SEC Filings - Microsoft - 0000898430-97-002409

8/14/2019 SEC Filings - Microsoft - 0000898430-97-002409

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0000898430-97-002409.txt : 199706040000898430-97-002409.hdr.sgml : 19970604ACCESSION NUMBER: 0000898430-97-002409CONFORMED SUBMISSION TYPE: S-4/APUBLIC DOCUMENT COUNT: 12

FILED AS OF DATE: 19970603SROS: NASD

FILER:

COMPANY DATA:COMPANY CONFORMED NAME: MICROSOFT CORPCENTRAL INDEX KEY: 0000789019STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED

SOFTWARE [7372]IRS NUMBER: 911144442

STATE OF INCORPORATION: WAFISCAL YEAR END: 0630

FILING VALUES:FORM TYPE: S-4/ASEC ACT: 1933 ActSEC FILE NUMBER: 333-26411FILM NUMBER: 97618332

BUSINESS ADDRESS:STREET 1: ONE MICROSOFT WAY #BLDG 8STREET 2: NORTH OFFICE 2211

CITY: REDMONDSTATE: WAZIP: 98052BUSINESS PHONE: 2068828080

MAIL ADDRESS:STREET 1: ONE MICROSOFT WAY - BLDG 8STREET 2: NORTH OFFICE 2211CITY: REDMONDSTATE: WAZIP: 98052-6399


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TOFORM S-4

REGISTRATION STATEMENTUNDER

THE SECURITIES ACT OF 1933---------------

MICROSOFT CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---------------WASHINGTON 7373 91-1144442

(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYERJURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)

INCORPORATION OR CLASSIFICATION CODEORGANIZATION) NUMBER)

ONE MICROSOFT WAY ROBERT A. ESHELMAN, ESQ.REDMOND, WASHINGTON 98052-6399 ONE MICROSOFT WAY(425) 882-8080 REDMOND, WASHINGTON 98052-6399

(ADDRESS, INCLUDING ZIP CODE, AND (425) 882-8080TELEPHONE NUMBER,INCLUDING AREA CODE, (NAME, ADDRESS,INCLUDING ZIP CODE,OF REGISTRANT'S PRINCIPAL EXECUTIVE AND TELEPHONE

NUMBER,INCLUDING AREAOFFICES) CODE, OF AGENT FOR SERVICE)

---------------WEBTV NETWORKS, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

---------------CALIFORNIA 5065 77-0406905

(STATE OR OTHER (PRIMARY STANDARD (IRS EMPLOYERJURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)

INCORPORATION OR CLASSIFICATION CODEORGANIZATION) NUMBER)

305 LYTTON AVENUE ALBERT A. PIMENTELPALO ALTO, CALIFORNIA 94301 CHIEF FINANCIAL OFFICER

(415) 326-3240 WEBTV NETWORKS, INC.

(ADDRESS, INCLUDING ZIP CODE, AND 305 LYTTON AVENUETELEPHONE NUMBER,INCLUDING AREA CODE, PALO ALTO,CALIFORNIA 94301OF REGISTRANT'S PRINCIPAL EXECUTIVE (415) 326-3240

OFFICES) (ADDRESS, INCLUDING ZIP CODE, ANDTELEPHONE NUMBER,INCLUDING AREA CODE,

OF AGENT FOR SERVICE)---------------

COPIES OF ALL COMMUNICATIONS TO:JOSHUA PICKUS, ESQ. RICHARD B. DODD, ESQ.

STEVEN J. TONSFELDT, ESQ. RICHARD A. MONTFORT, ESQ.VENTURE LAW GROUP PRESTON GATES & ELLIS LLP


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A PROFESSIONAL CORPORATION 5000 COLUMBIA CENTER2800 SAND HILL ROAD 701 FIFTH AVENUE

MENLO PARK, CALIFORNIA 94025 SEATTLE, WASHINGTON 98104-7078

---------------APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE

SECURITIES TO THEPUBLIC: At the effective time of the recapitalization of WebTV Networks, Inc.,which shall occur as soon as practicable after the effective date of thisregistration statement and the satisfaction of the conditions to therecapitalization.

If any of the securities to be registered on this form are to be offered ona delayed or continuous basis pursuant to Rule 415 of the Securities Act of1933, check the following box. [X]

If the securities being registered on this form are being offered inconnection with the formation of a holding company and there is compliancewith General Instruction G, check the following box. [_]

---------------THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT

ON SUCH DATE ORDATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTILTHE REGISTRANTSSHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES

THAT THISREGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVEIN ACCORDANCE WITHSECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THEREGISTRATION STATEMENTSHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,ACTING PURSUANT TO SAIDSECTION 8(A), MAY DETERMINE.

- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------

WEBTV NETWORKS, INC.305 LYTTON AVENUE

PALO ALTO, CALIFORNIA 94301(415) 326-3240

, 1997

Dear WNI Shareholder:

A Special Meeting of Shareholders (the "Special Meeting") of WebTV Networks,Inc., a California corporation ("WNI"), will be held at the principal


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executive offices of WNI, 305 Lytton Avenue, Palo Alto, California, on ,1997 at local time. At the Special Meeting you will be asked to consider andvote upon the following proposals:

1. To approve an Agreement and Plan of Recapitalization dated as of April 5,1997 (the "Recapitalization Agreement"), among WNI, Microsoft Corporation, aWashington corporation ("Microsoft"), and certain WNI shareholders, pursuantto which WNI will undergo a reorganization of its capital (the"Recapitalization"). The details of the Recapitalization are set forth in theaccompanying Notice and Proxy Statement/Prospectus. In summary, if theRecapitalization is consummated, the following will occur at the time ofclosing of the Recapitalization:

. Holders of vested WNI Common Shares may elect to receive $12.841 pershare in cash directly from Microsoft or receive in the Recapitalization

the equivalent value per share in new WNI Class A Common Shares whichwill be exchangeable for Microsoft Common Shares initially on a one-to-one basis, in either case less approximately 11.4% of the cash or WNIClass A Common Shares to be received by each holder of WNI CommonShares, which amount (the "Common Escrow Withholding Amount") will bewithheld and placed in an escrow fund described below, for an effectivevalue per WNI Common Share of approximately $11.381 if none of theCommon Escrow Withholding Amount is ultimately paid out to the holdersof WNI Common Shares (such lesser amount, the "Adjusted Common SharesConsideration");

. Holders of unvested WNI Common Shares will receive in the

Recapitalization the Adjusted Common Shares Consideration in new WNIClass A Common Shares which will be exchangeable for Microsoft CommonShares initially on a one-to-one basis, in each case with vesting termsequivalent to the vesting terms of their existing WNI Common Shares;

. Holders of options to purchase WNI Common Shares will receive

replacement nonqualified options for Microsoft Common Shares on termsand conditions described in the Proxy Statement/Prospectus;

. Holders of WNI Preferred Shares may elect to receive $13.686 per share

(determined on an as-if-converted to WNI Common Shares basis) in cash

directly from Microsoft or alternatively receive $13.686 per share(determined on an as-if-converted to WNI Common Shares basis) in cashfrom WNI in the Recapitalization, in either case less approximately11.4% of the cash to be received by each holder of WNI Preferred Shares,which amount (the "Preferred Escrow Withholding Amount") will bewithheld and placed in an escrow fund described below, for an effectiveprice per underlying WNI Common Share of approximately $12.130 if noneof the Preferred Escrow Withholding Amount is ultimately paid out to theholders of WNI Preferred Shares (such lesser amount, the "AdjustedPreferred Shares Consideration");

. Holders of WNI Common Shares or WNI Preferred Shares may exercise


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dissenters' rights by not voting in favor of the Recapitalization andstrictly following the statutory procedures summarized in the ProxyStatement/Prospectus and set forth in full in Appendix C to the ProxyStatement/Prospectus; and

. Holders of WNI Warrants may elect to receive $13.686 per share

(determined on an as-if-net-exercised and an as-if-converted to WNICommon Shares basis) in cash directly from Microsoft or alternativelyreceive the same cash payment from WNI in the Recapitalization, ineither case less an amount equal

to the Preferred Escrow Withholding Amount, for an effective price perunderlying WNI Preferred Share of approximately $12.130 if none of the

amount withheld is ultimately paid out to the holders of WNI Warrants(such lesser amount, the "Adjusted Warrant Consideration").

Although holders of WNI Preferred Shares and WNI Warrants will receive thesame cash consideration whether they elect to sell to Microsoft or have suchshares or warrants converted into the right to receive cash from WNI, theremay be income tax advantages either to such holders or to other WNIshareholders if they elect to sell such shares or warrants to Microsoft. Suchholders should consult their own tax advisors with respect to such electionand review discussion of "Certain U.S. Federal Income Tax Matters" in theProxy Statement/Prospectus.

Also as part of the Recapitalization, Microsoft will receive, in exchangefor the contribution to WNI of certain assets and other consideration, all ofthe newly created Class B Common Shares of WNI at a ratio of four Class BCommon Shares for each Class A Common Share issued in connection with theRecapitalization, which will represent not less than 80% of the voting powerof WNI. Microsoft has also agreed that after the Recapitalization isconsummated additional options to purchase Microsoft Common Shares will begranted to certain WNI employees and consultants. The vesting and other termsand conditions of these new Microsoft options are described in the ProxyStatement/Prospectus.

2. To approve certain employee and consultant compensation matters as morefully described herein under the heading "Proposal II--Option Grants, OptionAcceleration and Other Compensatory Matters," including specifically:

. Approval of various option grants previously made by WNI and grants tobe made by Microsoft on a discounted basis in connection with theRecapitalization;

. Approval of rights previously granted to certain employees to additionalvesting of WNI options upon termination of employment without causefollowing a change of majority ownership or control of WNI; and


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. For certain other WNI shareholders and advisors, approval of variousoption grants and payments to be made to such individuals and entitiesin connection with the Recapitalization.

The Recapitalization Agreement provides that at the time of the closing ofthe Recapitalization an aggregate of $50,000,000 will be deposited in anescrow account to be held for a period of 18 months. This $50,000,000 amountwill be funded by withholding approximately 11.4% of the cash or Class ACommon Share consideration to be received by each WNI shareholder and warrantholder in the Recapitalization. This escrow fund will be used to satisfyclaims that Microsoft may have following the closing with respect to potentialinaccuracies or misrepresentations made by WNI or its Principal Shareholders(as defined in the accompanying Proxy Statement/Prospectus) in theRecapitalization. Approval of the Recapitalization by the WNI shareholderswill result in these escrow arrangements being deemed applicable to all

shareholders. Should Microsoft successfully assert claims with respect to suchpotential inaccuracies or misrepresentations, some or all of the escrowedamount would not be released to WNI shareholders and warrant holders.

Following completion of the Recapitalization, WNI will be a controlledsubsidiary of Microsoft. At that time, the operations and management of WNIwill be under the direction of Microsoft.

Deutsche Morgan Grenfell Inc. ("DMG"), the investment banking firm retainedby the WNI Board of Directors to perform certain financial advisory servicesin connection with the Recapitalization, has rendered its opinion that, as ofApril 5, 1997, the consideration to be received by the holders of WNI Common

Shares and WNI Preferred Shares was fair from a financial point of view to theholders of WNI Common Shares and WNI Preferred Shares, respectively.

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THE WNI BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THERECAPITALIZATION ANDTHE TRANSACTIONS RELATED THERETO AND HAS UNANIMOUSLYDETERMINED THAT THEY AREFAIR TO AND IN THE BEST INTERESTS OF WNI AND ITS

SHAREHOLDERS. AFTER CAREFULCONSIDERATION, THE WNI BOARD OF DIRECTORS UNANIMOUSLYRECOMMENDS THATSHAREHOLDERS VOTE FOR THE WNI RECAPITALIZATION AND FORTHE APPROVAL OF THEEMPLOYEE AND CONSULTANT COMPENSATION MATTERS DESCRIBEDABOVE.In the materials accompanying this letter, you will find a Notice of Special

Meeting of Shareholders, a Proxy Statement/Prospectus relating to the actionsto be taken by WNI shareholders at the Special Meeting, a proxy card, a Letterof Transmittal and the Escrow Agreement Signature Page. The Proxy


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Officer

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WEBTV NETWORKS, INC.305 LYTTON AVENUE

PALO ALTO, CALIFORNIA 94301(415) 326-3240

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON, 1997

Notice is hereby given that a Special Meeting of Shareholders (the "SpecialMeeting") of WebTV Networks, Inc., a California corporation ("WNI"), will be

held at the principal executive offices of WNI, 305 Lytton Avenue, Palo Alto,California, on , 1997 at local time. At the Special Meeting you will beasked to consider and vote upon the following proposals:1. To approve an Agreement and Plan of Recapitalization dated as of April 5,

1997 (the "Recapitalization Agreement"), among WNI, Microsoft Corporation, aWashington corporation ("Microsoft"), and certain WNI shareholders, pursuantto which WNI will undergo a reorganization of its capital (the"Recapitalization") whereby (i) each WNI Common Share, other than WNICommonShares of holders who have perfected their dissenters' rights or have electedto have their shares purchased by Microsoft in the manner contemplated by item

(iii) below, shall be converted into a number of Class A Common Shares of WNIpursuant to an exchange ratio calculated by dividing $12.841 by the MicrosoftClosing Price (as defined in the Recapitalization Agreement), which shares areexchangeable for Microsoft Common Shares, as further described herein; (ii)each WNI Common Share subject to repurchase by WNI (i.e., "unvested shares")pursuant to existing agreements in effect as of the effective time of theRecapitalization shall be converted into Class A Common Shares of WNI pursuantto such exchange ratio; (iii) each vested WNI Common Share of holders who havereturned a completed letter of transmittal electing to receive cash in lieu ofClass A Common Shares shall be purchased by Microsoft for $12.841, less, withrespect to the consideration to be received by holders of WNI Common Shares in

items (i), (ii) and (iii), approximately 11.4%, which amount (the "CommonEscrow Withholding Amount") will be withheld and placed in an escrow fund morefully described in the Proxy Statement/Prospectus under the heading "ProposalI--The Recapitalization and Related Transactions--Related Agreements--EscrowAgreement" (for an effective price per WNI Common Share of approximately$11.381 if none of the Common Escrow Withholding Amount is ultimately paid outto the holders of WNI Common Shares) (such lesser amount, the "AdjustedCommonShares Consideration"); (iv) each WNI Preferred Share and WNI Warrant ofholders who have returned a completed letter of transmittal electing to havetheir share or warrant purchased by Microsoft shall be purchased by Microsoftfor $13.686 (determined on an as-if-converted to WNI Common Shares basis and,


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in the case of warrants, on an as-if-net-exercised basis) in cash, lessapproximately 11.4% of the cash to be received by each holder of WNI PreferredShares and WNI Warrants, which amount (the "Preferred/Warrant EscrowWithholding Amount") will be withheld and placed in an escrow fund described

below, (for an effective price per underlying WNI Common Share ofapproximately $12.130 if none of the Preferred/Warrant Escrow WithholdingAmount is ultimately paid out to the holders of WNI Preferred Shares or WNIWarrants) (in the case of WNI Preferred Shares, such lesser amount being the"Adjusted Preferred Shares Consideration" and, in the case of WNI Warrants,such lesser amount being the "Adjusted Warrant Consideration"); (v) each WNIPreferred Share, other than shares of holders who have perfected theirdissenters' rights or have elected to have their shares purchased byMicrosoft, shall be converted into the right to receive the Adjusted PreferredShares Consideration; (vi) each WNI Warrant, other than warrants of holderswho have elected to have their warrants purchased by Microsoft, shall be

converted into the right to receive the Adjusted Warrant Consideration;(vii) each option to purchase WNI Common Shares shall be replaced by one ormore nonqualified Microsoft stock options to purchase Microsoft Common Shareson the terms and conditions described in the accompanying ProxyStatement/Prospectus; and (viii) Microsoft shall be entitled to receive all ofthe newly created Class B Common Shares of WNI at a ratio of four Class BCommon Shares for each Class A Common Share issued in connection with theRecapitalization, which will represent not less than 80% of the voting powerof WNI, in exchange for the consideration described in the ProxyStatement/Prospectus and (ix) the Common and Preferred/Warrant EscrowWithholding Amounts will be deposited into an escrow account to be held for aperiod of 18 months to secure the indemnification obligations of the WNI

securities holders under the Recapitalization

Agreement. Should Microsoft successfully assert claims for indemnificationunder the Recapitalization Agreement, some or all of the Common andPreferred/Warrant Escrow Withholding Amounts would not be released to holdersof WNI Shares or WNI Warrants;

2. To approve certain employee and consultant compensation matters as morefully described in the Proxy Statement/Prospectus under the heading "Proposal

II--Option Grants, Option Acceleration and Other Compensatory Matters,"including specifically: (i) approval of various option grants previously madeby WNI and grants to be made by Microsoft on a discounted basis in connectionwith the Recapitalization; (ii) approval of rights of certain employees toadditional vesting of WNI options upon termination of employment without causefollowing a change of majority ownership or control of WNI; and (iii) forcertain other WNI shareholders and advisors, approval of various option grantsand payments to be made to such individuals and entities in connection with theRecapitalization; and

3. To transact such other business that may properly come before the SpecialMeeting or any postponements or adjournments thereof.


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Each new WNI Class A Common Share initially will be exchangeable, at theelection of the holder and subject to certain restrictions and limitationsdescribed in the Proxy Statement/Prospectus, for one Microsoft Common Share or

cash. Microsoft has a call right which will entitle it to directly acquire WNIClass A Common Shares which have been tendered for exchange by deliveringeither Microsoft Common Shares or the cash equivalent value thereof.

THE WNI BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THERECAPITALIZATION ANDTHE TRANSACTIONS RELATED THERETO AND HAS UNANIMOUSLYDETERMINED THAT THEY AREFAIR TO AND IN THE BEST INTERESTS OF WNI AND ITSSHAREHOLDERS. AFTER CAREFULCONSIDERATION, YOUR BOARD OF DIRECTORS UNANIMOUSLY

RECOMMENDS THAT SHAREHOLDERSVOTE FOR THE RECAPITALIZATION AND FOR THE APPROVAL OF THEEMPLOYEE ANDCONSULTANT COMPENSATION MATTERS DESCRIBED ABOVE.

Only shareholders of record at the close of business on , 1997 areentitled to notice of and to vote at the Special Meeting, or at anypostponements or adjournments thereof. The Recapitalization must be approved bya majority of the WNI Common Shares and the WNI Preferred Shares votingtogether as a single class, of which the Principal Shareholders (as definedbelow) own approximately 45%, a majority of the WNI Common Shares and amajority of the WNI Preferred Shares each voting as a single class, and a

majority of the Series A, Series B and Series D Preferred Shares votingtogether as a single class. The employee and consultant compensation mattersdescribed above must be approved by holders of more than 75% of the eligibleWNI Common Shares and WNI Preferred Shares voting together as a single class.The determination of whether such 75% approval requirement is met with respectto a payment shall be made disregarding WNI Common Shares and WNI PreferredShares owned (actually or constructively) by a recipient of such payment. Suchshareholder vote on employee and consultant compensation matters must, in eachcase, determine the right of the recipient to receive (or in the case of apayment previously made, retain) such payment. Officers and directors as agroup are deemed to beneficially own 83.87% and 49.17% of WNI Common Shares

andWNI Preferred Shares, respectively, and 69.71% of such shares treated as asingle class. Stephen G. Perlman, Bruce A. Leak, and Phillip Y. Goldman, WNI'sPresident and Chief Executive Officer, Chief Operating Officer, and Senior VicePresident, respectively (collectively, the "Principal Shareholders"), theholders of an aggregate of 15,000,000 WNI Common Shares have agreed to votetheir shares in favor of the Recapitalization, and against approval of anyproposal made in opposition to or in competition with consummation of theRecapitalization.

Under the California General Corporation Law (the "CGCL"), a shareholder whoobjects to the Recapitalization may assert statutory dissenters' rights to


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dissent from and obtain payment of the fair value of his or her WNI CommonShares and WNI Preferred Shares by strict compliance with the requirements ofthe CGCL. See "The WNI Special Meeting of Shareholders--Dissenters' Rights" inthe Proxy Statement/ Prospectus for a more detailed description of dissenters'

rights with respect to the Recapitalization.

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A complete list of shareholders entitled to vote at the Special Meeting willbe available for examination at WNI's principal executive offices, for anypurposes germane to the Special Meeting, during ordinary business hours, for aperiod of at least ten days prior to the Special Meeting.

IMPORTANT

ALL SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETINGIN PERSON. WHETHEROR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON,PLEASE COMPLETE,DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT WITHOUTDELAY IN THE ENCLOSEDBLUE ENVELOPE, WHICH REQUIRES NO ADDITIONAL POSTAGE IFMAILED IN THE UNITEDSTATES. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY THENWITHDRAW YOUR PROXY ANDVOTE IN PERSON. IT IS IMPORTANT THAT YOUR SHARES BE

REPRESENTED AND VOTED ATTHE SPECIAL MEETING.SHAREHOLDERS SHOULD NOTE THAT NOTWITHSTANDING ANY

SHAREHOLDER APPROVAL OF THEMATTERS DESCRIBED IN THE PROXY STATEMENT/PROSPECTUS, THERECAPITALIZATION ANDRELATED TRANSACTIONS REMAIN SUBJECT TO, AND WILL NOTOCCUR UNTIL SATISFACTIONOF, ALL APPLICABLE REGULATORY REQUIREMENTS, INCLUDINGTHOSE IMPOSED BY THE

HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976.

By Order of the Board of Directors,

_____________________________________Bruce A. Leak, Secretary

Palo Alto, California, 1997

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MICROSOFT CORPORATIONWEBTV NETWORKS, INC.

PROSPECTUS

----------------

PROXY STATEMENTFOR

SPECIAL MEETING OF SHAREHOLDERS OFWEBTV NETWORKS, INC.

TO BE HELD , 1997

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This Proxy Statement/Prospectus constitutes the proxy statement of WebTVNetworks, Inc., a California corporation ("WNI"), relating to the solicitationby WNI of proxies for use at the Special Meeting of Shareholders of WNI (the"Special Meeting") scheduled to be held at local time on , 1997, andthe prospectus of WNI relating to WNI Class A Common Stock, par value $.001per share (the "Class A Shares" or "Exchangeable Shares"), that will be issuedin connection with the recapitalization (the "Recapitalization") of WNI,pursuant to which, among other things, Microsoft Corporation, a Washingtoncorporation ("Microsoft"), will acquire WNI Class B Common Stock, par value$.001 per share (the "Class B Shares"), and WNI will become a controlledsubsidiary of Microsoft. This Proxy Statement/Prospectus also serves as a

prospectus for the Microsoft Common Shares, par value $.000025 ("MicrosoftCommon Shares"), that may be issued upon exchange of the Exchangeable Shares.The Exchangeable Shares and the Microsoft Common Shares are sometimesreferredto collectively as the "Securities." The Recapitalization will be effectedpursuant to an Agreement and Plan of Recapitalization (the "RecapitalizationAgreement") dated as of April 5, 1997, by and among Microsoft, WNI and certainshareholders of WNI. A copy of the Recapitalization Agreement is attached tothis Proxy Statement/Prospectus as Appendix A and incorporated herein byreference. WNI and Microsoft have filed a joint registration statement withthe Securities and Exchange Commission (the "Commission") with respect to the

issuance of the Exchangeable Shares by WNI and the Microsoft Common Sharesissuable upon the exchange of Exchangeable Shares.

No person has been authorized to give any information or to make anyrepresentation other than those contained in this Proxy Statement/Prospectusin connection with the solicitations of proxies or the offering of securitiesmade by this Proxy Statement/Prospectus and, if given or made, suchinformation or representations must not be relied upon as having beenauthorized by WNI or Microsoft. Neither the delivery of this ProxyStatement/Prospectus nor any distribution of securities made hereunder shallunder any circumstances create any implication that there has been no changein the information set forth herein since the date of this Proxy


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Statement/Prospectus. This Proxy Statement/Prospectus does not constitute anoffer to sell, or a solicitation of an offer to buy, any securities, or thesolicitation of a proxy, by anyone in any jurisdiction in which such offer orsolicitation is not authorized or in which the person making such offer or

solicitation is not qualified to do so or to anyone to whom it is unlawful tomake such offer or solicitation.SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT

SHOULD BEEVALUATED BY WNI SHAREHOLDERS IN CONNECTION WITH THEIRCONSIDERATION OF THERECAPITALIZATION. THIS DISCUSSION BEGINS AT PAGE 20.

NEITHER THE RECAPITALIZATION NOR THESE SECURITIES HAVE BEENAPPROVED OR

DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ORANY STATE SECURITIESCOMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSIONOR ANY STATESECURITIES COMMISSION PASSED UPON THE ACCURACY ORADEQUACY OF THIS PROXYSTATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARYIS A CRIMINALOFFENSE.

Capitalized terms that are not otherwise defined in this ProxyStatement/Prospectus are defined in the Recapitalization Agreement attached

hereto as Appendix A. Page 6 of this Proxy Statement/Prospectus sets forth anindex of significant defined terms that are used herein.

The approximate date on which this Proxy Statement/Prospectus and theaccompanying proxy card will first be mailed to WNI shareholders is ,1997.

The date of this Proxy Statement/Prospectus is , 1997.

AVAILABLE INFORMATION

Microsoft is subject to the information requirements of the SecuritiesExchange Act of 1934, as amended (the "Exchange Act") and files reports andother information with the Commission in accordance therewith. Such reports,proxy statements and other information filed by Microsoft are available forinspection and copying at the public reference facilities of the Commission at450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission'sRegional Offices at 7 World Trade Center, Suite 1300, New York, New York10048, and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,Illinois 60661-2511. Copies of such material may be obtained by mail from thePublic Reference Section of the Commission at 450 Fifth Street, N.W.,Washington, D.C. 20549, at prescribed rates. The Commission maintains a World


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Wide Web site on the Internet at http://www.sec.gov that contains reports,proxy and information statements and other information regarding registrantsthat file electronically with the Commission. The Microsoft Common Shares aretraded as a "National Market Security" on The Nasdaq Stock Market. Material

filed by Microsoft can be inspected at the offices of the National Associationof Securities Dealers, Inc., Reports Section, 1735 K Street, N.W., Washington,D.C. 20006.

This Proxy Statement/Prospectus constitutes a part of a RegistrationStatement on Form S-4 (together with amendments and exhibits thereto, the"Registration Statement") filed with the Commission under the Securities Actof 1933, as amended (the "Securities Act"), with respect to the ExchangeableShares of WNI and the Microsoft Common Shares issuable upon the exchange ofsuch Exchangeable Shares. This Proxy Statement/Prospectus does not contain allof the information set forth in such Registration Statement, certain parts of

which are omitted in accordance with the rules and regulations of theCommission. Reference is made to the Registration Statement and to theexhibits relating thereto for further information with respect to WNI,Microsoft and the Securities offered hereby. Any statements contained hereinconcerning the provisions of any document filed as an exhibit to theRegistration Statement or otherwise filed with the Commission or incorporatedby reference herein are not necessarily complete, and, in each instance,reference is made to the copy of such document so filed for a more completedescription of the matter involved. Each such statement is qualified in itsentirety by such reference.As a result of the filing of this Registration Statement, WNI will become

subject to certain periodic reporting and other informational requirements ofthe Exchange Act. For so long as WNI is subject to such periodic reporting andinformation requirements, it will file with the Commission all reports andother information required thereby, which may be inspected at the publicreference facilities maintained by the Commission at the same addressesreferenced above in the first paragraph of this section. Copies of suchmaterial may also be obtained from the Public Reference Section of theCommission at 450 Fifth Street, N.W., Washington D.C. 20549 at prescribedrates.

Under the Amended and Restated Articles of Incorporation (attached as

Appendix E) WNI or Microsoft is obligated to provide the holders of theExchangeable Shares with notice of (i) adoption of a plan of Liquidation(defined in such Articles to include the liquidation, dissolution, winding-upof, or the filing of a petition for involuntary liquidation or otherproceeding in bankruptcy by, WNI); (ii) declaration of a dividend record dateby WNI; or (iii) exercise of a class call right by Microsoft whereby all ofthe outstanding Exchangeable Shares may be acquired by Microsoft during theperiod commencing five years and six months after the Effective Time andending six years after the Effective Time. WNI and Microsoft undertake toprovide such notices to the holders of outstanding Exchangeable Sharestogether with other information that may reasonably be expected to have amaterial effect on the decisions of holders of Exchangeable Shares generally
http://www.sec.gov/


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to either hold or exchange such shares.

Microsoft will also provide holders of outstanding Exchangeable Shares withcopies of Microsoft's annual reports, proxy statements and other reports and

documents, if any, generally sent to holders of Microsoft Common Shares.

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed with the Commission by Microsoft (File No. 0-14278) are incorporated by reference in this Proxy Statement/Prospectus:

1. Microsoft's Annual Report on Form 10-K for the year ended June 30, 1996;

2. Microsoft's Proxy Statement dated September 27, 1996 for Microsoft'sannual meeting of shareholders on November 12, 1996;

3. Microsoft's Quarterly Report on Form 10-Q for the quarter ended September30, 1996;4. Microsoft's Quarterly Report on Form 10-Q for the quarter ended December

31, 1996;

5. Microsoft's Quarterly Report on Form 10-Q for the quarter ended March 31,1997; and

6. The description of the capital shares of Microsoft which is contained inthe Registration Statement on Form S-3 of Microsoft filed pursuant to theSecurities Act under Commission, file number 333-17143, dated December 16,1996, which is incorporated by reference in Form 8-A filed pursuant to theExchange Act under Commission file number 0-14278.

All documents filed by Microsoft pursuant to Sections 13(a), 13(c), 14, or15(d) of the Exchange Act subsequent to the date of this Proxy

Statement/Prospectus and prior to the termination of the offering of theSecurities offered hereby shall be deemed to be incorporated by reference intothis Proxy Statement/Prospectus and to be a part hereof from the date offiling of such document. Any statement contained herein or in a document allor a portion of which is incorporated or deemed incorporated by referenceherein shall be deemed to be modified or superseded for purposes of this ProxyStatement/Prospectus to the extent that a statement contained herein or in anyother subsequently filed document which also is or is deemed to beincorporated by reference herein modifies or supersedes such statement. Anystatement so modified or superseded shall not be deemed, except as so modifiedor superseded, to constitute a part of this Proxy Statement/Prospectus.


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Microsoft hereby undertakes to provide without charge to each person to whomthis Proxy Statement/Prospectus has been delivered, upon the written or oralrequest of any such person, a copy of any and all of the foregoing documentsincorporated herein by reference (other than exhibits to such documents which

are not specifically incorporated by reference into the information that thisProxy Statement/Prospectus incorporates). Written or telephone requests shouldbe directed to Investor Relations Department, Microsoft Corporation, OneMicrosoft Way, Redmond, Washington 98052-6399, telephone number (800) 285-7772or by electronic mail at [email protected]. Microsoft also has posted on itswebsite (www.microsoft.com/msft/) the Annual Report (Form 10-K), ProxyStatement and Quarterly Reports (Form 10-Q) incorporated by reference in thisProxy Statement/Prospectus. In order to ensure timely delivery of thedocuments, any request should be made by , 1997.

Microsoft, Natural Keyboard, PowerPoint, Windows and Windows NT areregistered trademarks and BackOffice, FrontPage, MSN, and Outlook aretrademarks of Microsoft Corporation.

WebTV, WebTV Network, TVLens, LineShare, Explore, Around Town and OneThumbBrowsing are trademarks of WNI.

3

TABLE OF CONTENTS

PAGE----

AVAILABLE

INFORMATION..................................................... 2INCORPORATION OF CERTAIN DOCUMENTS

BY REFERENCE........................... 3SUMMARY OF PROXY

STATEMENT/PROSPECTUS.....................................7

RISKFACTORS.............................................................. 20

Consequences of Holder's Failure to Give TimelyNotice Prior to

Expiration of Holder's ExchangeRights................................. 20

Absence of Public Market for ExchangeableShares........................ 20

Right of Microsoft to Call All ExchangeableShares...................... 20


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Risks Related to Exercise of ExchangeRights............................ 20

Risks Related to EscrowAgreement....................................... 21

Risks Related to Interests of CertainPersons........................... 21

Effects of Bankruptcy of WNI Following theRecapitalization............. 21

Tax Consequences of Exchange of WNI CommonShares for Exchangeable

Shares................................................................. 21Risks and Uncertainties Regarding Forward-

Looking Statements............ 22Effects of Non-Consummation of theRecapitalization of WNI.............. 22

THE WNI SPECIAL MEETING OFSHAREHOLDERS................................... 24Date, Time and Place of

Meeting......................................... 24Record Date and Outstanding

Shares...................................... 24Voting of Proxies.......................................................

24Vote Required and Voting Intentions of Certain

Shareholders............. 24Solicitation of Proxies and

Expenses.................................... 25

Dissenters' Rights......................................................25

PROPOSAL I--THE RECAPITALIZATION ANDRELATED TRANSACTIONS................. 27

Background of Recapitalization; Material Contactsand Deliberations..... 27

WNI's Reasons for theRecapitalization.................................. 29

WNI BoardRecommendation................................................ 30

Opinion of Financial

Advisor............................................ 31Interests of Certain Persons in theRecapitalization.................... 33

Microsoft's Reasons for theRecapitalization............................ 34

The Recapitalization....................................................34

Summary of Other Provisions of the RecapitalizationAgreement........... 39

RelatedAgreements...................................................... 45

Certain U.S. Federal Income Tax


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Matters................................. 47Accounting

Treatment.................................................... 51Regulatory

Requirements................................................. 51Surrender of Certificates; Lost

Certificates............................ 51Affiliates' Restrictions on Sale of

Shares.............................. 52Recapitalization

Expenses............................................... 52PROPOSAL II--OPTION GRANTS, OPTION

ACCELERATION AND OTHERCOMPENSATORY

MATTERS..................................................................

53Employment and NoncompetitionAgreements................................ 53

Grant of Options to Purchase Microsoft CommonShares.................... 53

WNI BoardRecommendation................................................ 58

WNI'SBUSINESS............................................................ 59General................................................................. 59

Products, Services andTechnology....................................... 59

Sales, Marketing andDistribution....................................... 62

4

TABLE OF CONTENTS--(CONTINUED)

PAGE----

Manufacturing...........................................................

62Customer Service........................................................

62Proprietary

Technology.................................................. 62Patents, Copyrights and

Trademarks...................................... 63Competition.............................................................


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64Employees...............................................................

65Facilities.............................................................. 65

Legal Proceedings.......................................................65

MANAGEMENT'S DISCUSSION AND ANALYSISOF FINANCIAL CONDITION AND RESULTS OF

OPERATIONS...............................................................66

MANAGEMENT OFWNI......................................................... 70

PRINCIPAL SHAREHOLDERS OFWNI............................................. 73

DESCRIPTION OF CAPITAL SHARES OF

WNI...................................... 75Common Shares...........................................................75

Preferred Shares........................................................75

Warrants................................................................ 75Certain Anti-Takeover

Provisions........................................ 76Class B Shares and ExchangeableShares.................................. 76

COMPARISON OF RIGHTS OF SHAREHOLDERSOF WNI AND MICROSOFT................. 76

Rights Under Existing Common Shares VersusRights Under Exchangeable

Shares................................................................. 76Rights Under Washington Law Versus Rights Under

California Law.......... 77LEGAL

MATTERS............................................................. 83EXPERTS...................................................................

83INDEX TO FINANCIAL STATEMENTS OF

WNI...................................... F-1

LIST OF APPENDICES

Appendix A Agreement and Plan of Recapitalization

Appendix B Opinion of Deutsche Morgan Grenfell Inc.

Appendix C Chapter 13 of California General Corporation Law

Appendix D Escrow Agreement


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Appendix E Amended and Restated Articles of Incorporation of WNI

5

INDEX OF SIGNIFICANT DEFINED TERMS

PAGE----

1991 Plan..........................

39Acquiring

Person................... 79Adjusted Common SharesConsideration.....................

9Adjusted Preferred SharesConsideration.....................

10Adjusted Warrant

Consideration..... 10Affiliates

Agreements.............. 46Annual Report......................

22AOL................................

32Approval

Notice.................... 26Break-up Fee.......................

44Call Right.........................

11Cash............................... 11

Certificate........................

36CGCL...............................

13Chapter 13.........................

25Class A ExchangeRate.............. 11

Class A Shares.....................1

Class B Shares.....................1

Class Call Right...................


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11Closing............................

15CNET...............................

32Code............................... 16Commission.........................

1Common Escrow

Withholding Amount... 9Comparable

Companies............... 32Competing

Business................. 46CompuServe.........................

32Counsel............................47

Court.............................. 26Credit

Agreement................... 46Current Market

Value............... 11Department of

Justice.............. 51Dissenting

Shares.................. 25

Dividend EquivalentTransaction.... 48

DMG................................8

Earthlink..........................32

Effective Time.....................12

EmploymentAgreements.............. 46

Escrow

Agreement................... 45Escrow

Amount...................... 21Escrow WithholdingAmounts......... 10

Exchange Act.......................2

ExchangeAgent..................... 36

ExchangeRatio..................... 9

Exchangeable


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Shares................ 1Excite............................. 61

FoundersShares.................... 45

FTC................................ 51Fujitsu............................ 68HSR Act............................

41Indemnifiable

Amounts.............. 43Intellectual Property

Agreements... 45Interested

Shareholder............. 79IRS................................ 21

Letter ofTransmittal.............. 12Liquidation........................

11Loan............................... 46

PAGE----

Microsoft......................

1Microsoft

Articles............. 77Microsoft

Bylaws............... 77Microsoft Closing

Price........ 9Microsoft Common

Shares........ 1Microsoft

Options.............. 12

MSN............................28

NETCOM.........................32

Netscape.......................32

OEMs...........................18

Opinion........................31

Outside Date...................14


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Pace........................... 59Participating

Shares........... 80PCs............................ 18

Philips........................ 59Preferred Escrow

WithholdingAmount........................

10Preston Gates &Ellis.......... 15

PrincipalShareholders......... 24

Recapitalization...............1

RecapitalizationAgreement..... 1Registration

Statement......... 2Securities..................... 1Securities Act.................

2Securities

Holders............. 45Series A Shares................

34Series B Shares................

34Series B

Warrant............... 75Series C Shares................

35Series C

Warrants.............. 76Series D Shares................

35Shareholder

Agreements......... 45

Shareholders'Representative... 43

Sony........................... 59Special Event..................

39Special

Meeting................ 1Target

Corporation............. 79Tax Opinions...................

47Termination


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Fee................ 44URL............................ 60

Venture LawGroup.............. 15

VotingAgreements.............. 45WBCA...........................

77Web............................ 59

WebTVNetwork.................. 59

WebTV set-topterminal......... 59

WNI............................ 1WNI Articles...................

76WNI Bylaws.....................77

WNI CommonShares.............. 34

WNI DissentingShareholder..... 25

WNI Options....................35

WNI PreferredShares........... 34

WNI Record

Date................ 24WNI Shares.....................

35WNI

Warrants................... 35

6

SUMMARY OF PROXY STATEMENT/PROSPECTUS

The following is a summary of certain information contained elsewhere in thisProxy Statement/Prospectus. This summary is not, and is not intended to be,complete in itself. Reference is made to, and this summary is qualified in itsentirety by, the more detailed information contained in this ProxyStatement/Prospectus and the attached Appendices, which shareholders of WNI areencouraged to review. Unless otherwise defined in this summary, capitalizedterms used in this summary are defined elsewhere in this ProxyStatement/Prospectus.

INTRODUCTION


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This Proxy Statement/Prospectus relates to the consideration of arecapitalization of WNI, following which WNI will become a controlledsubsidiary of Microsoft, and the consideration of certain employee and

consultant compensation matters.

THE COMPANIES

Microsoft

Microsoft develops, manufactures, licenses, sells and supports a wide rangeof software products, including operating systems for personal computers andservers, server applications for client/server environments, business andconsumer productivity applications, software development tools, and Internetand intranet software and technologies. Microsoft's principal executive offices

are located at One Microsoft Way, Redmond, Washington 98052-6399, and itstelephone number is (425) 882-8080. See "--Information About Microsoft."

WNI

WNI operates an on-line service that enables consumers to experience theInternet through their televisions via set-top terminals based on WNI'sproprietary technologies. WNI's principal executive offices are located at 305Lytton Avenue, Palo Alto, California 94301, and its telephone number is (415)326-3240. See "WNI's Business."

THE WNI SPECIAL MEETING OF SHAREHOLDERS

Purpose of Meeting

A Special Meeting of shareholders of WNI will be held at the principalexecutive offices of WNI, 305 Lytton Avenue, Palo Alto, California, on ,1997 at local time. Only shareholders of record at the close of businesson , 1997 are entitled to notice of and to vote at the Special Meeting, orat any postponements or adjournments thereof. At the Special Meeting, WNIshareholders will be asked to consider and vote upon the following proposals:(i) to approve the Recapitalization Agreement, pursuant to which WNI willundergo the Recapitalization, as further described herein; (ii) to approve

certain employee and consultant compensation matters as more fully describedherein; and (iii) to transact such other business that may properly come beforethe Special Meeting or any postponements or adjournments thereof. See "The WNISpecial Meeting of Shareholders."

Vote RequiredApproval of the Recapitalization requires the affirmative vote of the holders

of (i) a majority of the outstanding WNI Common Shares and WNI PreferredShares, voting together as a single class, (ii) a majority of the WNI CommonShares and a majority of the WNI Preferred Shares, each voting as a singleclass, and (iii) a majority of the outstanding Series A Shares, Series B Shares


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and Series D Shares, voting together as a single class. Approval of each of theemployee and consultant compensation matters described elsewhere in this Proxy

7

Statement/Prospectus requires the affirmative vote of the holders of more than75% of the outstanding WNI Common Shares and WNI Preferred Shares, votingtogether as a class on an as-converted basis, of those shareholders eligible tovote on such matters (excluding in each case shares owned, actually orconstructively, by the person who would receive the payment subject to suchapproval). See "The WNI Special Meeting of Shareholders--Vote Required andVoting Intentions of Certain Shareholders."

BACKGROUND AND REASONS FOR THE RECAPITALIZATION;

RECOMMENDATION OF BOARD OFDIRECTORS OF WNI

The Board of Directors of WNI has unanimously approved the RecapitalizationAgreement and unanimously recommends that the shareholders of WNI vote forapproval and adoption of the Recapitalization Agreement. The primary factorsconsidered and relied upon by the WNI Board of Directors in reaching itsrecommendations are referred to in "Proposal I--The Recapitalization and theRelated Transactions--WNI's Reasons for the Recapitalization."

INTERESTS OF CERTAIN PERSONS IN THE RECAPITALIZATION

In considering the recommendation of the Board of Directors of WNI withrespect to the Recapitalization, and the employee and consultant compensationmatters described elsewhere in this Proxy Statement/Prospectus, shareholdersshould be aware that certain officers and directors of WNI have interests inconnection with the Recapitalization. If the Recapitalization is consummated,Microsoft intends to appoint Stephen G. Perlman, the President and ChiefExecutive Officer of WNI, a Vice President of Microsoft. As a result of theRecapitalization, certain officers of WNI will receive employment agreements,acceleration of existing options to the extent their employment with WNI isterminated following the Recapitalization, grants of new options and otherconsideration. See "Proposal I --The Recapitalization and Related Transactions--

Related Agreements--Employment and Noncompetition Agreements" and "ProposalII--Option Grants, Option Acceleration and Other Compensatory Matters." Inaddition, in the event that the Recapitalization is consummated, Microsoft hasagreed to provide certain indemnification rights to WNI's officers anddirectors. Paul Allen, a director of Microsoft, is the beneficial owner of allof the outstanding capital shares of Vulcan Ventures Inc., which is the recordowner of 3,220,582 WNI Preferred Shares. Accordingly, Vulcan Ventures willreceive $44,076,885 if the Recapitalization is consummated. See "Proposal I--The Recapitalization and Related Transactions--Interests of Certain Persons inthe Recapitalization."

OPINION OF FINANCIAL ADVISOR


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Deutsche Morgan Grenfell Inc. ("DMG"), the investment banking firm retainedby the WNI Board of Directors to perform certain financial advisory services inconnection with the Recapitalization, has rendered its opinion that, as of

April 5, 1997, the consideration to be received by the holders of WNI CommonShares and WNI Preferred Shares was fair from a financial point of view to theholders of WNI Common Shares and WNI Preferred Shares, respectively. The fulltext of the written opinion of DMG, which sets forth the assumptions made,matters considered and limitations on the review undertaken in connection withsuch opinion, is attached hereto as Appendix B and is incorporated herein byreference. Holders of WNI capital shares are urged to, and should, read suchopinion in its entirety. See "Proposal I--The Recapitalization and RelatedTransactions--Opinion of Financial Advisor."

THE RECAPITALIZATION

Approval of the Recapitalization by the WNI shareholders will provide holdersof WNI securities with certain elections and/or result in the conversion of alloutstanding WNI securities as follows:

Conversion of WNI Common Shares

WNI Common Shares, other than WNI Common Shares of holders who exercisetheirdissenters' rights or who elect to have their shares acquired by Microsoft forcash, shall be converted into, and WNI shall issue to

8

holders of WNI Common Shares, a number of Exchangeable Shares pursuant to anexchange ratio determined by dividing $12.841 by the Microsoft Closing Price(the "Exchange Ratio") (provided, however, that the amount to be received byeach holder of WNI Common Shares shall be reduced by approximately $1.460 perWNI Common Share, which amount (the "Common Escrow Withholding Amount")will bewithheld and placed in an escrow fund more fully described herein under the

heading "Proposal I--The Recapitalization and Related Transactions--RelatedAgreements--Escrow Agreement"). As a result of such withholding, each holder ofWNI Common Shares will receive an effective value per WNI Common Share ofapproximately $11.381 if none of the Common Escrow Withholding Amount isultimately paid out to such holders (such lesser amount, the "Adjusted CommonShares Consideration"). The "Microsoft Closing Price" shall be the averageclosing price of Microsoft Common Shares as publicly reported by The NasdaqStock Market over the twenty (20) consecutive trading days ending two (2) daysprior to the Closing. For example, if the Microsoft Closing Price wascalculated to be $100 per share, the Exchange Ratio would be .12841 ($12.841divided by $100) and a holder would receive .12841 Exchangeable Shares for eachWNI Common Share held at the time of the Recapitalization. Thus, if a holder


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has 1,000 WNI Common Shares at the time of the Recapitalization, such holderwould receive a total of 128 Exchangeable Shares, less the Common EscrowWithholding Amount. See "Proposal I--The Recapitalization and RelatedTransactions--The Recapitalization--Conversion of WNI Common Shares."

Election by Holders of Vested WNI Common SharesAny holder of vested WNI Common Shares may elect to receive $12.841 per

share, less the Common Escrow Withholding Amount (for an effective value perWNI Common Share of the Adjusted Common Shares Consideration) in cash fromMicrosoft at the effective time of the Recapitalization in lieu of receivingExchangeable Shares by properly completing the Letter of Transmittal, markingthe election to have such shares purchased by Microsoft for cash, and returningthe Letter of Transmittal, Escrow Agreement Signature Page and the certificatesfor such shares to WNI prior to the Closing. If no Letter of Transmittal

indicating an election for cash is received by WNI from an eligible holderprior to the Closing, such holder will be deemed to have elected to receiveExchangeable Shares. See "Proposal I--The Recapitalization and RelatedTransactions--The Recapitalization--Election by Holders of Vested WNI CommonShares" and "--Related Agreements--Escrow Agreement."

Conversion of Unvested WNI Common SharesCertain WNI Common Shares are subject to a vesting schedule and may be

repurchased by WNI in the event a holder thereof ceases to be employed by WNI.Unvested WNI Common Shares shall be converted into Exchangeable Shares on thesame basis as other WNI Common Shares and will be registered in each holder's

name. Such unvested Exchangeable Shares will be held by WNI following theRecapitalization pursuant to existing agreements governing such shares. See"The Recapitalization and Related Transactions--The Recapitalization--Conversion of Unvested WNI Common Shares."

Election by Holders of WNI Preferred Shares and WNI Warrants

Any holder of WNI Preferred Shares or WNI Warrants may elect to have suchsecurities acquired for cash by Microsoft at the effective time of theRecapitalization by properly completing the Letter of Transmittal marking theelection to have such shares acquired by Microsoft for cash and returning the

Letter of Transmittal, Escrow Agreement Signature Page and the certificates forsuch shares to WNI prior to the Closing. See "Proposal I--The Recapitalizationand Related Transactions--The Recapitalization--Election by Holders of WNIPreferred Shares and WNI Warrants."

Conversion of WNI Preferred Shares and WNI Warrants

Each of the WNI Preferred Shares, other than shares held by holders who haveexercised their dissenters' rights or elected to have their shares acquired byMicrosoft for cash, will be converted, without any action on

9


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the part of the holders, into the right to receive $13.686 (determined on an

as-if-converted to WNI Common Shares basis) in cash (provided, however, thatthe amount to be received by each holder of WNI Preferred Shares shall bereduced by approximately $1.556 per WNI Preferred Share, which amount (the"Preferred Escrow Withholding Amount"), will be withheld and placed in theescrow fund, for an effective price per underlying WNI Common Share ofapproximately $12.130 if none of the Escrow Withholding Amount is ultimatelypaid out to the holders of WNI Preferred Shares) (such lesser amount, the"Adjusted Preferred Shares Consideration"). Subject to each of their terms,each WNI Warrant, other than warrants held by holders who have elected to havetheir warrants acquired by Microsoft for cash, shall be converted, without anyaction of the part of the holders thereof, into the right to receive $13.686

(determined on an as-if-net-exercised and converted to WNI Common Shares basis)in cash, less an amount per underlying WNI Preferred Share equal to thePreferred Escrow Withholding Amount (together, such amount, the CommonEscrowWithholding Amount and the Preferred Escrow Withholding Amount constitute the"Escrow Withholding Amounts"), which will be withheld and placed in the escrowfund, for an effective price per underlying WNI Common Share of approximately$12.130 if none of such Escrow Withholding Amount is ultimately paid out to theholders of WNI Warrants) (such lesser amount, the "Adjusted WarrantConsideration"). In each case, the cash payment contemplated by this paragraphwill be made by WNI following the Closing. See "Proposal I--TheRecapitalization and Related Transactions--The Recapitalization--Conversion of

WNI Preferred Shares and WNI Warrants."

Issuance of Class B Common Shares and Consideration Paid by Microsoft

At the Closing, Microsoft shall transfer to WNI cash equal to not less thanthe amount required to satisfy the conversion rights of holders of WNIPreferred Shares and WNI Warrants who have not elected to have their shares orwarrants purchased by Microsoft. Microsoft shall also transfer, at itselection, either Microsoft Common Shares equal to not less than five times theamount required to satisfy the exchange rights of the Exchangeable Shares, orcash equal to not less than such amount, or a combination of the foregoing. At

the Closing, Microsoft will also execute an agreement whereby among otherthings Microsoft will agree to use its reasonable best efforts to ensure at alltimes that sufficient numbers of Microsoft Common Shares or cash are availableto WNI to permit WNI to satisfy its obligation to deliver Microsoft CommonShares or cash to holders of Exchangeable Shares upon the exercise of theirexchange rights. In consideration for the transfer of the Microsoft CommonShares and/or cash to WNI as described above and the execution of theRecapitalization Agreement and other ancillary agreements, Microsoft willreceive four Class B Shares for each Class A or Exchangeable Share issued inthe Recapitalization. Thus the exact number of Class B Shares to be issued toMicrosoft will not be known until just before the Effective Time but in noevent will the Class B Share represent less than eighty percent (80%) of the


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outstanding capital shares on the basis of value and voting power. See"Proposal I--The Recapitalization and Related Transactions--TheRecapitalization," "--Summary of Other Provisions of the RecapitalizationAgreement" and "--Related Agreements."

Rights and Preferences of Exchangeable Shares

The form of Amended and Restated Articles of Incorporation to be adopted byWNI in connection with the Recapitalization is attached to this ProxyStatement/Prospectus as Appendix E and is incorporated herein by reference. Theterms of such Articles are summarized below.

Voting, Dividend and Liquidation Rights of Holders of Exchangeable Shares

Each holder of Exchangeable Shares shall be entitled to vote for directors

and such other matters as may be submitted to the shareholders. Except to theextent required by applicable law, each Exchangeable Share shall have one (1)vote. Each holder of Exchangeable Shares shall be entitled to receive noticeof, and to attend, any meetings of shareholders of WNI.

10

The WNI Board of Directors may declare dividends in its discretion from timeto time, and WNI shall pay dividends out of its assets properly available forthe payment of dividends, provided that any such dividend declared with respect

to each Exchangeable Share and Class B Share shall be identical in amount andcharacter. Such dividends shall have record and payment dates as may bedetermined in the discretion of the WNI Board of Directors.

In the event of a liquidation, dissolution or winding-up of WNI or otherdistribution of assets, including the filing of a petition for involuntaryliquidation or other proceeding in bankruptcy, of WNI (collectively, a"Liquidation"), WNI shall pay to the holders of the Exchangeable Shares fromthe assets of WNI available for distribution an amount that is identical inamount and character with respect to each share of Exchangeable Share and ClassB Share. See "Proposal I--The Recapitalization and Related Transactions--The

Recapitalization--Rights and Preferences of Exchangeable Shares--Voting,Dividend and Liquidation Rights of Holders of Exchangeable Shares."

Exchange Rights

Subject to the call rights of Microsoft described below, holders ofExchangeable Shares shall have the right to exchange each Exchangeable Shareheld for Microsoft Common Shares at any time prior to the end of fifty-one (51)months after the effective date of the Recapitalization. Each ExchangeableShare shall be exchanged, for (i) such number of Microsoft Common Shares as areequal to the product obtained by multiplying the Class A Exchange Rate ineffect at the time the exchange procedure is initiated by the number of


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Exchangeable Sharesbeing exchanged; or (ii) an amount in immediately available funds equal to theCurrent Market Value of the Microsoft Common Shares otherwise issuable uponexchange of the Exchangeable Shares ("Cash"). The determination as to whether

holders of Exchangeable Shares will receive Microsoft Common Shares or Cashupon the exchange will be made by WNI. The "Class A Exchange Rate" shallinitially be 1.0 Microsoft Common Shares for each Exchangeable Share, subjectto adjustment based on certain capital changes in Microsoft Common Sharesfollowing the Recapitalization. In the event Microsoft does not exercise itscall rights, WNI is obligated to exchange such Exchangeable Shares for eitherMicrosoft Common Shares or Cash. The "Current Market Value" of the MicrosoftCommon Shares shall be the closing price as publicly reported by The NasdaqStock Market at 4:00 p.m. (Eastern time) as of the date on which a holder ofExchangeable Shares delivers his or her certificates and an "Exchange Notice"to the Secretary of WNI, or a person designated by the Secretary. See "Proposal

I--The Recapitalization and Related Transaction--The Recapitalization--Rightsand Preferences of Exchangeable Shares--Exchange Rights."

Microsoft Call Rights

WNI shall immediately notify Microsoft of any exchange request. Microsoftshall thereafter have one (1) day in which to exercise its right (the "CallRight") to deliver to such holder, at Microsoft's election, (i) such number ofMicrosoft Common Shares as are equal to the product obtained by multiplying theClass A Exchange Rate in effect at the time the exchange procedure is initiatedby the number of Exchangeable Shares being exchanged; or (ii) Cash. Inaddition, Microsoft shall have the right to acquire all, but not less than all,

of the outstanding Exchangeable Shares ("Class Call Right") solely for a numberof Microsoft Common Shares as determined under clause (i) above (except thatthe Class A Exchange Rate used will be the Class A Exchange Rate in effect atthe time Microsoft shall exercise its Class Call Right, upon delivery of anirrevocable written notice by Microsoft to WNI at any time during the periodcommencing five years and six months after the effective date of theRecapitalization and ending six years after the effective date of theRecapitalization. In the event Microsoft exercises its Class Call Right,Microsoft shall provide each holder of Exchangeable Shares written noticespecifying a closing date for such proposed action not more than sixty (60) andnot less than fifteen (15) days prior to taking such action. See "Proposal I--

The Recapitalization and Related Transactions--The Recapitalization--Rights andPreferences of Exchangeable Shares--Microsoft Call Rights."

11

Adjustments to Class A Exchange Ratio Upon Certain Events

Upon the happening of certain share issuances, subdivisions, splits orcombinations after the effective date of the Recapitalization, the Class AExchange Rate shall, simultaneously with the happening of such event, be


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adjusted by multiplying the then effective Class A Exchange Rate by a fraction,the numerator of which shall be the number of Microsoft Common Sharesoutstanding immediately after such event and the denominator of which shall bethe number of Microsoft Common Shares outstanding immediately prior to such

event, and the product so obtained shall thereafter be the Class A ExchangeRate. The Class A Exchange Rate, as so adjusted, shall be readjusted in thesame manner upon the happening of any successive event or events. See "ProposalI--The Recapitalization and Related Transactions--The Recapitalization--Rightsand Preferences of Exchangeable Shares--Adjustments to Class A Exchange RateUpon Special Event."

WNI Stock Options

At the effective time of the Recapitalization, Microsoft shall replace theoutstanding WNI Options with options to purchase Microsoft Common Shares

("Microsoft Options") subject to terms and conditions as follows: (i) each newMicrosoft Option will be exercisable for a number of whole Microsoft CommonShares equal to the number of WNI Common Shares subject to the WNI Optionbeingreplaced immediately prior to such effective time multiplied by the ExchangeRatio, rounded to the nearest whole Microsoft Common Share; (ii) the exerciseprice per Microsoft Common Share shall be the exercise price of the WNI Optionbeing replaced immediately prior to such effective time divided by the ExchangeRatio; and (iii) such replacement options will be nonqualified options even ifthe WNI Options being replaced were incentive stock options (within the meaningof Section 422 of the Code) before such replacement. For example, if a holderhas options for 1,000 WNI Common Shares priced at $1.00 per share and the

Microsoft Closing Price is $100, the Exchange Ratio is .12841 ($12.841 dividedby $100) and such holder's new options would cover 128 Microsoft Common Sharesand would be priced at approximately $7.79 per share ($1.00 divided by .12841).See "Proposal I--The Recapitalization and Related Transactions--TheRecapitalization--WNI Stock Options."

In addition to the Microsoft Options issued in replacement of WNI Options,Microsoft shall grant additional Microsoft Options to certain employees of WNIwith a discounted exercise price (but subject to vesting), with an aggregatediscount of $31,774,000. See "Proposal II--Option Grants, Option Accelerationand Other Compensatory Matters."

Effective Time

It is anticipated that the Recapitalization will become effective as promptlyas practicable after the requisite WNI shareholder approval has been obtainedand all other conditions to the Recapitalization have been satisfied or waived(the "Effective Time"). See "Proposal I--The Recapitalization and RelatedTransactions--The Recapitalization--Effective Time."

Exchange Procedure

Accompanying this Proxy Statement/Prospectus is a Letter of Transmittal and


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Election Form ("Letter of Transmittal"), which when properly completed andreturned together with certificate(s) that represent the shareholder's WNIshares and an executed Escrow Agreement Signature Page, will enable the holderto exchange such certificate(s) for the number of whole Exchangeable Shares to

which the holder of WNI Common Shares is entitled or the cash to which theholder of WNI Preferred Shares, WNI Warrants or electing vested WNI CommonShares has either elected to, or is entitled to, receive under theRecapitalization Agreement. Until holders of certificates have surrendered themfor exchange and returned the executed Letter of Transmittal and EscrowAgreement Signature Page, (i) no dividends or other distributions will be paidwith respect to any shares represented by such certificate(s), and (ii) nointerest will be paid on any cash payable for WNI Preferred Shares, WNIWarrants or eligible electing WNI Common Shares or dividends or otherdistributions payable with respect

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to Exchangeable Shares if and when declared. Upon surrender of anycertificate(s) in exchange for Exchangeable Shares, the holder thereof willreceive any dividends or other distributions which became payable at or afterthe Effective Time, but were not paid by reason of the foregoing, with respectto the number of whole Exchangeable Shares represented by the certificate(s)issued upon such surrender. See "Proposal I--The Recapitalization and RelatedTransactions--The Recapitalization--Effect of Recapitalization."

Dissenters' Rights

The shares of any holder of WNI Common Shares or WNI Preferred Shares whohasdemanded and perfected dissenters' rights for such shares in accordance withthe California General Corporation Law ("CGCL") and who, as of the EffectiveTime, has not effectively withdrawn or lost such dissenters' rights, shall notbe converted into or represent a right to receive the consideration to bereceived by such holder in the Recapitalization, but rather the holder thereofshall only be entitled to such rights as are granted by California Law. See"The WNI Special Meeting of Shareholders--Dissenters' Rights."

SUMMARY OF OTHER PROVISIONS OF THE RECAPITALIZATIONAGREEMENT

Representations and Covenants

The Recapitalization Agreement contains certain customary representations andwarranties by WNI, the Principal Shareholders and Microsoft. See "Proposal I--The Recapitalization and Related Transactions--Summary of Other Provisions ofthe Recapitalization Agreement--Representations and Covenants."

Conditions to the Recapitalization


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The Recapitalization Agreement provides that, unless waived, the respectiveobligations of each party to effect the Recapitalization are subject to, amongother things, the following material conditions: (i) shareholder approvals asdescribed above; (ii) the absence of any injunction or other specified legal

prohibition; (iii) the receipt of required consents; (iv) the performance ofagreements and covenants and the absence of a material breach of therepresentations and warranties of the other party; and (v) the receipt of legalopinions as to the tax consequences of the Recapitalization and other customarymatters. See "Proposal I--The Recapitalization and Related Transactions--Summary of Other Provisions of the Recapitalization Agreement--Conditions tothe Recapitalization."

Indemnification by Shareholders and by Principal ShareholdersIn the Recapitalization Agreement, the holders of WNI Common Shares and WNI

Preferred Shares (other than holders who exercise their dissenters' rightsunder California law) and WNI Warrants will, by the approval of theRecapitalization and acceptance of the consideration provided in theRecapitalization Agreement, agree, severally, to defend, indemnify and holdMicrosoft harmless from and against any and all damages and other amounts(including expenses and attorneys' fees) incurred by Microsoft by reason of orarising out of or in connection with (i) any breach or asserted breach of anyrepresentation or warranty of WNI or the Principal Shareholders contained inthe Recapitalization Agreement or related documents, or (ii) the failure of WNIor the Principal Shareholders to perform any agreement or covenant in theRecapitalization Agreement. Cash and Securities with an aggregate value of $50million will be withheld on a pro rata basis from the consideration to be

distributed in connection with the Recapitalization and placed in an escrowaccount to be used to secure the indemnification obligations of the WNIshareholders. Should Microsoft successfully assert claims for indemnificationunder the Recapitalization Agreement, some or all of the Escrow WithholdingAmounts would not be released to holders of WNI Shares or WNI Warrants. See"Proposal I--The Recapitalization and Related Transactions--Summary of OtherProvisions of the Recapitalization Agreement--Indemnification by Shareholdersand by Principal Shareholders" and "--Related Agreements--Escrow Agreement."

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Termination or AmendmentThe Recapitalization Agreement may be terminated by mutual consent of the

parties at any time prior to the Effective Time of the Recapitalization.Microsoft or WNI may terminate the Recapitalization Agreement (i) upon thefailure of the shareholders of WNI to give the requisite approvals for theRecapitalization and related transactions; (ii) upon the entry of any courtorder that declares the Recapitalization unlawful or enjoins the consummationof the Recapitalization or the enactment of any statute causing theRecapitalization to be unlawful, or (iii) if the Effective Time does not occurby September 30, 1997 (the "Outside Date"); provided that if the parties elect


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to pursue litigation in connection with antitrust matters, this Outside Datemay be extended to March 31, 1998 by mutual agreement of the parties. Microsoftmay terminate the Recapitalization Agreement (so long as Microsoft is not inmaterial breach of the Recapitalization Agreement) if there has been a material

breach by WNI of any representation, warranty, covenant, or agreement containedin the Recapitalization Agreement and such breach has a material adverse effecton the Recapitalization and has not been cured within 30 days after notice ofsuch breach is given. Even if there has been no such breach, or a terminationis not otherwise permitted, Microsoft may terminate the RecapitalizationAgreement, subject to the payment to WNI of certain fees. WNI may terminate theRecapitalization Agreement (so long as WNI is not in material breach of theRecapitalization Agreement) if there has been a material breach by Microsoft ofany representation, warranty, covenant, or agreement contained in theRecapitalization Agreement and such breach has not been cured within 30 daysafter notice of such breach is given. Even if there has been no such breach,

WNI may terminate the Recapitalization Agreement. In such an event, Microsoftshall be entitled to the receipt of specified consideration in the event thatWNI is acquired on or before the first anniversary of the effective date ofsuch termination. The Recapitalization Agreement may be amended only by aninstrument in writing signed on behalf of each of Microsoft, WNI and thePrincipal Shareholders. See "Proposal I--The Recapitalization and RelatedTransactions--Summary of Other Provisions of the Recapitalization Agreement--Termination or Amendment."

RELATED AGREEMENTS

Escrow Agreement

At the Closing, Microsoft, WNI, each of the holders of WNI Common Shares, WNI

Preferred Shares and WNI Warrants, the Shareholders' Representative andChaseMellon Shareholder Services, LLC will enter into an escrow agreement, theform of which is attached to this Proxy Statement/Prospectus as Appendix D andis incorporated herein by reference. The purpose of the escrow agreement is tosecure the indemnification obligations of the WNI securities holders under theRecapitalization Agreement. Under the terms of the escrow agreement, cash andsecurities with an aggregate value of $50 million will be withheld from theconsideration to be distributed in connection with the Recapitalization andplaced in an escrow account. Execution of the escrow agreement is a

prerequisite to the receipt of the WNI Exchangeable Shares or cash provided forin the Recapitalization Agreement. Should Microsoft successfully assert claimsfor indemnification under the Recapitalization Agreement, some or all of theEscrow Withholding Amounts would not be released to holders of WNI Shares orWNI Warrants. See "Proposal I --The Recapitalization and Related Transactions--Related Agreements--Escrow Agreement."

Voting Agreements

Microsoft has entered into agreements with each of the PrincipalShareholders, who on the Record Date together owned beneficially in theaggregate 15,000,000 WNI Common Shares representing approximately 45% of the


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then outstanding WNI Shares, pursuant to which such shareholders have agreed tovote their WNI Shares in favor of the approval of the Recapitalization and theadoption of certain documents with respect to the Recapitalization and againstany action or agreement that would impede or interfere with the performance of

such Recapitalization documents or the consummation of the transactionscontemplated thereby. See "Proposal I --The Recapitalization and RelatedTransactions--Related Agreements--Voting Agreements."

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Intellectual Property, License of Technology and Patent License AgreementsImmediately prior to the execution of the Recapitalization Agreement, the

Principal Shareholders executed Intellectual Property, License of Technology,and Patent License Agreements with WNI, the purpose of which is to ensure thatat the closing of the Recapitalization (the "Closing"), all of the IntellectualProperty (as defined in the Recapitalization Agreement) is in fact owned by, orlicensed to, WNI, and available for use by WNI. See "Proposal I--TheRecapitalization and Related Transactions--Related Agreements--IntellectualProperty, License of Technology and Patent License Agreements."

Amended and Restated Shareholder Agreements

Contemporaneous with the execution of the Recapitalization Agreement,Microsoft, WNI and each of the Principal Shareholders entered into Amended and

Restated Shareholder Agreements with respect to the vesting of their respectiveunvested WNI Common Shares. See "Proposal I--The Recapitalization and RelatedTransactions--Related Agreements--Amended and Restated ShareholderAgreements."

Line of Credit Agreement

Contemporaneous with the execution of the Recapitalization Agreement,Microsoft and WNI entered into a Line of Credit Agreement, whereby Microsoftagreed to loan WNI, on a revolving basis, up to $30,000,000. See "Proposal I--The Recapitalization and Related Transactions--Related Agreements--Line of

Credit Agreement."

Make-Well Agreement

It is a condition to WNI's obligation to consummate the Recapitalization thatMicrosoft execute a Make-Well Agreement in favor of WNI pursuant to whichMicrosoft will agree to use its reasonable best efforts to ensure that WNI isable to and has the financial resources to take certain actions with respect toits Exchangeable Shares and to ensure that all exchange obligations of WNIunder the terms of the Exchangeable Shares are satisfied. See "Proposal I--TheRecapitalization Agreement and Related Transactions--Related Agreements--Make-Well Agreement."


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Affiliates AgreementsPrior to the Effective Time, WNI and Microsoft will enter into agreements

with each of the Principal Shareholders, and certain officers and directors ofWNI, pursuant to which such persons will agree that they will not sell orotherwise dispose of any Exchangeable Shares or Microsoft Common Shares unlesssuch sale or disposition is permitted pursuant to the provisions of Rule 145under the Securities Act, is otherwise exempt from registration under theSecurities Act, or is effected pursuant to a registration statement under theSecurities Act. See "Proposal I--The Recapitalization Agreement and RelatedTransactions--Related Agreements--Affiliates Agreements."

Employment and Noncompetition Agreements

Prior to the Effective Time, each of the Principal Shareholders will enterinto an Employment and Noncompetition Agreement with Microsoft and WNI. See"Proposal I--The Recapitalization and Related Transactions--RelatedAgreements--Employment and Noncompetition Agreements."

CERTAIN U.S. FEDERAL INCOME TAX MATTERS

It is a condition to the obligation of WNI and Microsoft to consummate theRecapitalization that WNI receive from Venture Law Group, A ProfessionalCorporation ("Venture Law Group"), and Microsoft receive from Preston Gates &Ellis LLP ("Preston Gates & Ellis"), an opinion that the Recapitalization morelikely

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than not constitutes a reorganization within the meaning of Section368(a)(1)(E) of the Internal Revenue Code of 1986, as amended (the "Code"). WNIsecurity holders are urged to consult their own tax advisors regarding the taxconsequences of the Recapitalization. See "Proposal I--The Recapitalization andRelated Transactions--Certain U.S. Federal Income Tax Matters."

ACCOUNTING TREATMENT

The Recapitalization is anticipated to be accounted for using the purchase

method of accounting under generally accepted accounting principles. Under thepurchase method of accounting, the assets of WNI will be valued at theirestimated fair market value and reflected on the books and records of Microsoftaccordingly. See "Proposal I--The Recapitalization and Related Transactions--Accounting Treatment." Microsoft expects that an in process research anddevelopment write-off of $300 million will be required in the quarter in whichthe Recapitalization closes.

EFFECT OF NONAPPROVAL


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If WNI is unable to obtain approval by its shareholders before September 30,1997 (or March 31, 1998 if Microsoft and WNI have mutually agreed to pursuelitigation against any action challenging the Recapitalization as violative ofantitrust laws), either Microsoft or WNI may terminate the Recapitalization

Agreement.

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SELECTED FINANCIAL DATA OF WNIThe selected financial data set forth below should be read in conjunction

with "Management's Discussion and Analysis of Financial Condition and Resultsof Operations" and the financial statements of WNI, including notes thereto,

included elsewhere in this Proxy Statement/Prospectus. The statement ofoperations data set forth below for the period from inception (June 30, 1995)to March 31, 1996 and for the year ended March 31, 1997 and the balance sheetdata as of March 31, 1996 and March 31, 1997 have been derived from the auditedfinancial statements of WNI included elsewhere in this ProxyStatement/Prospectus, which have been audited by Ernst and Young LLP,independent auditors.

PERIOD FROM

INCEPTION

(JUNE 30, 1995) YEARENDED

TO MARCH 31, MARCH

31,

1996 1997-

-------------- ------------

STATEMENT OFOPERATIONS DATA:

Revenues:On-line

service................................ $-- $ 3,456,120Licensing and

manufacturing....................-- 38,949,810


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----------- ------------Total

revenues...............................-- 42,405,930

Cost of revenues:On-line

service................................-- 12,384,056Licensing and

manufacturing....................-- 36,968,200

----------- ------------

Total cost ofrevenues....................... --

49,352,256Grossloss.......................................

-- (6,946,326)Operating expenses:

Research anddevelopment.......................

2,117,852 11,273,081Sales and

marketing............................258,865 18,688,022

General and

administrative.....................853,373 6,506,030

----------- ------------Total operating costs and

expenses........... 3,230,09036,467,133

----------- ------------

Loss fromoperations........................

Documents

SEC Filings - Microsoft - 0000898430-97-002409