Transcript of News Conference: Microsoft, Palm and Verizon Smartphone Alliance

Participants:
Ed Colligan, CEO, Palm Inc.
Bill Gates, Chairman and Chief Software Architect, Microsoft Corporation
Denny Strigl, CEO, Verizon Wireless
San Francisco, California
September 26, 2005

ANNOUNCER: Ladies and gentlemen, please welcome Palm's Senior Vice President Worldwide Marketing Ken Wirt. (Applause.)

KEN WIRT: Good morning, ladies and gentlemen. And welcome to the joint Palm-Microsoft-Verizon Wireless press conference this morning, and also welcome to everyone on the Webcast. I'm Ken Wirt, Senior Vice President Worldwide Marketing for Palm. We appreciate you being here this morning and witnessing what we think is mobile computing history in the making.

We're bringing together three leaders that we think will have some great news for both businesses and mobile professionals. So, before I bring out the featured speakers, I would just like to share with you the agenda. They will come out, they'll make some opening remarks. We'll show you some cool demos. We'll show you the progress that we've been making for all three companies. And then we'll have Q&A, and we'll end promptly at 10 a.m. So, for the photographers, I would like to ask you to limit your flash photography to just the beginning, and then switch to available light.

Without further ado, I would like to introduce three gentlemen who will be announcing our news this morning. First up is Ed Colligan, President and CEO of Palm. Welcome, Ed. (Applause.) Next, Bill Gates, Chairman and Chief Software Architect for Microsoft. (Applause.) And Denny Strigl, President and CEO of Verizon Wireless. (Applause.) Take it away, Ed.

ED COLLIGAN: Thanks, Ken.

Wow, we're really thrilled to be here. And thanks to everybody for showing out. I'm extremely honored to be on this stage, not only with these two great companies, Microsoft and Verizon, but also these two great leaders of our industry, and pioneers in our industry. It's a great pleasure to have this opportunity today.

Today, we're announcing, our three companies are announcing today that we're bringing together the best of the Palm computing experience to the Windows Mobile platform, and we're doing a new Treo Smartphone that will launch exclusively on the Verizon Wireless network. So, we're very excited about that. (Applause.) We'll have an opportunity to get into some great demos, and show you some of this later today.

Wow, it felt great to say that out loud. I don't have to use any code names, and nothing like that, and we've been working on this for a number of years, and keeping it under wraps has been tough. This is a very exciting day for Palm, obviously, and from my perspective an historic day for the industry. The three of us are very committed to continuing to bring mobile computing to the world over. I think you'll agree that we have the marketing firepower between us to really make a difference, to really bring these types of solutions to the market.

This is about expanding the family of Treos. So we have Treos in the market today, obviously, it's a product that has captured the imagination of a lot of users, and the idea behind this product is really to extend that, to enable people to capture and share information, to communicate with their friends, and family, and colleagues wherever they are. And so that's what this is all about today.

There's been a lot of speculation about this relationship. In fact, it's probably the worst-kept secret right now in the world, but because we've been working on this for a number of years, clearly there is the case that Microsoft and us in the past have obviously competed sometimes rather vigorously in the marketplace, but the fact of the matter is that things have changed. One, we're no longer in the underlying operating system business, and so that freed us to partner with others. And the second thing is that our product line has changed quite dramatically from being single hand-helds to being smart phones, and Microsoft's underlying platforms have changed, too. In this business, if you've been around long enough, you know that partners sometimes compete, and competitors sometimes partner. And that is what's happening here. The good thing about this is, throughout this process of developing this product, this has always been a very respectful relationship, and one that's been very productive.

When people had asked me in the press and analyst community when we would do another platform, or whether we'd do another platform, I really always had two standard answers to that question. Only if we could bring fundamental new technology to the marketplace, provide that to our users, or if we could reach a whole new set of customers, never for just technology's sake would we do this. And I'm proud to say that both of those criteria are true today. We will bring fundamental new functionality to our customers. The multimedia experience on this platform versus other platforms in the world is, I think, second to none. And the integration with Exchange Active Sync, enabling more and more companies to do e-mail on this platform around the world, I think, again, is second to none. And, of course, the Windows experience, millions and millions of customers around the world who would love to use that familiar Windows user experience. So, all those things being equal, that was one of the fundamental changes in technology.

And then, in addition, I do believe we will reach new customers. Certainly for Palm, we will reach into many, many more businesses and enterprises who have standardized on Windows technology, and it's a fundamental part of what they're looking for. So, both customers and carrier customers have been asking us for this product, and we tend to try to deliver. We think we're bringing the best of both of our capabilities, the best of that underlying Windows platform, and user experience, with the Palm experience on top of that from an applications situation, and also Verizon Wireless' incredible new EVDO network.

We've worked with Microsoft very hard to deliver this. And one of the things that we struggled with early on has been something that's been a great part of this collaboration is, I really felt very strongly, that the only way for us to feel good about doing this is if we could have an ability to differentiate on top of this platform. And Microsoft has given us that ability to differentiate by delivering a set of tools that enables us to create a very flexible development experience, and we can add some of our user experience expertise on top of this platform, and that was really, really critical. It's the only way we really felt this could work for us, and you're going to see in the demo some of those things that we've done.

So, this is really a strategic partnership. This is not about other things going away, it's really about growth. It's about category growth in the industry. We think we're going to take this to another level, to bring these types of solutions to more and more customers around the world. Treo is very successful today. We sold almost half a million of them last quarter to end users around the world. This is going to extend that even further. It's going to take us to a new level of growth by bringing new capabilities and reaching new customers, and that's really important to us. So, it's been an incredible collaboration effort. I can't thank these guys enough for the team spirit and the energy that's gone into this. It's been a couple of years of working through this and making it happen, and Bill's team throughout, and Microsoft has always worked with us on the most professional level, and really focused on creating the best products we can for our customers, and so I want to thank you for that commitment.

And, of course, Verizon Wireless has been an equal partner, in fact, have driven us to do this product. They're the first ones that came to us and said, hey, you know, if we could have a Windows, if you could do that Palm experience on Windows Mobile, wouldn't that be a great idea. And we said, sure, yes, it would be a great idea. Let's get them to work this out. And Verizon Wireless has been with us all the way, and really provided a great commitment. And, of course, has built an incredible network, EVDO network that's coming out around the country that Denny will speak about is just second to none. And, Denny, thank you for the commitment there.

This is our first 3G product. It's on an awesome network. I think we've brought the best of all the different technologies together. I've had the privilege, probably uniquely among us, of using it for the last month or so as my really exclusive device. And I've got to say, I love it. It's a great product. It really does bring those three different technologies together in a compelling way.

So, thanks very much. That's my opening comments, and I'll turn it over to Bill.

BILL GATES: Great. It is exciting to be here. This is a day that we've talked about for a long time, and it's finally arrived. We've taken the best work of all three of these companies and created a product that I think will be in incredible demand.

As Ed said, this is a high-growth market. In our view, every professional will have a phone that connects up to their e-mail. They'll have a phone that works super well with Exchange and Outlook and all of Microsoft Office. If you look at the total market today, it's not very well penetrated. This is 130 million Exchange users, of those, maybe 15 million have some type of mobile mail. About a third of that would be RIM, Blackberry type users.

As we move from that low penetration up to getting all of those users, there's a lot of devices to be sold, there's a lot of network capacity to be used to allow people to work in a very seamless way. Of course, we've been in doing software for mobile devices and PDAs for quite some time. In fact, many years of that, we had a very good competition between ourselves, and Palm and others. Palm always did great work, and so we lusted after some of those things that they do well, and wanted to combine them with the things that we did well, and so it's wonderful to see that coming together.

Likewise, Verizon has been a company that we've worked with a lot. In fact, here in the United States, they have more Windows Mobile devices than anyone else, more volume of those devices. There's a lot of good brainstorming about, given the uniqueness of their network, what is it that we can be doing to show that off. And even over the next year, there will be more things where the magic of software unleashes the magic of that network.

The strategy that we've taken here is the brawn or the strengths. For example, if somebody is a Visual Studio developer, it's got the mobile capability built in there. Over 2 and a half million developers, about a quarter of those have actually used this specific mobile capability, so over 600,000. Today that means we've got about 18,000 applications that are out there and generally available. We have a lot of other people developing applications, or doing special corporate applications. So the idea of this platform is very important to us. And, in fact, it's the flexibility of that platform that allowed us to sit down with Palm and say, OK, here is the opportunity to do unique things, not just at the application level, but in the sense of some of the ways the interface works on the device. And you'll be seeing a glimpse of that a little bit later.

People more and more want to work out of multiple locations. They want to have more integration in their communications experience across the boundaries of e-mail, voice mail, instant messaging, telephony, those things that are forcing the user to kind of bridge between those things today software can do a lot better job helping you out, letting you know what the important things that are going on, and the device we've got here is a great example of driving that out to a new level.

Of course, the version of Windows Mobile that we've got here is what we call Windows Mobile 5.0. We're evolving that in lockstep with the things we do in Microsoft Office. So, typically, we'll have releases every year, and those will go along with the way that we see people using their portable machines, their desktop machines in richer ways, in particular with Outlook and Exchange. There's the new capability with Outlook and Exchange to have your so-called push mail that shows up automatically. The people who use this device will be able to connect up to that capability. We announced that in the summer, but it's available to all our customers now before the end of the year.

Certainly, one of the scenarios there is that people will be connecting up to e-mail with large attachments, and that's where the unique capabilities of the EVDO network come in. It's fast, things like browsing, if you used this on previous networks you probably didn't find very practical, are now something that can be very mainstream, and we've certainly done rich software here that we think makes it the best device not only for the electronic mail and other communications, but also for browsing as well.

So, a big day for us. I just got the phone myself this morning, but I will definitely be using it as my phone device, and so I'm thrilled personally about that.

With that, let me turn it over to Denny.

DENNY STRIGL: Thank you very much, Bill and Ed. We are very delighted to be here to join in the introduction of the newest, the latest and greatest Treo, and it's being developed exclusively, as you heard, for our high speed network.

You know, when we first introduced broadband access and it was back in the fall of 2003, we knew that we had a winner, and early technology adopters, I think, as you all know, can be a pretty finicky bunch. But even the early response that we got as we introduced it in San Diego and Washington, D.C., told us that we really had a super product, and customers were hungry for the advantage that fully mobile wireless broadband gave them in terms of productivity and the ability to differentiate their business.

So, since those early days, back to 2003, we've been busy expanding our broadband footprint. Today, Verizon Wireless not only has the most experience in delivering wireless broadband, we actually also have the most broadband networks. Our EVDO broadband market network reaches nearly half of the U.S. population throughout more than 84 major metropolitan areas, and not just downtown business districts, but throughout those entire markets. Our broadband network also includes hundreds of airports large and small, from Hartsfield and O'Hare to the smaller airports like California's Apple Valley, or Zamperini Field, we've got you covered and you can use wireless broadband in so many places across the U.S. And I might add here, it's not just in airports, our networks stay with you when you get into the cab and ride into downtown areas to your hotel, in your hotel, too. And we're not just in isolated hotspot islands, but significant population centers across the U.S. You don't have to walk across the street, take a right, go three blocks to find a broadband connection, and I might add that you really don't have to drink a cup of coffee.

This is a national broadband network, with national service, supported also by national advertising and marketing. That's the breadth of our network, but what about the speed that we provide? Both of the gentlemen next to me here talk at length about the importance of speed, but let me tell you that our broadband service today is lightning fast. This new Windows Mobile-based Treo smart phone will highlight just how fast and also how powerful our network is.

You may have seen that Verizon wireless just announced partnerships with computer makers, to bring laptops to market with embedded EVDO modems built right into them. That's a tremendous move toward expanding the reach of broadband access. Early next year our new Treo, running on the broadband network, was the fastest, most productive way ever for American business people to access information from a PDA with the popular Palm and Windows Mobile experience. We think will be an outstanding product, and we think it will move very quickly in the market.

You'll see what I mean, as both Bill and Ed have pointed out, in just a few minutes with the demo that we have planned. In fact, you will see Palm's hardware, Microsoft's software, and what you can't see, what you won't be able to see happening is the power of airwaves and the broadband network. It's one thing to talk about the speed in technical terms, but seeing is appreciating just how fast the broadband network really is. So we have the speed, we have the experience, and we have the nationwide network and I'd like to talk just a second about the distribution strength that we also have. Verizon Wireless' national distribution network is built on the foundation of 1900 Verizon wireless stores across the country, and we will bring Windows-based Treo smart phones directly to mobile professionals, and to small business customers who are already relying on our professional and tech smart staff.

Our enterprise and our B2B teams will also be able to integrate this gold star product as a centerpiece of our lineup, and with partners that we have added throughout the country that have we'll also bring value added specifics to market segments. We really will round out our distribution. So Ed and Bill, congratulations on developing such an extraordinary product. And I guess by now we're probably already getting inquiries in our stores, and in our B2B sales force. So I can't wait to be able to introduce this product hopefully very early next year.

Thank you very much. (Applause.)

KEN WIRT: All right. So enough talking, let's get a little demo going here. I'm going to introduce Joe Fabris to the stage. He's both a demo god, and also happens to part-time be our enterprise marketing director here.

So, Joe, do you want to join me on stage?

JOE FABRIS: I'm really glad to be here. Thank you, Ed and Bill and Denny for having me join you guys today. The themes I'll be trying to bring forward today will kind of go around the speed of the network that Denny talked about, as well as the innovations that we've been able to bring on the Windows Mobile 5 operating system, again, through the ability to differentiate on top of the products. So this is the Treo, and I'm so pleased, again, to be the first person to show it off publicly without, again, having to use any codenames, or things like that. As you might appreciate, we were doing a lot of to get ready for today. Part of that work, again, was taking all the e-mail and all the Word documents, and the PowerPoint presentations that were floating around, and working through the weekends to get here on time.

One of the nice things is, in the past I might have stayed in the office and done all of that work from the office, or at least from my home office. But, again, I had a daughter running a cross-country race this weekend, so I was at Stanford, I was using my phone, I was keeping up with everybody. And this is just an example, again, of some of the sort of e-mail that we got over the weekend.

So one of the things I'm showing off here, again, is Outlook. Again, if you're an individual, this Outlook can synchronize back to your PC and get your calendar and your contacts. If you're a corporation, though, and you're running Microsoft Exchange 2003, then we will wirelessly download your e-mails, your calendar and your contacts, and that's what we've been doing here, using Exchange Active Sync.

Here's an e-mail that I got from Jimmy, and you'll see that it's got some attachments to it. So you can see, I've got a plethora of attachments. I've got PowerPoint Mobile, I've got Word Mobile, I've got Excel Mobile, so let me just launch this PowerPoint slide so you can get an idea of what Jimmy was talking about. It renders up quite nicely, I can read what it says.

OK. I've got it. I've got the gist of it. Now what I'd like to do is reply back to Jimmy. The traditional way, of course, if I wanted to call Jimmy would be, I'd exit, I'd back out, I'd go into contacts, I'd do a search for Jimmy, I'd find his number, and I'd press the button to launch the phone. But, now I simply just tap on Jimmy's name, and I will get all of his contact information, including his picture, which I've kept inside of my contacts inside of Outlook. So I can call his mobile, I can call his work number, I can send him a text message, I can drop him an e-mail, or I can even instant message him. Whatever it takes, I will get to Jimmy, and Jimmy knows that, and he tries, but can't hide from me.

One of the things that I'll ask about everybody in the audience, too, is how many people have more than one e-mail account? Anybody? Usually in a room like this every hand will go up, the harder question is, who doesn't have more than one. So I'll simply just use the right button to start cycling through my different e-mail accounts, so here's my Hotmail account. And I'll step over here, now I'm going into a text messaging account, MMS, and then the regular SMS.

Now, let me jump back to that MMS for a moment, this is another chance to highlight a couple of things. One is, this is an application that our developers wrote on top of the Windows Mobile 5 operating system, to take advantage of Jimmy's broadband access network. So because we have the speed we can now do things like send multimedia files using SMS infrastructure. So here's a message I got from Denny, and it has a picture of the Golden Gate. We got this yesterday to show that we knew that Denny was here, and everybody was resting easy on that. But, you kind of get the idea, again, we were able to innovate on top of the platform, and then it's an easier way to move large files around on the broadband Verizon network.

Speaking of the broadband Verizon network, let me also now head over and show you another app. This is a third-party application that we'll be launching, and it's a streaming radio player. Now, streaming radio, again, is out there today, but the difference is it may or may not be the experience that you would like to have. I'm getting a connection issue right now, so what I'm going to do instead of showing you the radio here, I'll be around afterwards to show it off in a broader audience, is I'm going to switch back to some of the innovations that we've done to the Windows Mobile 5 operating system, and how we've been able to bring the core Treo elements to the environment.

Now, the key thing that I love about the Treo, and I just got mine recently, just like Bill and Ed's had his a little bit longer, what I love best is it's a Treo. It acts like a Treo, it feels like a Treo, it's a Treo. That means we have the same form factor, we're able to do one-handed navigation. So whether I'm moving between one Treo or the other, it's the same, and that's going to be good for enterprises who are going to be rolling out broad Treo deployments. Some of the things we've always had in the Treo are things like the ability to type or dial by name. So instead of trying to memorize tons of telephone numbers, because I'm maxed out at about 15, I don't know about your guys. I'm sure there's some brain power on the stage that can memorize hundreds of telephone numbers, but it's not me. But, I can remember names, and I can remember faces, so we're using those two key elements to help people dial. One thing I can do is simply start typing a name, and again, it can just be a partial name. I know I met this guy, Bill, and I met him a while ago, and he works for the company Microsoft, and if I simply go through my Bills, and I'll look first and find him there. He's the chairman and chief software architect, I captured his picture, so that jars my memory as well. I can say, yes, that's the guy, and I can simply, again, work through the telephone numbers, and reach him in any method that I've got there. So there's dialing by name.

The other item that you'll notice is down below we have the ability to do a speed dial now with a photograph. So this is our photo speed dial. We've always had speed dial on the Treos, and some of the things that we've always done that we thought were quite clever, and our customers have loved, is the fact that when you have a contact and you put them into a speed dial you can get everyone of their telephone numbers. You don't have to create a special speed dial for their mobile number, for their work number, for their home number, for their car number.

So if I clicked on Denny and just pressed it, it would dial his mobile number right away, but if I press hold, what I'll see is I get all of Denny's telephone numbers. So I can work through his work, his home, his car, I can even send him an SMS. So that capability has always been in the Treo, and now we've brought it forward to the Windows Mobile 5 operating system.

Now, as I work through my gallery, you can see I've got a series of people in my photo ID, but I'm working now over towards Ed. What I'd like to do for Ed is talk a little bit about phone etiquette. Let's say I was demoing to a large studio audience like this, and it was a very important day and I didn't want to any interruption, but it's my CEO, what do I do? The first thing is, I slide the ringer switch off to silence it, which is a Treo feature we're bringing over to Windows. The second, I can choose to ignore, not a good career move, or I can ignore with a text message. So this now gives me the ability to be in a meeting and discreetly step away and say, not now, in a minute. And I'll just send that as an SMS. So what I've been able to do with that is let Ed know that I did get the call. It was important to me, but I was doing something busy, and I'll get back to him right away. So, again, it's a little bit of phone etiquette, and we're using our SMS technology to make that happen.

Now, the last thing I'll show you today before I get yanked off the stage is a patented innovation we've brought to voice mail. You've seen probably like I mentioned you have multiple e-mail systems, I bet you have multiple voice mail systems, too. One for your cell phone, you probably have one for your home, and one for your office, and if you have multiple cell phones. The thing that happens is each one of the voice mail systems, uses a different set of codes to do things like advance, delete, save, file and skip. So if you go down – I've got it set so I press and hold 1 to launch my voice mail on my Treo, we've added these VCR-like buttons that I can now assign each of those codes to, so that I will be able to visually play back my messages. So I can do that from my Treo voice mail, and by the same token I'll go over now to my home voice mail, press and hold to, a typical two set up over there, and now I can assign a three to my home voice mail. I can work this through every voice mail system that I have. So I don't have to spend time trying to memorize my voice mail system, I can simply use that Treo Advantage on my Windows Mobile platform.

That's what I have. They're going to yank me off here in a second. I do want to thank you all, again, I'm glad that we'll be bringing Treo to the broadband network, I'm glad that we'll be bringing Treo to expanding markets into the Windows world and the enterprise world. It's where I live, so I'm looking so forward to it. And with that, I guess I get to turn it back over to Ken, and Ken will close out with questions.

Thank you all very much. (Applause.)

KEN WIRT: Thank you, Joe. We're going to open it up for Q&A in just a second. I'd like to tell you before we start, though, that we won't be releasing any other specifications on the product this morning other than that it has an Intel processor, and an EVDO radio. We also won't be talking about the price, although, because it has an EVDO you could expect it might be slightly higher than the current Treos.

So as we go into the questions, we have some wireless mikes we'll be using. I'd like you to state your name and affiliation before you ask your question.

QUESTION: Availability, you seem somewhat evasive, next year, that could be a year from now? Tell us a little bit about what availability means and what your plans are to bring it to market, so that expectations are appropriate for users who are interested in the platform? Thank you.

DENNY STRIGL: Thanks, Gary. Our plans are early next year, so very early would be the time frame that we're looking for right now.

QUESTION: Microsoft has many other licensees of the Windows Logo. Is Palm of any greater importance to Microsoft than companies, such as Motorola or HPC? And what does Palm bring to Microsoft that other companies have not been able to?

BILL GATES: Certainly Palm is adding value both at the hardware level and at the software level. We've got a sense of some of the key innovations they've done using the platform. I think there will be a lot of Windows Mobile users who want to switch to this device, a lot of hopefully people who have gotten used to the way Palm is done. A big challenge we'll have is to keep the product in stock for the growing market that's out there. We do have a number of partners. Palm is a great partner, as well.

QUESTION: Can you be specific about what happens to the Palm operating system now going forward with the product, and how it will maybe change the relationship.

ED COLLIGAN: The question about the Palm operating system, it's really not a major change to that relationship. As I said in my opening comments, this is about growth, and about taking this whole category to the next level. We really think this operating system brings a whole new set of functionality that the Palm operating system doesn't necessarily have. Certainly, that's something better, and absolutely brings the Windows Mobile experience to customers demanding that. So, we really think Treo has been very successful, it will continue to be successful. This is additive to that success, and we think it will help us reach new markets, new geographies, new carriers, and customers who demand a Windows experience end to end.

QUESTION: Denny, next year Comcast has announced it's going to be rolling out B2BH nationwide, so you'd be able to receive television directly on portable devices. Do you have plans to be able to deliver that same content over your EVDO network, or will Ed have to add yet another radio to his next generation Treo?

DENNY STRIGL: Well, thank you for that question. We have no current plan, but stay tuned.

QUESTION: Can you just clarify, especially from both Bill and Denny, how the push mail and how a wireless sync from the road would work?

BILL GATES: Yes. To be clear, our view is that mobile messaging is just a feature that every Exchange user ought to have available. And the way it works with Exchange, you don't have to set up a separate server, you don't have to buy separate account. You simply have the up-to-date client software in the phone itself, and the up-to-date Exchange Server, and then you get this push e-mail capability. So, it's a very different approach than some others are taking. It's something we think of as fundamental to the phone and to Exchange.

QUESTION: Ed, first of all, there is some model number for this Treo? And, secondly, how long is this period of exclusivity with Verizon Wireless, how long before we see it on other carriers?

ED COLLIGAN: Well, we'll just call it Treo on Windows for now. We haven't announced its specific naming nomenclature. As far as exclusivity, Verizon Wireless is a great partner of ours, and they are going to have a period of exclusivity on this product. We certainly plan to bring it to other networks, to other network technologies over time, but it will be some time into the middle of the next year before that happens.

QUESTION: I have two questions regarding your relationship with HTC now that you have entered the Windows Mobile market, since HTC and Palm are the leading software developers, how will you manage to work with HTC as closely as you have in the past, and still maintain a competitive edge? You'll have to share a lot of information with them. And follow-up on that. And also, how do you view HTC as a partner, and as a competitor at the same time?

ED COLLIGAN: HTC is our partner who helps us manufacture this product and do some engineering design on the hardware side of it, and we plan to continue to work with HTC in a broad range of programs. They're a great partner of ours, we really work well together. And I said earlier in the comments, in this business, lots of times there's cooperation and partnership, or competition and partnership with the same companies. It is a great partnership. We have other partners we work with that do ODM manufacturing for us as well, and so you can expect us to certainly spread the various programs around between various partners that we aren't dependent on any particular partnerships. And I think on this platform in particular, it's going to be incumbent upon us to continue to innovate on top of it. That's one of the reasons why we did this, it's because we did have the ability to differentiate. And I think our Palm experience that we feel very strongly about is something that will allow us to differentiate relative to other products, and this is just the beginning, by the way. The first product, we think there's a lot of running room to continue to add value on top of the platform.

QUESTION: What plans or visions do you have, is this going to be a domestic release of this product and software, and the whole network, or do you have plans to go international, and if so, what are those plans?

KEN WIRT: This is an EVDO CDMA product, it is domestic for release at this stage. There are other EVDO networks around the world, so certainly we'll be talking to those carriers as well. But right now, it is very much focused on Verizon Wireless release here in the United States.

QUESTION: What part remains before you can bring this product to market?

KEN WIRT: I don't know, it's working incredibly well. So, seriously, I am using it day-in and day-out as my core phone. I don't use anything else right now, and I have a pretty busy phone schedule and e-mail demand. We are still in the process of going through various certification efforts down the network. We have to do that to make sure it is rock solid. Verizon Wireless has a very high standard relative to network performance, and we certainly need to do everything we can to meet those standards and make as reliable a product as possible.

DENNY STRIGL: And let me just say, Ed, that we really have this on a fast track, so we'll do everything we can to get this out of the labs as quickly as we can, and as Ed has said, it's worked very well for him. I will be giving this a personal test, I just got one this morning and I can't wait to use it.

QUESTION: This question is for Bill. We see Windows Mobile phone edition running on a lot smaller screens now, with HP and now Palm running on 240x240 pixel displays. How do you see this as conflicting with Windows Mobile for Smartphones running on now larger and larger devices, such as the Motorola Q?

BILL GATES: Well, over time the distinction we've had between PDA type devices with phone capabilities and then dedicated phone devices, really that becomes an artificial distinction. There's just going to be a family of products that have different screen sizes, some of which support the stylus, like this one does. In a sense, this product shows off all our capabilities: It's a great phone and yet all the things that we had that were unique up in the PDA space we've been able to support in here as well. So a lot more flexibility on the screen types and you won't think of it as two product lines, you'll think of it as just one product line, and that's why the term Windows Mobile is really how we're talking about our offering.

QUESTION: I'm curious, obviously as Ed said, the Palm will continue to develop Palm OS devices, but just like you hear from Verizon, the same support will continue at the carrier level to have two Treos, one running Palm OS and the other one running Windows Mobile.

DENNY STRIGL: We will continue to carry both. When this new device becomes available, we will continue to carry the Treo 650.

QUESTION: I wanted to find out, Ed, you said with the marketing firepower between you, that you had some plans. I wonder if you could elaborate on that as far as the level of commitment and how you're planning on combining that together. I've heard some rumors about a very large number from Microsoft going through to promote the push e-mail solution in the marketplace, and I'd like to see how does this tie together.

ED COLLIGAN: I'm not going to get into specific dollar figures or anything, but I can say there's been a great collaborative effort between the marketing groups to sit down and really go through every major element of rolling out a product and from training and customer and store support, all the way up to advertising and brand development around it. The teams have worked extremely well together, there is a great plan that has obviously a significant amount of resources going against it, not only human but capital resources as well, and we do think will make an impact in the marketplace as we come out early next year.

QUESTION: Ed, going forward, should we expect that the enhancements you bring to this device will be moved on to the Palm platform as well or will there be separate tracks taken?

ED COLLIGAN: They're very separate tracks and development teams. We've really tried to keep them focused on what's the best of this platform and how can we leverage that into creating a great experience on this platform. Clearly, there is some crossover. One of our things, dial by name, right, that was something that we've done, we wanted to bring that to this platform, that exists in our other software on the Palm OS.

But really I think they are different in a lot of ways, too, and we want to do everything we can to leverage the strength of this platform. I mentioned the media applications; I think it's really robust on this platform and we can take advantage of that in a much greater way. The Exchange ActiveSync support, you feel like you're in Outlook on this platform and using Outlook and Office docs and making that really seamless and a great out of the box experience, I think those are the kinds of things that we want to make happen here and make the customer feel like, hey, I've just got Outlook in my pocket.

QUESTION: This question is for Ed and/or Bill. Ed, you said you've been working on this for a long time, and I just wanted any insight on how large a technical challenge is it after having so many years working with one platform to move your design and your expertise to another one, the degree to which Palm and Microsoft were sort of active collaborators in coming up with this device?

BILL GATES: The Palm engineering team has been great to work with. As we started the planning for Windows Mobile 5.0, we knew we were working out the business terms and so we could sit down engineer to engineer and say, OK, what flexibility do you need. So they were able to have an impact on exactly how we did this Windows Mobile 5.0 version, and then they went and took advantage of that both in the interface and at the application level. So it's been a great relationship with the engineering team.

ED COLLIGAN: Yeah, I've got to tell you that you would imagine that if you made up all your stories because of the competitive environment previously, that maybe it would be very difficult, but, in fact, I think that probably the most difficult issue of any of them were some of the business terms. The engineers got together immediately and said let's create a great product here, and there was very little NIH kind of behavior there; it was, hey, how can we leverage your strength and how can we work together to make something great. And I've been just, I'll tell you, really floored by how well the teams have worked together.

QUESTION: It's a question for Ed. Do you plan to put this -- do you plan to put out a device that uses GPRS or UMTS with the Windows Mobile operating system, and if so, when do you think that might happen?

ED COLLIGAN: Absolutely, we plan on doing that. It's going to be after the middle of next year.

QUESTION: Obviously -- this is a question for Ed. Obviously you've opened up the Palm devices to multiple operating systems. Now, I'm just wondering if you can talk a little bit about going forward with another operating system, Symbian, Linux -- (laughter).

ED COLLIGAN: No. (Laughter.) No, not that, no, I can't talk about it; no, we don't need another operating system. I mean, really, we feel like the effort here was very much we felt like we could bring some new functionality to the marketplace through this partnership, we also thought we could reach some new customers, we thought a relationship with Microsoft, as we're looking around the world about who could we partner with to help us really take this market to another level, this was a company we thought would really make a difference for us in that. But do not take developing a whole new product on a new platform lightly. It is a major effort and it is something that we just aren't going to willy-nilly go bring up the next operating system now; it's too much effort. We're going to focus on what we've got on the table, and we're going to do a great job on those.

QUESTION: I have a Treo 650 and I really love the device and all the functionality it has, but I do miss some features, I would like at least 1 gigabyte internal memory, I would like a GPS with a moving map display, even though there is one in mar, I would like a high quality 8 megapixel digital camera with a larger lens, and so what are the trends in mobile devices? Do you see some of these features coming soon or what are your plans?

ED COLLIGAN: I was waiting for you to say you want a HDTV 42-inch in it, too. (Laughter.)

QUESTION: I would like it, too.

ED COLLIGAN: Folding out, yeah.

Well, I could get you three of the things you requested very quickly. The high capacity, you know, it has an SD slot in it that today I have a 2-gigabyte card in mine, which you find very quickly it's hard to fill actually with content that you want to see on this. But anyway, it's great, and you'll see the capacity of those cards escalate rapidly. I will be surprised if we don't have 16 gig cards in reasonably short order at reasonable price points.

The camera, obviously that's continuing to progress, although that's a very interesting one. The question is are we ever going to get to a camera performance that you think is great in a package this size, without zooming and larger area for that camera to operate, and is this camera better for quick snapshots, and it needs to get to a critical mass because of course when you capture a very high res camera image, it then has to transmit that over the network or could have to transmit that over the network. So the camera tradeoffs are interesting. Certainly they're going to get higher performance, I think they're going to get thinner and lighter.

I look at this a lot as like a laptop design. You know, I think we've hit the sweet spot to a large extent of a device in your pocket that's small enough as a phone but has enough display and keyboard to really do a lot of robust applications. And now what happens, you know, the displays get a little better, the cameras get a little better, the memory gets a little bigger, the processing gets a little faster, it gets a little thinner, the networks get faster, and really the innovation is around the application, what you can do with it, and that's going to continue to expand pretty rapidly.

QUESTION: This is to all three of you. When will we see a Wi-Fi-enabled or VoIP-enabled phone?

ED COLLIGAN: Wi-Fi, you know, immediately there are Wi-Fi cards that you can put into the expansion slot to enable that. We certainly see Wi-Fi as a technology that is a trend that is unstoppable at this point, and you will see Wi-Fi in future Palm products. The only way to add it to this device is through an expansion slot.

DENNY STRIGL: And as far as other wireless devices are concerned, you will see partnerships with Wi-Fi to fill such things as campus applications.

QUESTION: Can you talk a bit more about the development teams? I know that Palm and Microsoft are now working together. How do you translate that to your respective communities and your growth going forward? Will there be more synergies between the two as you're developing this platform?

ED COLLIGAN: Well, I certainly hope so. Using the product, OK, I feel like one of the core things we wanted to do is have the ability to differentiate. That was a real collaboration effort with Microsoft, and they really stepped up, from my people, in saying, hey, what do you need to do to do this and let's enable this to happen.

But the more I use it, the more I go, wow, there's all these opportunities to continue to develop new and interesting ways of accessing information or sharing information or new applications, new user interface innovations.

And so my experience has been, and the team's experience has been that whenever we've requested those things or we've sat down and tried to work on how we would go about doing that, we've had a very collaborative relationship on the other side, so I expect it to continue.

BILL GATES: Yeah, from Microsoft's side this is a space we've chosen to invest in very heavily. The software intensity of the phone device is just going to go up year after year. So we'll sit down with Palm and talk about Mobile 6.0 and once we've done that we'll sit down and talk about Mobile 7.0. Over time, the ability to take the imaging capability and see that it's barcode or a foreign language that you want translated, the ability to have some level of voice recognition down on the device, it was mentioned the idea of mapping, these mapping services to my device and networks, you're just going to be able to see all the things that are around you and get a great visual interface there.

So I think we'll look back on this not only as a big milestone but the beginning of the joint engineering relationship where we take all these new application frontiers and say to Palm, okay, which one of these do you want to invest in, do you want to do unique things on, both on the hardware and software side, and so there will be a stream of products that will push the state of the art.

ED COLLIGAN: You have to ask your question out loud. Everyone is like SMSing me since they got my number off this. (Laughter.) QUESTION: I'm just curious, obviously definitely some of the improvements that Palm has made on the Windows Mobile side seem to be very exciting. I just would like to understand how these are going to be going forward; are they going to be exclusive to Palm or are you going to integrate across all Windows Mobile devices going forward? I mean, how is that going to work?

ED COLLIGAN: All we're really expecting -- of course, if we did something incredibly innovative in our -- (device sounds) -- let me turn that little switch there. There's a little switch on the top.

BILL GATES: We're very popular today. (Laughter.)

ED COLLIGAN: I've lost my train of thought.

Of course, we want to innovative as much as we can. We feel like we have a lead in our innovations and we need to continue to push those. If we did something that was incredibly unique that we felt we could protect in some way, we would try to. But the reality of the market is that these things, you know, of course, when people see good ideas they want to implement those, I expect some of them to come into the platform at some point. We're going to do the best job we can to continue to drive our innovation as fast as possible.

QUESTION: Ed, just a follow-up or kind of a multi-parter. First of all, just to be clear, you expect this to be meaningful to Palm's revenues when, in the February quarter?

And to what extent do you expect the Windows Treo to either cannibalize or slow down sales of the Palm Treo, Palm OS-based Treo?

And now that you have a Treo that's running Windows Mobile, what's to stop this from becoming a commodity product since you're now just one of many Windows Mobile products?

ED COLLIGAN: Well, that was a lot of questions.

It will be meaningful I think to the revenues in the February quarter.

I do not think -- sure, there is some cannibalization, there are people who'd want to move to this platform, no question about that, but I also think it expands the market, too. I think it gets more people seeing Treos who want to use this type of functionality and that grows both markets. So I don't think it's incredibly cannibalistic, I really believe it's expansive and additive.

And then finally I forget the last question.

ED COLLIGAN: Oh, you know, that's all about our ability to differentiate, and our ability to do some things on the platform that we think are relatively unique, and also designs of our devices and that Palm experience that we hope to bring to this platform. If we can't continue to do that and build differentiation on that, then we deserve to be in a commodity business and that will be the end of that. I mean, it's something we've got to really focus on to do great.

KEN WIRT: OK, last question.

QUESTION: There's been a lot of criticism of the Smart phone devices in general and the quality of the voice conversation that you have with compared to an off-the-shelf Nokia phone. Obviously, that is a factor that slows down the adoption of these devices at both the consumer and the enterprise level. So can you please comment as to what you're doing specifically with this device to improve the voice experience that the user has as far as dropped calls, call quality, things like that?

BILL GATES: Yeah, the first thing I'd say is that if you go back, oh, two and a half years, that was definitely the case; that is, the maturity of the radio stack, the way that the applications integrated into that radio stack, we were coming up a learning curve. As we've moved to Windows Mobile 5.0, we dramatically advanced the state of the art in that, the way we do the stack, the way we do the testing, the way we work with partners in terms of both the hardware and software pieces there. We're very proud across the board with Windows Mobile 5.0 of how it deals with the most basic thing of all, which is telephony. And there's been a lot of testing that goes into this; in fact, there's a very high quality bar by Microsoft, Palm and Verizon to make sure that that's done well before this product gets into the market.

DENNY STRIGL: Let me also say that – and I mean this sincerely, the number of dropped calls and ineffective attempts, if you will, that you get really depends upon the carrier's ability to grow their network. With EVDO we have grown this rapidly over the past couple of years; as Bill has mentioned, as we've perfected the technology in the PDA itself, we've also been building out the network rapidly. And I am convinced that you will see from Verizon Wireless a very high quality, reliable network, and it will be available with this phone.

KEN WIRT: Okay, that will conclude today's press conference. Thank you very much, everyone, for attending. (Applause.)