#1Microsoft Accelerating Growth Microsoft's strategic rationale for deal announced with Nokia on September 3, 2013#22 This presentation contains forward-looking statements, which are any predictions, projections or other statements about future events based on current expectations and assumptions that are subject to risks and uncertainties. The potential risks and uncertainties include, among others, that the expected financial and other benefits from the Nokia transaction may not be realized, including because of: our inability to close the transaction, or Nokia's inability to repay the financing should it take down the financing and the transaction doesn't close; the response to the acquisition by the customers, employees, and strategic and business partners of the Nokia's Devices & Services business; the extent to which we achieve anticipated operating efficiencies and cost savings, and anticipated smart device and mobile phone market share targets; the overall growth rates for the smart device and mobile phone markets; ongoing downward pressure on prices for mobile devices; unanticipated restructuring expenses; any restrictions or limitations imposed by regulatory authorities; the impact of Microsoft management and organizational changes resulting from acquisition of Nokia's Devices & Services business; the ability to retain key Nokia personnel; our effectiveness in integrating the Nokia Devices & Services business with Microsoft's businesses; the response of existing Microsoft smart devices original equipment manufacturers; risks related to the Nokia Devices & Services international operations; and our ability to realize our broader strategic and operating objectives. Actual results could materially differ because of the factors discussed above, in the comments made during this conference call, and in the risk factors section of our Form 10-K, Form 10-Qs, and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.#33 Today's Speakers (on the phone) Steve Ballmer CEO Microsoft Corporation Stephen Elop EVP, Devices & Services Nokia Corporation Amy Hood EVP & CFO Microsoft Corporation Brad Smith EVP & General Counsel Microsoft Corporation Terry Myerson EVP, Operating Systems Microsoft Corporation Chris Suh GM, Investor Relations Microsoft Corporation#44 The Deal Microsoft NOKIA Microsoft acquires Nokia's phone business Microsoft acquires Nokia's Qualcomm, other key IP licenses Microsoft licenses Nokia's patents for use across all Microsoft products Microsoft licenses ability to use Nokia HERE broadly in its products Nokia retains NSN, HERE, its CTO Office, and its patent portfolio Nokia and Microsoft cement original partnership with this deal before 2014 recommitment date#5LO 5 Nokia: More Than 200M Beautiful Phones A Year#66 Strategic Rationale Microsoft NOKIA Accelerate Phone Share Strengthen Overall Opportunity Smart Acquisition Strong Execution Plan#77 Accelerate Phone Share#88 Microsoft and Nokia Partnership 1 Lumia 520 Lumia 822 February 2011 Strategic partnership signed Nokia exclusive to Windows Phone Microsoft commits to HERE Lumia 925 November 2011 Lumia 800 ships First Nokia Windows Phone Lumia 1020 Lumia 920 November 2012 April 2013 Windows Phone 8 launch Lumia 520 ships Lumia 820 Entry level price point Lumia 620 July 2013 Lumia 1020 ships Best camera phone in the world Accelerate Phone Share#99 Nokia and Windows Phone Momentum ▪ >10% share in 9 markets Outselling Blackberry in 34 markets 78% YOY growth Units (M) 8 7 6 2 1 Nokia Windows Phone Shipments by Calendar Quarter 2012, Q3 2012, Q4 2013, Q1 2013, Q2 Accelerate Phone Share#1010 One Brand, United Voice Clarity helps make the market for all Windows Phones Microsoft Windows Phone. Nothing else comes close. Microsoft (O f CHN Accelerate Phone Share#1111 Accelerating Innovation 10:59 Next billion people online Imaging NOKIA Information capture Connectivity Personal assistant Interactive entertainment Meetings New form factors Accelerate Phone Share#1212 Strengthen Overall Opportunity#1313 Transformation: Beyond Software and PCs A family of devices with integrated services that best empowers people and businesses for the activities they value most Greater smartphone success strengthens Microsoft and our OEMs High value services including geospatial are key Start e NEFFOR S 20 Strengthen Overall Opportunity#1414 High Value Services Including Geospatial Office, Skype, Xbox Live, SkyDrive, Bing at Microsoft Geospatial and mapping essential to integrate for mobile Need an effective alternative to Google; more than one "digital map of the world" ▪ Nokia can maximize HERE use by others ▪ Microsoft gets flexibility to integrate HERE with other experiences A new, simpler, and more effective partnership for the future - Microsoft acquires rights equivalent to ownership for the HERE mapping apps • Nokia will continue to improve these apps for other platforms For mapping data and services, under a new four-year agreement: Nokia will provide Microsoft with mapping data services in exchange for annual payments Microsoft can combine Nokia mapping data with data from other sources ▪ Microsoft can syndicate Nokia's data to customers using Windows Azure for additional fees. Strengthen Overall Opportunity#1515 Devices and Services: Why Phones? ▪ Devices help services and services help devices With the consumerization of IT, users matter at both home and work ▪ Devices and high volume/value services are ways to build a large user base Microsoft and phones High value experiences light up on great devices ▪ Device innovation gives Microsoft economic opportunity ▪ We will continue to support iPhone and Android/Galaxy phones with our services ▪ But we cannot risk having Google or Apple foreclose app innovation, integration, distribution, or economics - We need a first-rate Microsoft phone experience for users ▪ Windows: 300M+ devices a year - Success in phones is important to success in tablets ▪ Success in tablets will help PCs . We will take additional steps to promote the app ecosystem for Windows Strengthen Overall Opportunity#1616 Devices and Services: Why Phone Hardware? Driving Ongoing OEM Opportunity Windows Phone has achieved #3 position in smartphones globally Acquisition protects Windows Phone future High concentration with Nokia First party hardware ensures Windows Phone presence OEM model alone expensive in this market position Acquisition reduces friction moving forward Pace of innovation Marketing efficiency Acquisition grows OEM opportunity - Address diversity of markets - Continue existing partnerships » Microsoft success creates expanded OEM opportunity Strengthen Overall Opportunity#1717 Devices: Nokia D&S Brings Key Capabilities Device design and engineering Mature operational processes and systems Device distribution and sales Operator sales and support Globally scaled supply chain Windows Phone Strengthen Overall Opportunity#1818 Smart Acquisition#1919 Smart Acquisition Deal Overview €3.79 billion for Nokia's Devices and Services business including key patents €1.65 billion for a broad intellectual property license Uses offshore cash; no impact on ability to return capital to shareholders. IP and patent agreements have material value Mobile phone business provides entry into key growth markets Improved unit economics Long term value creation Smart Acquisition#20Better Unit Economics Drive Profitability Improved unit economics by owning gross margin dollars and synergies 20 Current Partnership - Windows Phone royalty gross margin (<$10 per unit) Platform payment support • Marketing investment Acquisition - Smart Device gross margin (> $40 per unit) - Integrated hardware R&D and design *Focused marketing investment Fueling investment in innovation and marketing. Driving further unit growth and market share Operating income breakeven when Smart Device units exceed ~50M Smart Acquisition#21Accretive to Adjusted EPS by FY15 Expected EPS Impact $0.10 21 $0.05 $0.00 ($0.05) ($0.10) ($0.15) ($0.08) ($0.12) $0.00 ($0.06) $0.04 $0.08 GAAP Non-GAAP* FY14E FY15E FY16E * Excludes acquisition-related amortization and integration expenses The transaction is expected to be accretive to FY15 Non-GAAP EPS* Expected to be accretive to both GAAP and Non-GAAP EPS in FY16 Annual cost synergies of $600M within 18 months after close Smart Acquisition#2222 Long Term Value Creation Outsized financial opportunity fueled by growth in smartphone business Smartphone Revenue Opportunity 2018E Worldwide Smartphone Shipments Assumed Market Share Annual Revenue Assumed Operating Margin Annual Operating Income NPV NPV 5% $2.3 billion $15 billion 1.7 billion 15% ~$45 billion 10% $4.5 billion $30 billion Smart Acquisition#2323 IP Acquisition and License Agreements with Nokia - Intellectual property is an important element of the smart devices business - Unless managed proactively, patent issues can create uncertainty for smartphone shipments • Unless managed creatively, patent royalties can add over 10 percent to the costs of a smartphone Bill of Materials. ▪ Microsoft is acquiring over 8,500 design patents, ownership of the Lumia & Asha brands, and a ten-year license to use the Nokia brand on feature phones • Microsoft is paying €1.65 billion for a fully paid-up license to Nokia's utility patents • Covers all of Nokia's patents and applications as of the closing date (except NSN) . The total license price includes an option to convert coverage from a ten-year to a perpetual license The agreement provides for a broad, five-year, two-way standstill, including NSN Nokia's patent portfolio is one of the most valuable in the tech sector • Nokia's portfolio has approximately 30,000 utility patents and patent applications; we consider it to be one of the two most valuable portfolios relevant to wireless connectivity ▪ The license also provides significant value for Microsoft's existing businesses, replacing after 2014 Microsoft's existing annual license payment to Nokia Smart Acquisition#2424 Microsoft Also Secures Other Valuable Patent Benefits ▪ Nokia is assigning to Microsoft benefits under more than 60 patent licenses with third parties • Nokia is assigning its existing license with Qualcomm, which is the other company that ranks with Nokia at the top in having a valuable wireless patent portfolio • Nokia is also conveying rights under its agreements with IBM, Motorola Mobility, and Motorola Solutions . These give Microsoft the benefit of attractive royalty arrangements Nokia negotiated ▪ Microsoft will combine the new Nokia license and these assignments with its existing patent agreements • Microsoft's agreement with Samsung will provide coverage for these additional devices without added payments Microsoft will also benefit from its prior or continuing agreements with Apple, LG, Nortel, Kodak, and others at no additional cost ■ Put all together, Microsoft will have the most cost-effective patent arrangements for smart devices Smart Acquisition#2525 Strong Execution Plan#2626 Strong Execution Plan Nokia executives on board assuming key roles Device/supply chain consolidation Phone device R&D centered in Finland Marketing/services consolidation Nokia sales team intact Integration executives mobilized Working rhythms intact Stephen Elop EVP Devices Jo Harlow Smart Devices Stefan Pannenbecker Head of Design Juha Putkiranta Operations Timo Toikkanen Mobile Phones Chris Weber Sales & Marketing Strong Execution Plan#2727 Confident About Regulatory Approval We will submit the acquisition for approval in the EU, U.S., China, India, Brazil, Russia, Canada, and other countries We are confident about our prospects for approval by early 2014 The acquired assets are complementary The acquisition will promote competition Integration of hardware and software will help Microsoft offer competitive alternatives to Google and Apple Microsoft will gain proven capability and talent critical to success in devices and services Microsoft remains committed to working with partners in the Windows & Windows Phone ecosystems The acquisition will benefit consumers Will drive down Microsoft's devices and services costs from development through go-to-market and by obtaining cost savings from Nokia's existing IP licenses Provides consumers with more choice and innovation#28Q&A#29Reconciliation of GAAP and non-GAAP Financial Measures Net Income (In millions) Estimated impact of acquisition (GAAP) Estimated for acquisition-related amortization and integration expenses Estimated impact of acquisition (non-GAAP) Earnings per share Estimated impact of acquisition (GAAP) Estimated for acquisition-related amortization and integration expenses Estimated impact of acquisition (non-GAAP) 2014 ($1,005) $309 ($696) 2014 ($0.12) $0.04 ($0.08) Twelve Months Ended June 30, 2015 ($541) $548 $7 2015 ($0.06) 2016 $299 Twelve Months Ended June 30, $0.06 $0.00 $410 $709 2016 $0.04 $0.04 $0.08 The non-GAAP measures adjust for the estimated acquisition-related amortization and integration expenses, and are included as additional clarifying items to aid readers of this presentation in further understanding the Company's estimate for the impact of the Nokia devices and services acquisition in FY14, FY15 and FY16. The non-GAAP financial measures provided should not be considered as a substitute for, or superior to, the estimates prepared in accordance with GAAP.#30Microsoft ©2013 Microsoft Corporation. All rights reserved. Microsoft, Windows, Windows Vista and other product names are or may be registered trademarks and/or trademarks in the US, 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