Gates's Vision For Shareholders

In his annual letter to shareholders, Gates described a PC-Plus world - one that many consumers would probably recognize as Internet-centric. "The PC will undoubtedly remain at the heart of computing at home, work and school, but it will be joined by numerous new intelligent devices and appliances, from handheld computers and auto PCs to Internet-enabled cellular phones," Gates wrote. "More software will be delivered over the Internet, and the boundary between online services and software products will blur."

Gates repeated Microsoft's vision: Empowering people through great software - any time, any place and on any device, but also said that vision was dependent on the successful roll out of broadband services. In that regard, Microsoft said its strategy is to invest in the companies looking to make broadband available and to collaborate on the technology that will bring services across these networks. Microsoft's investments so far include AT&T, Concentric Networks, Nextel Communications, NTL, Rogers Communications, Wink Communications and Wireless Knowledge.

Gates said Microsoft would spend $3.8 billion on research and development next year. That's an increase from $3 billion this year. He also alluded to Microsoft's antitrust battles, saying, "Competition continues to intensify, and regulatory pressures are unlikely to ease." He also nodded to a coming slowdown in PC sales, saying they had so far been "remarkably robust" but that "some slowdown is likely in the coming year."