer, advertiser, and publisher sales and marketing organizations, to better connect with consumers, grow our software royalty business, and expand our rapidly growing online advertising capabilities.

PSD Organization Structure

Continuing to build our leadership capacity is essential to drive PSD’s growth and long-term aspirations. As Steveb’s mail outlined, Bill and Satya are being promoted and — working with Brian McAndrews— will take on expanded responsibilities running business strategy, sales, marketing, and engineering for Windows Live, Search, and MSN. These changes are examples of deepening our business and engineering functional leadership across the PSD leadership team.

With these changes, I want to share that Steve Berkowitz will be leaving Microsoft to pursue new opportunities at the end of August 2008. Until then, Steve will support the achievement of the teams’ FY08 commitments, and will consult on the transition to the new PSD organization structure. I want to thank Steve for his passion and professionalism, and all of his contributions to helping us continue to build the Microsoft online services and advertising business.

I also want to thank Mike Sievert for his leadership, passion, and focus on growth in our Windows Client business, and wish him well as he pursues aspirations outside Microsoft.

In support of our opportunity to better connect with consumers, increase value to advertisers and publishers, and enhance our global focus, we are announcing a set of leadership changes that are effective immediately:

Bill Veghte will lead the Online Services & Windows Business Group, with responsibility for all end user business strategy, sales, and marketing across Windows Client, Windows Live, MSN, and Search. I expect Bill and his team to strengthen our focus on a set of actions to transform how we market and connect with consumers. Bill’s organization will continue to include the Software Protection and Commerce teams, the Unlimited Potential group, and have shared responsibility for OEM sales.

Effective immediately, Bill will take on some additional responsibilities/teams for online services, including:

Search marketing (Brad Goldberg’s team)
Windows Live marketing (Brian Hall’s team); and
The Business Intelligence/Customer Intelligence team; the teams responsible for business development and partner management to support our end-user acquisition goals; and the mobile services strategy and marketing team. (Jon Tinter and a core part of his team)
Satya Nadella will lead the Search, Portals, and Advertising Group (SPAG) and will have end to end content programming & engineering responsibility for Live Search, MSN, and our advertising platform. This alignment will enable our vision of reinventing our Search and Portal experiences by driving “Search to Content” and “Content to Search” and also enable the sharing of our data & data mining platform across the portal, search, and advertising teams.

For this move, Joanne Bradford and the MSN organization will move to Satya. In FY08, MSN has had strong growth in page views, unique users, and minutes of usage. We are committed to ensuring continued focus for the team so they can deliver a differentiated experience in the market and grow our audience. The MSN team’s FY08 commitments and priorities will remain in place. By the start of FY09, the MSN organization will move to a functional model. Joanne will work with Satya, Bill Veghte and Brian McAndrews on the priority and org alignment for MSN to continue to thrive in FY 09. To fully align all end-user marketing under Bill, we will move the appropriate MSN product management/marketing capabilities to the Online Services & Windows Business Group as the team sets up for FY09.

Brian McAndrews continues to lead the Advertiser & Publisher Solutions Group (APS). As we implement the next phase of our integration plan, Brian will pick up additional responsibilities for online advertising sales, marketing, support, and all publisher business development, which includes:

· Global Sales and Marketing (Steve Vamos’ team)

· CSO (Anna Collins’ team)

· Microsoft Digital Advertising Solutions Business Team (Bill Shaughnessy’s team); and

· The Audience Solutions Team responsible for business development and partner management to support our third party advertising syndication partners. (Dell Wilkinson and a core part of her team)

Yusuf Mehdi will continue in his role leading key Strategic Partnerships that span multiple aspects of our business. Yusuf will continue to contribute to PSD strategy and his team will work across the division and the company to pull together important partnerships with named partners.

There are no changes to Steven Sinofsky, Jon DeVaan, or Debra Chrapaty’s teams, and their commitments remain the same.

With these changes, the PSD leadership team now includes:

· Steven Sinofsky, Windows & Windows Live Engineering
· Jon DeVaan, Core Operating Systems Division
· Satya Nadella, Search, Portals, and Advertising Group
· Brian Arbogast, Mobile Services
· David Treadwell, Live Platform Services
· Amitabh Srivastava, Cloud Infrastructure Services
· Debra Chrapaty, Global Foundation Services
· Bill Veghte, Online Services & Windows Business Group
· Brian McAndrews, Advertiser & Publisher Solutions Group
· Yusuf Mehdi, Strategic Partnerships
· Steve Berkowitz, Consultative support through organization transition
· Vivek Varma, Communications & PR
· Tami Reller, Finance
· Mary Snapp, Legal & Corporate Affairs
· Kristen Roby, Human Resources

You will hear more from the leaders above on details for their respective organizations. These leaders will work on a thoughtful process between now and FY09 to establish the FY09 plan with details on their teams’ goals. Until then, thanks in advance for your continued focus on FY08 commitments.

Please join me in congratulating Bill, Brian, and Satya on their new responsibilities, and in thanking Steve Berkowitz and Mike Sievert for their contributions to Microsoft.

Regards,
Kevin Johnson l President Microsoft Platforms & Services Division l p. 425-705-XXXX
One Microsoft Way l Redmond l WA l 98052-6399

The Microsoft Memos Sent Out Today By:

* Steve Ballmer Memo
* Kevin Johnson Memo
* Satya Nadella Memo