Also, customers are asking for help to take advantage of technology they've purchased from Microsoft and looking for ways to "get extra value from my existing customers" through business applications such as customer relationship management and business intelligence, and productivity software.

Microsoft in the "macroeconomic storm." As have other Microsoft execs, Holloway said Microsoft is well-positioned to weather the "macroeconomic storm" because of its diversity in terms of customers and markets and its strong financial position.

He also reiterated ways Microsoft is trying to reduce its internal costs, "whether it's how we actually spend money on travel, how we spend money on marketing and certainly trying to be much more effective internally."

On the other hand, the company does not plan to trim spending on research and development, Holloway said.

"We are continuing to invest for the long-term. So we are not changing our strategy at all with regard to how much we're investing in R&D," he said.

Netbooks. "Initially when those devices came out all those devices were either being shipped with no operating system or with Linux and certainly what we've been able to do over the last six, nine months is to get ourselves in a position where we have a fantastic offering on those netbooks.

"And interesting enough the -- if you take the Nordic countries, which is a country which adopts technology pretty quickly. What we've found there says Boost is one of the leading OEMs. They've taken the decision now only to put Windows XP on those devices. Why, because the customer wants Windows. And secondly, the return rates on the devices which were Linux was four times higher than on Windows. So from an OEM perspective it's better to ship with Windows and from a customer perspective better."

He added that it's too early to tell whether netbooks will cannibalize other PC sales or add to sales.

"If you look, there is definitely some level of cannibalization between, call it the traditional low cost PC, and where these netbooks are going," Holloway said.

He also noted that the netbooks are not just selling in emerging markets, but also in mature markets.

Windows 7. Holloway said "there will be a beta early in some stage in Q1 of next calendar." He had no comment on Morgan Stanley analyst Adam Holt's question: "There is a thesis out there, one that we subscribe to, that Windows 7 could be a more commercial release, for example, than Vista?"

Search deal with Yahoo. Asked by Holt why is there a perception that a Yahoo! search deal is so important? Holloway replied, "If you look in, say, the U.S. market and say Japan, Yahoo! has a good percentage share on search. So you could say just like Google and Yahoo! thought they could potentially do a deal which combined those two elements of search. There was a conversation where we thought we could combine our assets with their assets to improve our competitiveness in the marketplace, [inaudible]."