Retail Management System Latin America Strategy

1. Retail Management SystemLatin America Strategy September 30, 2004

2. RMS Introduction & Vision Product Overview & Way Forward Business Opportunity Latin America

3. RMS Introduction & Vision

4. Brief History of RMS • Acquired Sales Management Systems in May 2002 • Rebranded QuickSell product line as Retail Management System • Grew customer base from 12,000 to 17,000+ customers in over 55 countries • Hundreds of customers throughout Latin America – Caribbean – Central America • Built sales & marketing momentum in the US

5. HUGE Opportunity in SMB Retail Global Retail Market • “Lane” = PC/Software opportunity • Majority have not automated their business • Need for a smart client solution • Ease of deployment / lack of entrenchment • Strong, positive Microsoft brand image • Expands marketplace for partners Enterprise 9.3M Lanes Company Size No Market Leader Small & Medium 62.8M Lanes! ISV Opportunity Strong Brand, Complete Solution Lane Count Source: Clarendon 2003

6. Before Before After After Cash Register + Paper Ledger + Extra Hardware PC with Retail Management System Retail Management SystemCustomer Value Proposition

7. Why Retail POS for Microsoft? • “Broad and deep” opportunity – millions of retailers sharing a common need. • Clear value proposition • Starting point in “Demand Chain” • Connection to consumers and self-service • Sizable and growing PC marketplace • Largest market is underserved and fragmented

8. Retail Management System Target Customer • Small retailers – single or multi-store • Mid-sized retailers – small chains • Proprietor owned and operated stores • Inventory managed within stores and/or at a lead store or head office • Specialty and general merchandise • Inventory that can be price-tagged and stocked in stores • Examples include hobby, wine, apparel, bike shops, gift shops and more

9. Business Opportunity Latin America

10. Latin America Opportunity

11. Latin America POS/ECR Market • EPOS is PC based point-of-sale hardware system • Includes PCs from Dell, HP as well as POS from IBM, NCR, etc. • PC white box is dominant • ECR is Electronic Cash Register, not a PC • ECR has larger installed base • ECR is losing share to PCs

12. Caribbean POS/ECR Market • EPOS is PC based point-of-sale hardware system • Includes PCs from Dell, HP as well as POS from IBM, NCR, etc. • PC white box is dominant • ECR is Electronic Cash Register, not a PC • ECR has larger installed base • ECR is losing share to PCs

13. Latin America Retailer Statistics • Caribbean Regions are defined as follows: • Caribbean 1 • Bermuda, Bahamas, Cuba, Jamaica and W. Caribbean • Caribbean 2 • Puerto Rico, Dominican Republic, Virgin Islands, E. Caribbean • Caribbean 3 • Aruba, Curacao, Trinidad, Tobago and S. Caribbean Source: AMI Research, 2002

14. Caribbean 1 to 25 Store Retailers Source: Clarendon Reports, 2004

15. Caribbean Opportunity Summary • 1 to 10 store lane opportunity is 227,000 Lanes at 20% per year or • 45,400 POS shipments • 1% share = 454 RMS units • 11 to 25 store lane opportunity is • 3,181 Lanes at 20% per year • 1% share = 318 RMS units Source: AMI Research, 2002

16. Caribbean Market Opportunity FY05 FY06 Annual Refresh Rate 20% 20% Annual Refresh Shipments 45,400 45,400 Estimated FY’04 Market Share for RMS 1% 5% Microsoft RMS shipments 454 2,270 Percentage of FY 100% 100% FY’04 RMS shipments 454 2,270 FY’04 RMS revenue @ $1,000/lane $454,000 $2,270,000 With 1:1 Microsoft pull-through $908,000 $4,540,000 Current resellers 5??? 10???? Licenses per dealer 90 @ 5 VARs 227 @ 10 VARs Deals per dealer per year 18 23 If we are 50% wrong 9 11 Who wants this opportunity????

17. Total Latin America Opportunity

18. Latin America Opportunity Summary • 1 to 10 store lane opportunity is • 1,137,000 Lanes at 20% per year or • 227,400 POS shipments • 1% share=2,274 RMS units • 11 to 25 store lane opportunity is 714,000 Lanes at 20% per year • 142,000 POS shipments • 1% share = 1,420 RMS units Source: AMI Research, 2002

19. Product Overview & Way Forward

20. Retail Management System • A comprehensive retail solution designed for small and midmarket retailers • Enables small and midmarket retailers to begin reaping the advantages of affordable automation: • POS transactions • Inventory • Pricing • Purchasing • Customer service • Accounting integration • Store Operations • Headquarters • Merchant Services Store Operations Headquarters

21. The Solution Stack Deployment RMS MBS Financials MS Office WinXP RMS MBS Financials MS Office WinXP RMS WinXP Manager Station POS Station HQ Station TCP/IP RMS WinXP Internet Dial-up POS Station In-Store ServerSQL Server/MSDE HQ Server RMS WinXP POS Station Store Operations Headquarters

22. CUSTOMER INVOICE Revenue Breakdown Wine Retailer with 10 Stores What Success Looks Like

23. Summary • Microsoft can be successful in small retail with POS resellers – we have proof • Latin America and the Caribbean are high growth markets for PC based point-of-sale • ECRs need to be replaced with PCs so retailers can have faster transactions, e-mail, internet access, CRM, Office and… • Value Proposition: A small retailer can save time and go home sooner at the end of each day • Latin American can grow MBS business with Retail Management System today