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Windows 7 Upgrade Option Program

Revenue Recognition

Microsoft CorporationJune 25, 2009

This presentation may contain statements that

are forward looking. These statements are based

on current expectations and assumptions that

are subject to risks and uncertainties which may

cause actual results to differ materially because

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Windows 7 Upgrade Option Program Overview

Qualifying Product Version Upgrade Software VersionWindows Vista Home Premium Windows 7 Home Premium Windows Vista Business Windows 7 Professional Windows Vista Ultimate Windows 7 Ultimate

Small Business & Consumers receive free* Windows 7 licenses with qualifying purchases of Windows VistaObjective: Ensure customer satisfaction and support sales through the release of Window 7Program availability: Qualifying Windows Vista premium sales from June 26, 2009 – January 31, 2010Windows Vista qualifying versions:

*Shipping and handling costs may apply

Windows 7 Upgrade Option Revenue Recognition

Deferral of revenue equal to the pro-rata “fair value” of the products: ~50/50Deferral amount to be reflected in unearned balancesRevenue recognized upon fulfillment or program expirationNo impact on cash flows

Windows 7 Upgrade Option Revenue DeferralDeferral Framework:

Total Windows Vista premium sales

- Units covered by Client Software Assurance

= Sales subject to deferral

x Deferral rate of ~50%

= Windows 7 Upgrade Option deferral

Estimated Q4’09 revenue deferral $200M to $300M

© 2009 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the U.S. and/or other countries. The information herein is for informational purposes only and represents the current view of Microsoft Corporation as of the date of this presentation. Because Microsoft must respond to changing market conditions, it should not be interpreted to be a commitment on the part of Microsoft, and Microsoft cannot guarantee the accuracy of any information provided after the date of this presentation. MICROSOFT MAKES NO WARRANTIES, EXPRESS, IMPLIED OR STATUTORY, AS TO THE INFORMATION IN THIS PRESENTATION.