Ownership Submission
FORM 4
Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b).
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

STATEMENT OF CHANGES IN BENEFICIAL OWNERSHIP OF SECURITIES

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, Section 17(a) of the Public Utility Holding Company Act of 1935 or Section 30(h) of the Investment Company Act of 1940
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(Print or Type Responses)
1. Name and Address of Reporting Person *
SMITH BRADFORD L
  2. Issuer Name and Ticker or Trading Symbol
MICROSOFT CORP [MSFT]
5. Relationship of Reporting Person(s) to Issuer
(Check all applicable)
_____ Director _____ 10% Owner
__X__ Officer (give title below) _____ Other (specify below)
Senior Vice President
(Last)
(First)
(Middle)
ONE MICROSOFT WAY
3. Date of Earliest Transaction (Month/Day/Year)
09/22/2005
(Street)

REDMOND, WA 98052-6399
4. If Amendment, Date Original Filed(Month/Day/Year)
6. Individual or Joint/Group Filing(Check Applicable Line)
_X_ Form filed by One Reporting Person
___ Form filed by More than One Reporting Person
(City)
(State)
(Zip)
Table I - Non-Derivative Securities Acquired, Disposed of, or Beneficially Owned
1.Title of Security
(Instr. 3)
2. Transaction Date (Month/Day/Year) 2A. Deemed Execution Date, if any (Month/Day/Year) 3. Transaction Code
(Instr. 8)
4. Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4 and 5)
5. Amount of Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 3 and 4)
6. Ownership Form: Direct (D) or Indirect (I)
(Instr. 4)
7. Nature of Indirect Beneficial Ownership
(Instr. 4)
Code V Amount (A) or (D) Price
Common Stock               56,078 D  

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Table II - Derivative Securities Acquired, Disposed of, or Beneficially Owned
(e.g., puts, calls, warrants, options, convertible securities)
1. Title of Derivative Security
(Instr. 3)
2. Conversion or Exercise Price of Derivative Security 3. Transaction Date (Month/Day/Year) 3A. Deemed Execution Date, if any (Month/Day/Year) 4. Transaction Code
(Instr. 8)
5. Number of Derivative Securities Acquired (A) or Disposed of (D)
(Instr. 3, 4, and 5)
6. Date Exercisable and Expiration Date
(Month/Day/Year)
7. Title and Amount of Underlying Securities
(Instr. 3 and 4)
8. Price of Derivative Security
(Instr. 5)
9. Number of Derivative Securities Beneficially Owned Following Reported Transaction(s)
(Instr. 4)
10. Ownership Form of Derivative Security: Direct (D) or Indirect (I)
(Instr. 4)
11. Nature of Indirect Beneficial Ownership
(Instr. 4)
Code V (A) (D) Date Exercisable Expiration Date Title Amount or Number of Shares
Performance Rights $ 0 (1) 09/22/2005   A   90,750 (2) (3)   08/31/2006(4) 08/31/2008 Common Stock 90,750 $ 0 90,750 D  

Reporting Owners

Reporting Owner Name / Address Relationships
 Director  10% Owner  Officer  Other
SMITH BRADFORD L
ONE MICROSOFT WAY
REDMOND, WA 98052-6399
      Senior Vice President  

Signatures

 Keith R. Dolliver, Attorney-in-Fact for Bradford L. Smith   09/26/2005
**Signature of Reporting Person Date

Explanation of Responses:

* If the form is filed by more than one reporting person, see Instruction 4(b)(v).
** Intentional misstatements or omissions of facts constitute Federal Criminal Violations. See 18 U.S.C. 1001 and 15 U.S.C. 78ff(a).
(1) 1-for-1
(2) The reporting person received an increase in the target number of shares of common stock under a shared performance stock award ("SPSA") for the fiscal 2004-2006 performance period. This amount represents the minimum number of shares of common stock that will be issued under the SPSA.
(3) The number of shares ultimately received depends on the company's performance against specified performance targets. At the end of the performance period, the number of shares of stock and stock awards will be determined by adjusting upward or downward from a target in a range between 33% and 150%. The number reported herein is based on the 33% minimum. The final performance percentage on which the payout will be based, considering company performance metrics established for the performance period, will be determined by the board or a board committee in its sole discretion. Shares of stock are issued at the end of the performance period and as the stock awards vest over the following two years, provided that the reporting person remains continuously employed through the applicable vest date.
(4) One-third of the number of shares of common stock ultimately awarded under the SPSA will be distributed to the reporting person on or about August 31, 2006 (the "initial vest date"), an additional one-third shall vest and be distributed to the reporting person on each of the first and second anniversaries of the initial vest date, provided that the Reporting Person remains continuously employed through the applicable vesting date.

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