Who: Charles DiBona, General Manager, Server and Tools

When: Monday, November 7, 2011

Where: CLSA Asia USA Forum, San Francisco, CA

ED MAGUIRE: Good morning, everyone. I'm Ed Maguire, Software Analyst from CLSA, and this morning we welcome Charlie DiBona, who is the General Manager of Strategy and M&A for Microsoft’s Server and Tools Division. Charlie will be giving us a quick overview of a few broad topics, and we'll go into a very wide-ranging Q&A after that. So, don't be shy. But we want to thank Charlie and Todd Setcavage for joining us this morning.

CHARLES DIBONA: Thank you. I'm going to go up to the podium, I guess. I want to give a quick update on the position of where Server and Tools is, and where we are in the cloud, because I assume that's most of what we're going to talk about - innovation and the cloud, and how Server and Tools, and Microsoft more broadly, play into that. Obviously, my particular bent is toward Server and Tools, but the story is much more comprehensive for all of Microsoft with Office 365 and with some of the stuff that's happening in Online Services. But what Server and Tools does is provide the infrastructure for data centers, and for the cloud. We provide Windows Server. We provide SQL Server. We also are the department into which Azure falls, which is really the public cloud infrastructure that we're offering.

Safe harbor statement I won't go through it, but just understand that there are risks and uncertainties to which these statements are subject.

So, key points of interest from Server and Tools' perspective, and I think it's important to remember these in the broader context of innovation in the cloud, is that our business, which is overwhelmingly still a traditional server business, but with elements of the cloud, is growing and increasingly profitable, and has been for several years. IT is, in our mind, one of the hidden gems in Microsoft that's often overlooked, but it's been a double-digit grower for years now, and has continued to grow even through the downturn, though obviously at a slower rate, somewhat insulated in terms of our business model from some of the bigger vicissitudes in the server market.

In terms of as we go forward, we have unique assets that are really pervasive across all of enterprise IT, both on premise, on physical hardware, in a virtualized data center environment, and in a public cloud environment, that are unique - unique in their breadth and their depth to Microsoft, and which give us very strong competitive positioning as we move into a hybrid world where all of these idioms are important parts of the enterprise IT infrastructure.

And our vision of what Server and Tools is going to be, and going to evolve to, and what Microsoft as a company is going to evolve to, really leverages those key technological and business models that we've evolved across the spectrum of the way IT is delivered to the enterprise.

So, we'll go through very quickly - Fiscal Year '11, over $17 billion in revenue, stand-alone I forget what number we'd be, but something like the third or fourth independent software vendor, just our division alone. Five-year CAGR of a little over 10 percent. And operating margins have continued to expand. We think of the business of what we deliver really in terms of three pillars of where we're going to compete. One is the private cloud; second is the data platform; and then out into the public cloud is the third pillar. In the private cloud, we have over 75 percent share of new shipments of servers that have Windows Server attached to them. And, System Center attach, which I think is really the important thing to think about in terms of the private cloud, is up over 20 percent year over year. System Center is our management console for managing the private cloud environment, where there is heterogeneity. So, we, as opposed to some of our competitors, are embracing the idea that this is going to be not just a Hyper- V world, not just a Windows world, but a heterogeneous world where multiple formats, multiple platforms are deployed. And our System Center console allows you to manage through one pane of glass that heterogeneity.

The data platform, and this is, at least from my angle, is very hard to read because of the yellow, but can you see this from your angle? It says SQL Server deployment share of nearly 50, so that's deployed SQL Server.

Sorry, I'm near the mike. So, SQL Server is at nearly 50 percent, and premium SKUs and this is, again, I think the important thing premium revenue growth was at over 20 percent last year, and has been robust double digits for some time. The premium SKUs are where we are monetizing not only the growth of data in general, but most importantly, the delivery of information out of that data and through business intelligence offerings.

Now, we don't have a SKU that we say, here is our business intelligence SKU. There's not one product that you can say, Microsoft's business intelligence SKU is all in this. What we are enabling is through common interfaces, like Excel, the end user, the consumer of the data, to self-service the intelligence out of the reams of data that are getting created on the backend as long as they're buying the premium SQL Server SKUs that enable the self-server business intelligence to be front-ended through Excel.

So, that's one of the big drivers for why in my division the premium growth of SQL Server has been so robust because of empowering and enabling the end user, the information worker, access to the reams of data on the backend that have up until now really been captive to the business intelligence profession.

And then, finally, in the public cloud, we have tens of thousands of customers on Azure, and increasingly on Office 365, and hundreds of users added daily. And we think about the public cloud, in my division it's the Azure platform, but there's also public offerings like Office 365, which are a robust part of the story for Microsoft as a whole, and is part of an interconnected public cloud story for our company.

So, if we think about from the infrastructure side how we think of the world, what you've got is, and where we are uniquely positioned, we've got this private cloud infrastructure that's really the way the world is predominantly today. Windows Server, again, the dominant platform. But, increasingly it's a virtualized world in the private data center, where there is Hyper-V Virtualization, VM Ware virtualization, and managed by a console like System Center. Then you have the public cloud world, which has got a lot of buzz around it and where we have an offering in Azure that allows people to build platform-as-a- service oriented applications in the public environment. It's a different architecture, and it's a different way of thinking about how you construct and deploy, and consume your application in the public cloud, where you actually don't own any of the infrastructure underlying it, where we have a competitive advantage is that binding these things together, tying them together with common frameworks for identity, common frameworks for management around System Center, common frameworks for the way you virtualize, and common frameworks for development and deployment of applications. We are uniquely well positioned to tie the public and private cloud together with these common frameworks, in part because of our major competitors, and we have major competitors both in the public cloud and in the private cloud. What we do not have is a major competitor who is both in the public and in the private cloud.

We are the sole large enterprise you can think of that has an offering in both ends of the spectrum, and offerings that allow you to bind these together increasingly. And so if you think about what we have across these offers, what popped here was the offering that we have across these things. We have in the data center, Lync and Exchange, and SQL Server, and SharePoint, Microsoft Dynamics, all deployed on premises or in a virtualized environment in your data center. Meanwhile, in the public cloud we have Office 365 as a SAS-based application. We have Dynamics and, of course, Azure Platform and Windows Intune to manage PCs from the cloud.

Again, these assets are unique to us - the breadth and depth of these assets are unique to us in a position that's competitively, frankly, pole position of thinking about the world as a hybrid world, as opposed to a monoculture that's either in the private cloud, or in the public cloud. And we believe that's the way the world goes, and the world has historically never been a situation where the new technology completely eviscerates the old technology. The world is hybrid. The world continues to be hybrid and the world going forward will be hybrid, and we're uniquely positioned to help customers manage and deal with that complexity and heterogeneity.

So, I'm going to just whip through these really quickly. On the private cloud, Windows Server continues to grow faster than the market for servers and we continue to add customers continue to add our virtualization and management capabilities to their offering. With Windows Server premium and System Center bookings growing at an over 20-percent clip, those are the offerings in which you'll be using our private cloud technologies, as opposed to the on-metal technologies, and some of the other lower-end offerings that we have, lower end SKUs.

On the data platform, we are continuing to grow somewhat with and somewhat above the market rate with the business intelligence components of our offerings growing twice as fast as the market. Again, enabling customers to have access, end users to have access to that data is really what's driving our business. And we're seeing, again, the higher-end SKUs having the fastest growth rate of our offerings, which are the ones that enable these new age technologies.

And then finally on the public cloud. Our approach to winning in the public cloud is really about creating these virtuous cycles, around the self-reinforcing aspects of binding these heterogeneous environments together. Our private cloud offering shares technologies, and will continue to increasingly share technologies, with our public cloud offering, enabling developers to build in both environments and customers to consume from both environments in a more seamless way, and IT departments to manage across those environments in a seamless way.

So, they're self-reinforcing. And then the high-end, the SAS applications, particularly Office 365, as they deploy in the public cloud will continue to drive more flow into Azure, and then Azure will drive more flow into Office 365. It's a virtuous cycle, a self -reinforcing cycle of having that high-end app drive platform and our platform drive that high-end app. And then with that app in the public cloud to drive back into the data center and have that be a self-reinforcing cycle, as well. So, again, if we have a mantra, it's really that we're going to cloud-optimize all of our businesses. And what that means is this - as the cloud evolves, and we think the cloud will increasingly be the new paradigm for new applications, we're going to take some of the goodness of the cloud and we're going to drive it back into the data center, because we're uniquely well-positioned to do that, given our current position in the data center, and our position in the public cloud.

But, we can borrow from the public cloud, drive it back into the data center, and create a much more seamless environment, both for the IT professional who is managing it, for the developer who is building to that, and for the customer who is consuming across this heterogeneous environment of both public and private clouds, this hybrid IT world that we think is where the future is. And we have the offerings evolving in place to enable that, with the SAS offerings and the platform as a service offerings in the public cloud, and in the private cloud with our existing offerings that are on premise and with Hyper-V, and with the server offerings like Lync, Exchange, SQL Server, and SharePoint, and Dynamics to drive the application offering in the private cloud, which will join with the public cloud and create a more seamless consumption environment for our customers.

That was just a quick overview. I'm sorry I raced through that, but I wanted to leave a lot more time for Ed and the questions, and hopefully your questions, as well.

ED MAGUIRE: So, Charlie, you talked a bit about this ability to support a heterogeneous environment. When you go back to Microsoft's vision of a public cloud, of Azure, could you compare and contrast Microsoft's approach to building Azure, SQL Azure, to some of what you consider your pure cloud providers like an Amazon or Salesforce, or Google.

CHARLES DIBONA: Actually I would segment those two, actually, or those three. Look, I think Amazon is really Amazon's offering is about infrastructure as a service and what infrastructure as a service is is essentially to take what you have on premise and deploy it into a cloud environment where you insulate the customer from all of the ownership and management of the hardware and underlying infrastructure. But, it's essentially an on- premise world, an on-premise architecture moved out into the cloud. It's a deployment offering, a deployment option.

What we, and Salesforce and Google have done is really think about what the new architectures look like. What is it that the cloud enables you to do differently in the way you would build applications and think about really leveraging the power of the cloud around scale out architectures and around abilities to provision and such, your applications in a way that is unique to the cloud. So, it does mean that architecturally it's somewhat different than what you would build on-premise. And that is a somewhat higher hurdle to clear. But, it is ultimately a more efficient means of building an application for the cloud.

We are now taking that back and we're building IAS type of componentry with Azure, and thinking about how we deploy things like that. A couple of weeks ago we announced support for Horton Works, which is a Hadoop offering. So, we're branching out from just being Azure, to supporting other frameworks in our offering.

But, fundamentally what we said was the world is going the future is about PAS, platform as a service, not about IAS. And we built something that is a purebred PAS, if you will. And then whereas, Amazon has taken it on the other side of the coin and said, we're going to deploy existing architectures into the cloud. And we just think that in the long run the future will be PAS. And we see Amazon trying to add now PAS componentry on top of what they do. So we think that where we ended up is the right place. And we think we have some advantages in having built something that is really customized for that kind of deployment environment.

ED MAGUIRE: Charlie, one of the things that I think surprised a lot of people initially with Azure was this intent to support different frameworks, different development languages. But, you work with Server and Tools, so the question I have is how you look at developers and your tools, Microsoft has a big tools business, I believe the largest tools business in the software business. What role do you see your tools business playing in terms of furthering your efforts on the cloud and how do these cloud services play into really the next generation of the tools that developers are going rely on?

CHARLES DIBONA: Well, fundamentally our tools business has been a support for our platforms business. Yes, we do monetize the tools business, but fundamentally we are engaged with developers in a way that they support our platforms. And we will continue to be that. And we view developers as an incredibly important constituency for all of our offerings, all of our platforms offerings. They ultimately are where the rubber meets the road. And the reality of the world is that developers have multiple frameworks in which they like to work and we want to support those frameworks, particularly in Azure, and we're going to support them onto our platform offerings. So, we're trying to let the developer make the decision about how they best want to build their application and what we want to do is say, look, if you're going to build your application, regardless of what framework you want to build it in, the best place to deploy that, the best way to run that application, is on Azure, if it's a cloud application.

And take that feeling about any kind of sense of religiousness around a framework out of the equation, because really that's not where the meaningful differentiation is. The meaningful differentiation is in the deployment and operation execution of the application. And we want to be open to whatever the developer chooses to code in.

ED MAGUIRE: And it seems that that theme, that openness extends beyond just development tools, but it extends to the servers, and it extends to the applications with Office 365. As Microsoft has adopted this all-in cloud strategy, I mean, the objective for customers is choice. But, it would seem there are some challenges, technological, organizational, and go to market challenges. Could you discuss, at least from your perspective, at least on the server and tools business, as your trying to cloud enable some of the technologies and align your sales, your partners, and your customers to this new vision, what are the challenges, what are you certainly have some advantages, but could you also talk about some of the other considerations as you make this longer-term transition.

CHARLES DIBONA: That was a pretty open-ended question.

ED MAGUIRE: In three words or less.

CHARLES DIBONA: Yes, three words or less, look, don't misconstrue what I'm saying, I think we feel that our solutions are as good as or better than anything else that's out there. So, we think .NET is a great development environment, and a great framework for developing. And we think the engineers who are doing that are making the right decision. But, we want to be open to them choosing other things. We think Office 365 is the best cloud-based information worker offering out there. We believe that we are offering the best options to people, but we want to be open to them choosing other things, and still fundamentally being part of the Microsoft platform ecosystem.

I guess I'm struggling with what you were driving at with the question. I mean, I think yes, it means that we need to be more open, and I think the Horton Works example is great. I mean, Hadoop is a framework that is clearly not of Microsoft-origin. It came out of Yahoo! originally. So, it is a new framework that is not ours. We're embracing it, because we understand that for a lot of big data solutions that is clearly the way a lot of developers and end-users and customers want to go, at least for that part of what they do.

And there's a realization that we should embrace that, but fundamentally if you want to use Hadoop we think you should be using a Hadoop implementation on Azure, because that's going to be the best way to realize and leverage that investment in Hadoop. That's not to say that we think any less of the data platforms that we have internally, it's just that we realize that the world is not going to be a monoculture.

ED MAGUIRE: Questions.

QUESTION: What role, if any, do you see ARM-based chips playing in the server space over the next three to five years?

CHARLES DIBONA: It's something we're clearly there were announcements last week, and it's something we're looking at. I don't know that anyone has a real, firm answer on that at this point. So, I'd be hesitant to say put a stake in the ground one way or the other. It's something we evaluate on a daily basis, certainly within both the server side and within the cloud-based side, and the management side of the business. Again, to the extent we think it makes sense for us, both for our customers and economic sense for us, it's something we're going to we will look at supporting, but I don't have an answer for I don't think anyone has an answer for how big a part of the server world that's going to be in the near future.

QUESTION: Charlie, could you discuss Microsoft's vision for building this ecosystem around Windows Server and Windows Server Premium, as lays the foundation of the next- gen data center.

CHARLES DIBONA: Yes. What we really think about is how do we think about the consistencies, the sinews, that bind what will be a hybrid world. And there's a lot about what we are doing and learning from Azure, that we feel has a lot of value as we bring it back into the data center. So, we would think about, convergence would be too strong a word, but similarities across what we do with the Windows platform, and what we're learning and doing with Azure.

And that will only make it fundamentally that's to enable us to we would enable that with consistent identity, consistent management, consistent security frameworks, consistent development frameworks spanning across. We think the data center will benefit from the goodness of the cloud. And we're in a unique position to take that learning from the cloud and bring it back to our private cloud offerings. That's what I was trying to drive at, and again, I was rushing so I probably wasn't as articulate about it as I'd like to have been. But, the idea that there are commonalities about what goes on in the public cloud, and what's going on in the private cloud and even in the physical instantiation of the data center, where you can leverage your learnings across that spectrum and tie them together with these consistent sinews around the way you manage and develop and consume those assets.

QUESTION: How about how Microsoft internally is using your cloud assets? I mean, have you been able to use cloud-based tools and use the Azure platform itself? Have you seen that improve your ability to collaborate and drive innovation in a more efficient way?

CHARLES DIBONA: Well, I think where you see our collaboration environment is around things like Lync, around the application. I mean, as a company that is just full of information workers, the way we enable our information workers is the way we collaborate. So, we use Lync, we use those kinds of assets internally all the time. And again, you know, we eat some of our own dog food.

We test it out. And we've learned from doing that, as well. And it's things that we want to bring both to the application side of the suite, and also to the infrastructure side, which we think has all been constructive. The reality of operating a public cloud gives you learnings that you don't get if you're a private cloud deployer saying you want you want to enable public cloud. It's just different. Scale is just completely different.

QUESTION: Was that how, for instance, these investments in Bing, do those impact your ability to enhance your other information tools, like SharePoint?

CHARLES DIBONA: Yes. There's stuff on the ground that the fact that we have the Bing Index and such that's valuable to us as a company, but fundamentally, just the idea that you're operating on that scale, it's a learning thing as much as anything else. There are just things you run into as you run massive public cloud scale that you don't run into if you're running even a very large private data center. So, that kind of learning imbues the whole company.

QUESTION: I'm sure everyone agrees that the cloud is the way to go in the long-term, but have you done any analysis of a company that maybe doesn't use the cloud at all, and you go in and say, if you operate your business on this model, you'll save X percent? Is there any way of determining that, the cost-savings or benefit?

CHARLES DIBONA: Well, yes. There are going to be, our argument will be, it's unlikely that any company who is not a brand-new company starting from scratch is going to wholesale flip the switch and go public cloud. That's probably not the way the world works. There will be instances within a company to say, look, if you take this part, and you move that off to a public cloud, that's something that you could save X. And, yes, you can do those kinds of TCO types of analyses, and in the process of our sales motion, our sales guys do that on a daily basis.

But, again, I think the reality of the world is, it's unlikely you're going to see despite all the hype about the cloud being the be all and end all, and everything is going to the cloud, the reality is, the world, particularly the existing enterprises, are going to move pieces over time, and that the world will be hybrid and heterogeneous with private cloud deployments, physical instances in data centers, and public cloud with parts of what they do in terms of IT. And they will make decisions based on what's not only just on cost, but on what the security regimes look like, what compliance regimes look like, there's a whole litany of things that CTOs and CIOs look at in terms of what do I move off premise, and what do I keep on premise. Again, we think that works to our advantage. If the world is hybrid, we're that's what we play to. And while we believe in Azure as being world-class premier pass off in a public cloud, part of our proposition is, that's not all you get from us. What you get is an ability to think about that being a component of what you do with us as opposed to the whole enchilada; and, because we have world-class on premise capabilities as well, and we can tie those together with a consistent framework around management, and identity, and development.

ED MAGUIRE: I'll ask a broader question, or actually a more specific question about Windows Server. I mean, a lot of people thought that the Windows Server, after 10 years, would be taken over by Linux, but the share of the x86 server market has actually held in quite well, and you're seeing UNIX, except for very high end implementations be impacted much more by Linux.

What would you attribute to the resilience of Windows Server in a market where you faced open source competition?

CHARLES DIBONA: Well, I think fundamentally it boils down to a TCO type of argument. Linux - the software and the deployment are free. The stuff that you have to do to manage your Linux environment is not. What we've done is, you pay for our software, but managing it is we also provide management tools, which simplify those tasks.

So, on a case-by-case basis, Linux or Windows, you really can't think about an average case. It's really going to be a deployment-by-deployment type of scenario. It's one battle at a time, if you will, one fight at a time.

But Windows, despite the cachet about open source being free, and really the good PR around the open source having this great halo effect around it. The fact is that Windows Server is a very viable option in obviously about three-quarters of the deployment situations, right, because that's what people choose. And we don't think our customers are doing that because they're stupid, we think they're doing that because it makes sense to use Windows in those environments. And Windows is a great platform.

But I think it also speaks to what we're talking about - that it's not the only platform out there, and as we go into the next, into the new world, we have to understand that it's not the only choice out there, and we want to embrace our customers as they embrace other choices.

ED MAGUIRE: You guys have a pretty robust portfolio of products. Could you address what you see as really the most promising offerings? I mean, you look at Lync, for instance, you focused a lot on that. SQL Server has been able to show a lot of growth, Intune as well. What do you look at some of the most I know that's very broad.

CHARLES DIBONA: I'm not going to tell you who my prettiest child is. Look, I think the reality is that what's really powerful about our offerings, and we have great offerings across the board, I honestly believe that. But what's really powerful is the collection of the offerings. That there isn't another company out there that has the breadth of offerings, and depth of offerings, private cloud, public cloud, on premise, in the cloud, off premise, it's the confluence of those things, and allowing customers to basically say, here's what I need to do, and then enabling them to do what they want to do, because customers fundamentally don't buy technology. They fundamentally buy an end result. And we provide them a means to get to that end result. And that end result is going to, in many cases, mean that the environment has to be part in the cloud, part on premise. Our ability to enable that entire scenario is where we have an advantage. Look, we think and there's all sorts of positive feedback loops in that. I mean the fact that Office 365 is a great product for cloud- based information worker capabilities, and brings with it Exchange, and SharePoint, and Lync. That then feeds back into reinforcing Azure as a platform for doing incremental stuff that's tied to that. And then that feeds back into my it's a synergy, it's a feedback loop that's positive, but it's not about a single product, and that being the one that drives everything, it's about the ability to get to an end result for our customers, and enabling them to do that in the way in which they would like to do it, and which they're most comfortable doing it, and which makes the most sense for them to do it, whether that's all economics, or partly economics, or partly comfort level, and a whole bunch of other things that fit in.

ED MAGUIRE: I mean, it's really the whole idea of having these reinforcing and complementary products cuts to the core of Microsoft's value proposition, but it's also, in many respects, kind of complex. I mean, as you look at the as people look at Windows, and that's real simple. I can say, okay, well, there's PCs, and maybe there's Apple. As investors look at Microsoft, and look at the whole of Microsoft, what do you think is a challenge, or maybe what's misunderstood about the Microsoft Enterprise Business, which may not get as much of the headline attention that you get from obviously from Windows and

CHARLES DIBONA: I almost feel like I should ask people out here. Look, I think it is partly the complexity of it. The reality is that enterprise infrastructure is not something that's tangible to people. You can see what's on your desktop, or what's on your tablet, and you can count the number of iPads that are in an audience, and make some kind of extrapolation from that. It's all very tangible, very real to basically what we all I was on this side of the fence before. We're information workers, and so what we touch and feel we kind of understand better. Server infrastructure, cloud architectures, this is all pretty abstract, and therefore hard to really get our minds around it in a way that, frankly, is investible.

And it's a shame, because if you look at the business that we have built around Server and Tools, it's a $17 billion business, right, grown from I would say next to nothing over the last decade plus. Margins have continued to expand, and we continue to grow like this. We continue to have a very, very robust on premise server-based business that we are not only just proud of, but we think is a real engine of growth for the company, but it's kind of lost in the shuffle.

And then we have this option value around going into the cloud, and enabling customers with the suite of offerings that Microsoft has in the cloud to really leverage the next generation of computing, and be a big force in that. But, again, it's lost in the shuffle around what's really tangible and visible when you go to the Apple store, or you go to Best Buy, and you look at what's around there.

So, we are a hidden story, and it's partly just because I think it's just hard to visualize it. But, from an economic perspective, we think there's ample room for growth here.

QUESTION: Hi, just wondering, a lot of your competitors, some of your higher profile competitors have been pretty vocal about how aggressive they plan to be in terms of investing in platform as a service, infrastructure as a service, software as a service. How do you manage your P&L to be able to continue to be relevant, as these guys don't have the same profitability concerns that you might have? CHARLES DIBONA: Gee, you mean you're not going to hold them to the same profitability concerns we have? That's your

QUESTION: Not today.

CHARLES DIBONA: Actually, from a strategic point of view, when you see people who have IAS, infrastructure as a serviced, offerings investing to build a platform as a service, I think it just reinforces the fact that we've done the right thing. And that building a platform as a service, and bringing some of that back toward the infrastructure side, is a very strong strategy.

In terms of the economics of the business, we continue to invest appropriately to build our offerings. The reality is that the cloud part of our business is much smaller than the server part of our business. And that's going to continue to be the way it is for the foreseeable future here. We have a huge $17 billion business in Server and Tools. But we understand that we're investing for the next generation of what happens. We're happy that other people are validating the decisions we've made. We think that our strength is that, guess what, we aren't just invested in the cloud, and the world is not going to be just the cloud. I keep saying that here, but I think that really is a huge advantage we have over some of the pure plays, that we can enable customers to get to the end result they want to get even if that means not just being in the cloud.

And, frankly, like I said before, we think of Azure, we think of what we've built as being the best of the group. Azure is the best platform as a service, right? And we think, in and of itself, that's an advantage. We think we're ahead already, and that these people are investing to catch up with where we are. And we're going to continue to invest to stay ahead of them. Then we combine that with our on premise and private cloud offerings, and we think we have a collection of offerings that is uniquely valuable to enterprises, and to consumers of IT.

ED MAGUIRE: How are your cloud offerings, how will they enhance the operating system, the Windows OS, and Windows 8, I saw, there's some integration of cloud services. I mean, how do you see this, what you built in Server and Tools, enhancing the value of your end point franchise?

CHARLES DIBONA: Again, where you talked about why are people not paying attention to Server and Tools, Win Server 8 was also announced at BUILD, and got lost in all the hype, and it was extremely well-received. The developer preview was extremely well received by the development community, admittedly the more technologically oriented developer community.

But, it was a fundamental, and I don't want to get into a feature-by-feature issue, but fundamentally there are learnings that we get from what you need to do to run a massively scaled-up cloud that we feel we can bring back towards the on premise deployments, both in the private cloud environment, and even on the physical servers.

And in a way that those learnings are unique to us, because we have very, very strong competitors across the board in what we do. Where we are unique is that we are competing across an entire hybrid IT landscape, whereas we're competing with guys who are at various points very strong, but don't have the breadth we have, and we think that breadth is actually a unique advantage.

ED MAGUIRE: Okay. Anyone else?

(No response.)

Great. Well, I think that wraps it up.

CHARLES DIBONA: Thank you very much. I appreciate your time.

ED MAGUIRE: Thanks so much.

(Applause.)

END