Yahoo, Microsoft Back At The Table

4. Fix our online branding ? Our brands are fragmented and confusing today, and we recognize a need to clarify and align our online branding . We are now driving forward to address this opportunity.

5. Win in display advertising - We have an advantage in tools, agency assets/relationships and a team laser-focused on capturing the display ad platform opportunity. As we build from a position of strength, we will increase engineering resources to drive even more innovation.

6. Build on our strengths in Europe ? As measured by comScore in March, our online business in Europe is doing well. We have over 3 times the page view volume and nearly 7 times the minutes of usage compared to Yahoo!, and 68% reach to internet users throughout Europe. We will double down on our investments in Europe and expand on this strong position.

7. Expand strategic partnerships ? In addition to our organic innovation agenda, we will expand strategic partnerships that increase inventory on our display ad platform, enable new paradigms in search and accelerate growth in key geographies.

8. Pursue small, targeted acquisitions ? Looking forward, we will focus on small, targeted acquisitions that support our work in search, complement our value in the ad platform and help us grow scale in key geographies. Recent acquisitions including Rapt and YaData are examples of these types of acquisitions.

The PSD leadership team is actively working on the FY09 budget, including resources and investments to support the actions above. Additional elements of our work will be revealed in the coming weeks, leading to our Financial Analyst Meeting in July where I will share more details on our strategy and business/financial outlook.

As we move forward, I want to remind everyone that we are well positioned to compete. We have some of the industry?s best assets on our side: technical and business talent, global scale, a culture of self-criticism and tenaciousness, a healthy balance sheet and an unparalleled product portfolio. It?s time for us to seize the opportunity.

Thanks again for your continued leadership and focus on our business. If you have any feedback or thoughts, please feel free to send me mail at kevinjo@microsoft.com.

Regards,

Kevin Johnson l President Microsoft Platforms & Services Division l p. 425-705-8081

Executive Assistant l Sandi Baldock l p. 425-705-8082

One Microsoft Way l Redmond l WA l 98052-6399