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Steve Ballmer's Memo to Staff

(See accompanying story, "Three-Part Harmony for Microsoft?")

Today, we are announcing the creation of three new business divisions -- Microsoft Platform Products & Services Division, which will be led by Kevin Johnson and Jim Allchin as co-Presidents; Microsoft Business Division to be led by Jeff Raikes as President; and, Microsoft Entertainment & Devices Division, which will be led by Robbie Bach as President. Our goal in making these changes is to enable Microsoft to achieve greater agility in managing the incredible growth ahead and executing our software-based services strategy.

The new Platform Products & Services Division will include Windows Client, Server & Tools and MSN. Our MSN organization has a track record of innovating quickly and delivering software-based services at scale, while the existing platforms groups possess great expertise in creating a software platform and user experience that touches millions of people. Having David Cole and MSN reporting to Kevin Johnson enables us to bring together these businesses, harness our services capabilities and deliver greater value to our customers.

At the same time, Jim Allchin is announcing his plans to retire from Microsoft at the end of calendar year 2006 following the commercial availability of Windows Vista [see Allchin's memo]. This is a personal decision that Jim has spent a great deal of time thinking about and that I know was a difficult one for him to make. Jim and Kevin Johnson, who will succeed Jim, will serve as co-presidents until Jim's retirement next year. I know I speak for the entire Microsoft family when I say how proud we are of Jim's accomplishments here. Jim has had an immeasurable impact on our success. Millions of customers are able to realize their potential everyday thanks to software on which Jim was a key visionary and design architect. Of course, we'll celebrate Jim's great contributions closer to when he actually retires.

We're also announcing that Eric Rudder will be taking on a new role working directly for Bill focusing on some of the company's key advanced development efforts as well as overall technical strategy. Eric has done a great job of driving broad usage of .NET with developers and has led incredible growth and success of the server and tools business. Eric will transition into his new role following the launch of Visual Studio and SQL Server 2005 later this year.

Jeff Raikes will lead the new Microsoft Business Division, which combines the Information Worker business and MBS. Accordingly, Doug Burgum will now report into Jeff. With the new division, we have a unique opportunity to take Office to a new level by more deeply infusing it with the capabilities needed to address core business processes within organizations. And, we will make it easier for Microsoft Dynamics to automate business processes with familiar and easy-to-use programs, servers and services that already touch hundreds of millions of information workers around the world.

Robbie Bach will lead the new Microsoft Entertainment & Devices Division -- which brings together the Home & Entertainment Division with our Mobile & Embedded Devices Division thus consolidating our industry engagement around devices to deliver even richer and more relevant scenarios for individuals at work and at home. It will also bring more focus to our efforts in entertainment and related devices and services. Accordingly, Pieter Knook will report to Robbie. By bringing together all of Microsoft's device-centric products under one roof, we can better focus on serving the digital lifestyle needs of individuals whether at home or in the office.

Additionally, Ray Ozzie will expand his role of chief technical officer by assuming responsibility for driving our software-based services strategy and execution across all three new divisions. Under Ray's technical leadership and weaving together both software and software-based services, I see incredible opportunity to better address the changing needs of our customers' digital lifestyles and the new world of work. Ray will continue to report to Billg.

Kevin, Jim, Robbie and Jeff will be managing businesses in which we are poised for further growth resulting from a strong pipeline of innovative products and technologies. The establishment of these president positions reflects the critical importance I place upon having strong leadership in all three groups and a commitment to ensure we continue to exceed our customers' expectations for years to come.

Given these organizational changes, Bill and I would like to invite you to join us for an employee webcast today at 2:00 p.m. PDT, where we'll discuss these changes in greater detail and answer questions.



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