Microsoft to Boost Headcount, R&D Spending

With an eye to the future, Microsoft Chairman and Chief Software Architect Bill Gates Thursday said the company
will add 5,000 employees and ramp up research and development spending by 20 percent in the coming year.

Gates promised the increases during the company’s annual Financial Analyst meeting, and also aid he has high hopes for the
technology sector.

The company, he said, will push its R&D budget to $5.2 billion in fiscal 2003, representing more than 16 percent of net revenues.
One primary element of that spending will be incubation projects within every business unit.

In the short-term, over the course of fiscal 2003, which Gates dubbed the “Now wave,” the company will release Windows .NET Server,
Windows Media 9 Series, Windows XP Media Center Edition, MSN 8, Windows XP Tablet PC Edition, Windows CE for Smart Displays, an
update of Visual Studio .NET, Xbox Live, and new Xbox games.

The next wave of releases, or the “Yukon wave,” will be led by the next major release of Microsoft SQL Server, code-named Yukon,
which Gates said would deliver the unified storage architecture foundation for future products in the Microsoft .NET Enterprise
Server family and the “Longhorn” wave of products.

Longhorn is the code-name for the next major release of Windows, which Gates said “promises the greatest breakthroughs to date for
information workers.” He noted that Longhorn will see applications, operating systems and Web services tightly integrated in how
they store, present and manipulate data.

“As we continue to move into the “Digital Decade,” we’re seeing the boundaries between systems and applications start to dissolve,”
Gates said. “It’s this fluidity that will power incredible, tangible change in how all of us use technology.”