1 Microsoft strategy in South East Europe Goran Radman Microsoft Corporation Chairman SEE

2 SEE Region 9 countries 1.Albania 2.Bosnia & Herzegovina 3.Bulgaria 4.Croatia 5.Macedonia 6.Moldova 7.Romania 8.Serbia & Montenegro (incl. Kosovo) 9.Slovenia 6 Microsoft Subs –Ljubljana (SLO) – 1995 –Bucharest (ROM) – 1996 –Zagreb (CRO) – 1997 –Sofia (BUL) –Beograd (SMN) – 2002 –Skopje (MKD)

3 Microsoft in SEE  Moldova: /  Romania: 64 (52;12)  Serbia & Montenegro: 35 (14;21)  Slovenia: 64 (39;25)  Albania: /  Bosnia & Herzegovina: /  Bulgaria: 30 (20;10)  Croatia: 63 (37;26)  Macedonia: 6 (4;2) Staff by function:  SEE and Local Management: 8 (8;0)  Sales & Marketing: 140 (84;56)  Services: 66 (53;13)  F&A: 32 (10;22)  SEE Team: 16 (11;5) Microsoft South East Europe region 262 FTE employees Staff by country (FTE;vendors/others) :

4 ICT Market Indicators Key market indicators PC installed base (FY05) (1) PC shipment (FY05) (1) IT spend in US$mio (CY04) (2) Piracy rate (CY04) (3) Albania n/a Bosnia & Herzegovina n/a90% (1) Bulgaria % Croatia % Macedonia n/a80% (1) Moldova n/a Romania % Serbia & Montenegro % (1) Slovenia % Source: (1) Microsoft estimates; (2) IDC, 2005; (3) BSA/IDC, 2005

5 SEE Region in Context, 2004 SEE Region is of the Same Size as the Portuguese Market (US$M) IT Spending Source: IDC WW Black Book, April 2005

6 South East Europe’s IT Industry IT as a % of GDP YE Source: IDC IT Economic Impact Study, 2005

Enduring Low-end Technology SEE Total = $2.7 billion Drive Exceptional Spending Strong Focus on Low-end Hardware PCs and Related Technologies Still with Major Share Hardware Investments Will Remain Strong Reflecting Infrastructure Development and State of Smaller Country Markets Software & Services Categories Illustrates Highest Growth Source: IDC WW Black Book, April 2005

8 Executive Summary Growth in the IT sector is dynamic and will continue on an upward trajectory through 2008 The software market will grow at 13% average compound growth rate between now and 2009 In the next five years, the IT sector will generate over 35,000 new jobs; tax revenues will be $500 million higher in 2009 than 2004 Approximately 47% of all SEE IT employees are engaged in creating, distributing, or servicing software – for external customers or internal corporate users – and just under 55% of all IT tax revenues come from the software-related sector. Over half of 2004 employment and tax revenues stemmed from the vast Microsoft ecosystem. For every dollar of Microsoft revenue in the region another $8.65 were generated by other companies selling hardware or software that works on Microsoft operating systems or servicing that software. Source: IDC IT Economic Impact Study, 2005

9 Corporate Governance Competition and Compliance Contracts, Indemnification and Product Liability Diversity Environment Interoperability Intellectual Property. Child Safety Content Regulation (including games) Computer Crimes (including hacking and viruses) ID Theft and Phishing Privacy Spam Spyware/Adware Value of Proprietary Software Local Software Economy Innovation Jobs and Skills (Digital Inclusion) Economic Growth and Development Microsoft’s Global Citizenship Initiative is focused on mobilizing our resources across the company and around the world, to create opportunities in the communities where we do business, and to fulfill our commitment to serving the public good through innovative technologies and partnerships

10 Multi-stakeholder Partnerships for SEE PrivateSector InternationalCommunity Academia Government

11 SEE E-GOVERNANCE CENTER  e-Government policy and institutional capacity building support through shared expertise, best practices and standards in public services  Support for multilateral exchange of IT skills, competencies and solutions for public administration for public administration  Replicate Tallin (Estonia) EGC to Bled (Slovenia) EGC to Bled (Slovenia) e-Government

12  IT entrepreneurship and innovative SMEs support through local incubators  Incubator as source of new IT ideas, business solutions knowledge base and best practice share-point  BTC Varaždin (Croatia) as a model for the SEE region a model for the SEE region e-Business

13 What is the Local Software Economy (LSE) Initiative? The LSE initiative is designed to help a subsidiary engage with local policymakers, industry leaders and influential's on the topic of building the local software economy. The effort helps field teams shape activities to support the local software economy, how a robust local software economy can create opportunities in the broader economy, and how to message and appropriate position MS activities. What’s the focus of the LSE effort? The effort is focused on building strong local software economies, and helping governments, policymakers and influential's understand how to do so. Microsoft’s commitment to LSE does not promise economic growth or development, but does explain how MS contributes to and supports a robust local software economy. Local Software Economy

14 What: Technology centers offering a comprehensive set of programs and services to foster innovation and grow sustainable local software economies. Why: To connect people and organizations in the innovation ecosystem and give them access to resources, experts and facilities for collaboration and skills development. Who: Students, entrepreneurs, academics, professional software developers, startups, IT professionals, industry organizations and local governments. How: Sixty centers today; 90 centers in 30 nations by the end of Outcome: Local centers around the world foster skills and intellectual capital, industry partnerships and innovation. Business Technology Centres

15 Microsoft Business Technology Center Varaždin, Croatia Objective: Microsoft Business-technology Centre has the task to provide the infrastructure and resources to help ISVs create innovative new products and services, bring those products and services to market, and build well-managed competitive businesses around those innovative products and services. Functions: 1. Learning Centre –1/3 Technology (above CTEC’s) –1/3 Operations –1/3 Business (Sales, MKTG, Export, Outsourcing, EU Funds,...) 2. Testing new applications on “state-of-the-art” hardware 3. “Show Room” for partners and customers USAID – Microsoft joint venture project

16 MIC Bucharest Activity Description –Microsoft Innovation Centre Activity Goal/Objective –Innovation Centre where IT&C companies could come to learn about e-gov solutions and to test their own solutions Success Metrics –In Q3 FY07 MIC should deliver the first training classes, which address Microsoft technologies and e-gov solution and at the end of FY07 at least 5 ISV has to be involved in developing solutions on top of E-gov Deliverables/Milestones –Q1 – Partnership with a hardware provider to establish MIC infrastructure –Q2 – MIC Personnel to be trained on Microsoft and e-gov solution –Q3 – Launch of MIC, first PR events, and delivery of first training –Q4 – consolidate ISV community around MIC Stakeholders –Zsolt Nagy – Minister –Catalin Marinescu – President IGCTI –Ovidiu Artopolescu – GM MS Romania Post-FY07 Funding: –This MIC would be self sustainable in FY08.

© 2004 Microsoft Corporation. All rights reserved. This presentation is for informational purposes only. Microsoft makes no warranties, express or implied, in this summary.