TBR 1Q11 Microsoft Company Report
 

TBR 1Q11 Microsoft Company Report

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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company ...

Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology.

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    TBR 1Q11 Microsoft Company Report TBR 1Q11 Microsoft Company Report Presentation Transcript

    • SOFTWARE BUSINESS QUARTERLYSMMicrosoft Corp.First Calendar Quarter 2011Third Fiscal Quarter 2011 Ended Mar. 31, 2011 TBR OUTLOOK – POSITIVE TBR SCORE (0-10 SCALE)  6.27Publish Date: May 19, 2011Author: Allan Krans (allan.krans@tbri.com), Software Senior Analyst TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .Content Editor: Stuart Williams, Software Practice Manager
    • Contents TBR Company Analysis Company Analysis 3 Executive Summary 26 Income Statement 6 Strategy Overview 27 Balance Sheet 9 Corporate SWOT Analysis 28 Business Unit Revenue Model 10 Scenario Discussion 29 Geographic Model 13 Financial Model Strategy 30 Headcount Model 16 Go-to-Market & Services Strategies 31 Operating Expense Model 18 Alliance & Acquisition Strategies 32 Financial Strategy Graphs 22 Geographic Analysis 33 Go-to-Market Graphs 23 Resource Management Strategy 34 Resource Management Graphs 26 Appendix 36 Future Outlook Graph 37 Acquisitions Table 40 Strategic Alliance Tables 46 Product Portfolio Table 47 About TBR2 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • TBR Position TBRMicrosoft is re-examining long-held strategies and establishing newbusiness charters to ensure long-term growth TBR Assessment Corporate Strategic Objectives • Microsoft is realigning its core businesses in response Drive adoption of cloud services with Azure, Office to shifting market trends while continuing its forward Web Applications and Office 365 to offset cloud progress with cloud expansion initiatives. margin pressure with volume • The realignment of the next-generation Windows • Building cloud volume will be a long-term initiative operating system to run on ARM processors is an for Microsoft, but the company is gradually putting example of the way Microsoft is adjusting long-held the offerings and partnerships in place. strategies to capitalize on emerging trends such as the • A strategic partnership with Toyota, as well as proliferation of mobile computing. partner expansion in the media and entertainment • Cloud is not generating significant financial returns for industry, will expand the reach of Microsoft’s Azure platform into new verticals. Microsoft, but the company will maintain high levels of investment to expand its portfolio and win partner Maintain dominance of Windows and productivity commitment to build scale. software products to drive strong cash flow To address the second consecutive quarter of year-to- year declines in its core Windows division, Microsoft MSFT 1Q11 PERFORMANCE VS. EXPECTATIONS announced future ARM processor support and (in $ Millions) Consensus Guidance Range Actual Revenue $ 16,040 N/A $ 16,428 increased investments to position Azure as a cloud Operating Income N/A N/A $ 2,856 platform. Non- GAAP EPS $ 0.55 N/A $ 0.61 Expand presence in enterprise software (middleware and applications) to capture high-margin revenue MSFT 2Q11 GUIDANCE AND EXPECTATIONS growth (in $ Millions) TBR Estimate Consensus Guidance Range Microsoft announced the launch of Windows Intune Revenue $ 17,400 $ 17,380 N/A and System Center 2012 in 1Q11, cloud-based Operating Income $ 6,985 N/A N/A management and security platforms that will help Non-GAAP EPS N/A $ 0.60 N/A migrate additional Microsoft customers and partners to the cloud.3 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRContinued year-to-year declines in headcount enable Microsoftto remain highly efficient in GTM metrics CALENDAR QUARTER RESULTS TBR Company Average StandardTBR SCORING SUMMARY: 1Q10 2Q10 3Q10 4Q10 1Q11 FINANCIAL METRICS Score Figure in Class DeviationFinancial Model Strategy: 6.10 6.53 6.85 5.41 5.53 Gross Margin 4.94 76.3% 76.8% 10.7%Go-to-Market & Services Strategies: 8.04 8.11 8.17 8.18 8.22 SG&A as % of Revenue 7.23 27.7% 40.9% 11.9%Resource Management Strategy: 4.51 4.51 4.83 4.97 5.05 Sales & Marketing as % of Revenue 7.01 20.7% 31.1% 10.5% R&D as % of Revenue 5.22 13.8% 14.3% 4.5%TOTAL AVERAGE TBR SCORE: 6.22 6.38 6.62 6.19 6.27 Operating Margin 7.30 34.8% 19.3% 13.7% Net Margin 5.94 31.8% 18.3% 28.7% Revenue Growth YTY 4.90 13.3% 14.1% 16.0% Due to strong demand for core products such as Office Gross Profit Growth YTY 4.01 6.7% 14.0% 14.8% License Revenue Growth YTY 4.70 13.2% 15.8% 16.8% and Windows, Microsoft’s year-to-year revenue growth Maintenance Revenue Growth YTY 4.91 12.0% 13.0% 22.3% picked up in 1Q11, lifting its Financial Metrics score Professional Services & Consulting Revenue Growth YTY 4.73 12.4% 16.6% 31.4% back above peers’. Revenue growth, coupled with 5.53 TOTAL AVERAGE TBR SCORE shaved costs, enable Microsoft to sit above peers in TBR Company Average Standard both its Financial and Go-to-Market metrics, and GO-TO-MARKET & SERVICES METRICS Score Figure in Class Deviation ultimately its overall TBR score. Total Revenue per Employee** 10.00 $772.7 $313.3 $125.1 TBR Company Average Standard Annual Prof. Services Revenue per Service & Support Employee** 5.01 $175.1 $174.2 $153.6RESOURCE MANAGEMENT METRICS Score Figure in Class Deviation Annual Soft. License & MaintenanceDays Sales Outstanding 5.29 54.97 59.08 28.61 Revenue per Developer** 8.34 $1,478.3 $911.1 $339.4Fixed Asset Turnover 4.04 8.33 15.21 14.33 Annual Prof. Services/Consulting RevenueDays Cash Outstanding 6.43 274.74 187.23 122.02 per Salesperson** 4.77 $246.1 $281.6 $310.9Total Asset Turnover 5.64 0.69 0.61 0.22 Annual Software LicenseDebt/Asset Ratio 5.31 0.46 0.48 0.12 Revenue per Salesperson** 10.00 $3,225.5 $629.8 $522.2Current Ratio 8.45 2.76 1.59 0.67 Annual MaintenanceReturn on Assets 9.38 0.24 0.07 0.08 Revenue per Salesperson** 9.43 $1,134.5 $527.7 $273.9Return on Equity 7.88 0.45 0.15 0.21 Annual Revenue per Salesperson** 10.00 $4,606.1 $1,439.2 $702.3Annual Sales & Marketing Expense per TOTAL AVERAGE TBR SCORE 8.22Sales & Marketing Employee** - $585.5 $319.4 $90.0 Key ■ Represents an area where Microsoft is currently challenged versus peersAnnual G&A Expense per G&A Employee** 0.47 $491.7 $251.0 $105.7 ■ Represents an area where Microsoft is outperforming its peersAnnual R&D Expense per Developer** 2.69 $248.6 $161.7 $75.4 ■ Represents an area where Microsoft is neither significantly outperforming norTOTAL AVERAGE TBR SCORE 5.05 underperforming its peers * In thousands4 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Executive Summary TBRCore products remain the financial base for Microsoft to execute onhigh-growth opportunities in future quartersTBR assessment of Microsoft’s two-year strategic outlookKey Takeaways Strategic Outlook Financial: Drive revenue growth from core • Microsoft will continue expanding the applicability and products, including Microsoft Office, Windows OS availability of its Windows and Office products to reach new and current customers. and Xbox 360. • Entertainment & Devices, specifically Xbox 360 and Kinect, Go to Market: Develop new offerings to capture will drive revenue growth in coming quarters as Microsoft high-growth areas in the cloud and appliance integrates Skype into its communications portfolio. markets. • Partners and resellers will continue to be a crucial channel Resource: Continue to invest in partner program for Microsoft to promote its core products, as well as new offerings in the cloud and appliance markets. enhancements to maintain the indirect channel as • Microsoft’s Azure cloud ecosystem will be the critical link Microsoft’s primary go to market route. for the company to transfer existing distribution MICROSOFT NET REVENUE, GROWTH AND PROJECTIONS partnerships to cloud services. TBR • Microsoft will broadly utilize the Azure platform, attracting Net Revenue Growth Year-to-year $80 30.0% $70 25.3% 25.0% customers, partners and development investments across $60 22.4% 20.0% new verticals in CY11. $50 In $ Billions 13.6% $40 13.3% 15.0% • Microsoft will continue to face competition in the cloud 8.5% $30 $20 6.3% 4.9% 5.0% 7.5% 10.0% computing market from vendors such as Salesforce.com, $10 5.0% Google, Amazon, HP, IBM and EMC; however, Microsoft $0 0.0% continues to move forward with its cloud strategy and 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 CY10 CY11 CY12 Est. Est. Est. release new products. Net Revenue Revenue Growth Year-to-YearNOTE: Annual revenue and projections are for calendar 2010, 2011 and 2012, respectively.SOURCE: MICROSOFT AND TBR5 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRMicrosoft continues to rely on core products, such as Windows andOffice, while looking to expand in new growth markets Function Key Strategies TBR Assessment  Incremental growth in Microsoft’s Windows Division cut into the product line’s margins in Preserve position in Windows and Office 1Q11. As Microsoft’s second-highest contributing products to maintain division, it is crucial for the company to restore revenue and profitability growth in its Windows Division to maintain high streams. levels of corporate profitability. Overall ►  In 1Q11, Microsoft ended its x86 processor Promote cloud, mobile exclusivity with Intel and announced additional and appliance portfolios to support of AMD and ARM SoC architectures, increase revenue in empowering the company to expand the growing markets. availability of its core Windows products to more devices, including smartphones and tablets.  User adoption of Windows Phone 7 continues to progress slowly, but the Skype acquisition could Make investments in the bolster adoption. Financial cloud and mobile markets ►  Microsoft expanded the market presence of the to grow with the market. Azure platform into new verticals, arming partners to better compete within specific verticals with cloud solutions. Key:  Working: Short-term impact expected on bottom / top line  Not working: No major impact or differentiation expected6 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRMicrosoft continues to rely on core products, such as Windows andOffice, while looking to expand in new growth markets (cont.) Function Key Strategies TBR Assessment Extend portfolio in high-  The Online Services Group continues to growth areas like cloud contribute relatively minimal revenue, and and appliance markets. requires significant investment that could be used to fund more promising investments or bolster Go to Market Increase buy-in from ► profitability. partners, as Microsoft  Microsoft improved its developer network in expands cloud offerings to 1Q11 with new cloud-centered training and SMBs. accessibility tools for developers.  Microsoft’s acquisition of Skype was the largest Focus on acquisitions to acquisition in company history, and will add a expand product functionality, helping layer of functionality to Microsoft’s Microsoft enhance its communications capabilities, allowing the current portfolio. company to better compete across both the Alliances & ► consumer and business markets. Acquisitions Establish strong  Microsoft continued to enhance its partner partnership ecosystem to network in 1Q11, establishing partnerships in the offload the burden direct automotive and media and entertainment (M&E) sales, and drive adoption of Microsoft products. markets to drive the adoption of its Azure platform. Key:  Working: Short-term impact expected on bottom / top line  Not working: No major impact or differentiation expected7 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Strategy Overview TBRMicrosoft is investing to capture long-term revenue growth in thecloud market Function Key Strategies TBR Assessment Utilize partners to cost-  Microsoft maintains a strong commitment to its Operations & effectively resell products partner network that provides advantages in cost- ► GDM and deliver services effectively developing and delivering software worldwide. solutions.  Microsoft’s appliance strategy hinges on outside Begin investing more vendors and partners to add the hardware layer heavily to enhance to their appliance offerings. Significant investment product offerings in in partner development will be crucial for appliance market. Microsoft’s appliance strategy to become a viable Resources & ► business model. Investment Invest in growth  While cloud promises to generate revenue growth opportunities to drive in the long run, heavy investment in the short long-term revenue growth term comes at a cost, as Microsoft continues to across portfolio. rely on its core products to fund investments that will not see an immediate monetary return. Key:  Working: Short-term impact expected on bottom / top line  Not working: No major impact or differentiation expected8 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Corporate SWOT Analysis TBRThe acquisition of Skype expands Microsoft’s communicationsopportunities in both the consumer and business markets Corporate SWOT Analysis Strengths Opportunities • Core segments, Windows and Office, continue to be • Use Skype acquisition to integrate Windows leaders in the market. Phone 7, Xbox 360 and Kinect, and Windows OS to • Increasing recognition in database, middleware and expand communications capabilities across business application markets. and consumer markets. • Established brand name reassures potential • Provide continual upgrades around resources and partners to adopt Microsoft technology. incentives for partners to adopt Microsoft’s • Partner-based distribution model enables wide and portfolio. efficient sales coverage. • Diverse portfolio allows Microsoft to achieve revenue growth in new and growing markets across the globe, like healthcare IT and media and entertainment. Weaknesses Threats • Systems vendors threaten to take market share • Established players in the appliance space, such as from Microsoft as customers look for all-in-one EMC and IBM, threaten Microsoft’s entry into the hardware/software solutions. market. • Investments for expansion into new markets and • Vertical expansion causes hesitation from partners verticals take significant upfront investment. questioning profitability. • Lack of experience in the appliance market • Pure-play cloud companies, such as Google, threatens customer adoption. threaten Microsoft’s desktop software model.9 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Scenario Discussion TBRMicrosoft continues to rely on partnerships to expand portfolio intonew verticals and revenue streams Scenario Discussion: Microsoft’s vertical expansion through partnerships Scenario SWOT Assessment Strength: Established brand name is • TBR believes Microsoft’s expansion into new verticals is dependent on partners to help drive new sources of reassuring to potential partners. revenue and strengthen Microsoft’s overall position against Weakness: Vertical expansion through competitors across industries. partners is more focused on SMB customers rather than enterprise market. • In 1Q11, Microsoft expanded its vertical reach through partnerships in the healthcare, automotive and Opportunity: Expand partner ecosystem entertainment industries, while also releasing products to across verticals. directly target the education and retail verticals. Threat: Possible hesitation from partners • Microsoft announced the development of a partner regarding unproven verticals. ecosystem to drive cloud adoption within the media and entertainment (M&E) industry in 1Q11. Focused on Microsoft’s successful partner network, the new partner ecosystem will help drive adoption of Microsoft’s Azure platform within the M&E industry. • To fully take advantage of the opportunities growing verticals present, Microsoft couples partnerships with organic vertical expansion and new product releases. • Partnerships allow Microsoft to focus on the development of its portfolio and platform, while allowing partners to add a layer of customization to attract customers to Microsoft’s SOURCE: MICROSOFT offerings.10 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Scenario Discussion TBRMicrosoft expands its partner network to drive adoption across therapidly growing healthcare market Scenario Discussion: Microsoft’s healthcare vertical expansion Scenario SWOT Assessment • Microsoft’s portfolio of healthcare solutions continues to grow Strength: Numerous partnerships in as the company works to fully take advantage of the quickly healthcare IT help reinforce Microsoft’s evolving industry through partnerships and new product credibility in the market. releases. Weakness: Security is a critical • In 1Q11, Microsoft focused on further expansion into the consideration for Health IT, which is not a healthcare market by relying on partnerships and new product traditional Microsoft strength. releases to drive further into the emerging market. Opportunity: Healthcare IT shows strong • Microsoft formed three partnerships in 1Q11 targeting the revenue growth opportunities for software healthcare vertical: athenahealth, Royal Philips Electronics NV vendors. and Dell and Stellaris Health Network. Threat: Unclear path of what direction • All three partnerships reinforce Microsoft’s healthcare strategy healthcare IT is heading in as an industry. to create solutions that simplify processes for healthcare providers, and improve communication across hospitals, doctors and patients. • Microsoft also released its State Health Insurance Exchange in 1Q11 to help states create a interoperable architecture that allows insurance information to be exchanged across both public and private healthcare systems. • The healthcare vertical is undergoing rapid change, as organizations within the industry work to become more digital and computerized. This transformation opens up many new opportunities for software vendors to create solutions tailored to the industry and specific customer needs, such as record SOURCE: MICROSOFT organization.11 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Scenario Discussion TBRIncreased demand for end-to-end solutions has led Microsoft to dipits feet into the appliance market Scenario Discussion: Microsoft’s gradual entrance into the appliance business Scenario SWOT Assessment Strength: SAP partnership adds layer of • TBR believes Microsoft will continue to establish its appliance capability that competing appliances lack. business, as customers continue to demand all-in-one hardware and software solutions. Weakness: Lack of experience in the • At the end of 4Q10 Microsoft partnered with HP to deliver the market threatens customer adoption. HP Database Consolidation Appliance. While the tight Opportunity: Appliance market quickly integration of software and hardware is an area of expansion, gaining momentum. Microsoft has been working to integrate software solutions Threat: More established appliance with partners, recently announcing an expanded partnership vendors like EMC and IBM threaten with SAP to deliver the Duet Enterprise, which combines Microsoft’s entry into the market. Microsoft SharePoint with SAP solutions. • Previously, Microsoft focused on delivering its software solutions through traditional hardware delivery models; it is now diversifying its delivery methods by dipping into the appliance business to meet customer demand for solutions. • Companies are increasingly demanding all-in-one solutions as the lines between hardware and software begin to blur. The plug-and-play capabilities appliances offer are very attractive to customers seeking easily implemented solutions to complex IT problems. To compete and address this new demand, more companies are entering into the appliance business, including Microsoft. • As Microsoft continues to dip into the appliance market, it will position itself for future growth and to compete on a more direct level with large players Oracle, HP and IBM. SOURCE: MICROSOFT12 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBRCore Microsoft products Office 2010 and Windows continue tocontribute the highest proportion to revenue in 1Q11 Revenue Performance and Product Strategies 1Q11 Net Revenue: $16.4 billion, 13.3% YTY TBR MICROSOFT REVENUE AND PROFITABILITY • Microsoft’s double-digit year-to-year revenue growth $25,000 100% was mainly attributable to strong performance of 90% $20,000 80% Windows Server, SQL database, Microsoft Office and In $ Millions 70% $15,000 60% the increased adoption of cloud services. 50% $10,000 40% 30% • Microsoft’s Business Division led year-to-year growth $5,000 20% 10% in 1Q11 at 23.8%, while also comprising the highest $- 0% 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 proportion of total revenue at 32.0%. This growth can Est. be attributed to increased Office sales with PC Total Revenue Operating margin Gross Margin shipments. SOURCE: TBR AND MICROSOFT • Despite an increase in enterprise demand for Windows 7, consumer PC shipments continued to TBR decrease in 1Q11, slowing the overall growth of MICROSOFT SEGMENT CONTRIBUTIONS TBR $868,264 $853,727 $954,673 $944,290 Microsoft’s Windows Division to 0.7% from 1Q10. 100% $861,387 $972,290 90% Revenue and Growth Outlook Percent of Total Revenue 80% $3,142,200 $3,679,587 $3,291,973 $3,433,711 $3,519,264 $3,716,383 70% 60% • TBR expects Microsoft’s Entertainment and Devices 50% 40% division to lead year-to-year growth in 2Q11 with just $11,175,616 30% $8,261,536 $9,340,686 $9,719,640 $9,353,446 $10,185,167 over 23% year-to-year growth, as the demand for 20% 10% Xbox, and Xbox Kinect continues to increase. 0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. • In 2Q11, TBR estimates total revenue will increase Consulting Maintenance New License approximately 8.5% year-to-year to $17.4 billion, as SOURCE: TBR AND MICROSOFT cloud solutions, including Office 365 and Windows Intune, gain traction in the market.13 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBRMicrosoft’s margins continue to suffer due to high volume costs in theEnterprise Services and Entertainment and Devices divisions Cost & Margin Performance and Strategy 1Q11 Operating Expenses: $10.7 billion TBR MICROSOFT PERCENT EXPENSE BY FUNCTION • Higher expenses resulted from high 30.0% services volume within the enterprisePercent of Revenue 25.0% market, growth of the Entertainment 20.0% 15.0% and Devices division, and costs 10.0% COGS, associated with Microsoft’s alliance 5.0% Gross Profit with Yahoo. 0.0% • In 1Q11, Microsoft’s gross profit rose 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 6.7% year-to-year to $12.5 billion. COGS S&M G&A R&D Est. • Cost of sales increased 41.5% year-to-SOURCE: TBR AND MICROSOFT year to 23.7% of total revenue. MICROSOFT GROSS AND OPERATING PROFIT • R&D expenses rose 2.2% year-to-year in TBR AND PROJECTIONS 1Q11, to $2.3 billion. 100% SG&A & • SG&A expense increased 4.5% year-to- R&D 80% year in 1Q11, but fell 230 basis points Gross and Operating Margin 60% as a percentage of revenue to 27.7%. 40% • Operating margin decreased to 34.8% in 1Q11 from 35.7% in 1Q10. 20% Operating • TBR believes Microsoft’s operating Margin and 0% margin will increase in 2Q11 to 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 CY10 CY11 CY12 Outlook Est. Est. Est. approximately 40% as top-line revenue Gross Margin Operating Margin growth will outpace expenses. NOTE: Annual gross and operating profit and projections are for calendar 2010, 2011 and 2012, respectively. SOURCE: TBR AND MICROSOFT 14 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Financial Model Strategy TBROffice 2010 and Microsoft’s Business Division lead revenue growthin 1Q11 Segment Revenue Performance and Strategies Segment Financials TBR MICROSOFT SEGMENT REVENUE Microsoft Windows Division grew 0.7% $18,000 Windows & $16,000 $648 year-to-year as Windows 7 maintains $14,000 $566 $1,935 Online Services Group Windows Live momentum in the enterprise market. $1,665 In $ Millions $12,000 $4,104 Entertainment and $10,000 $3,575 Devices $8,000 $4,445 Server and Tools Server & Tools grew 14.8% year-to-year $6,000 $4,415 in 1Q11, due to strong demand for $4,000 Windows Division Server & Tools Windows Server Premium, SQL Server $2,000 $4,243 $5,252 Microsoft Business $- Division Premium and System Center. 1Q10 1Q11 Calendar Quarter Online Services grew 14.5% year-to- Online Services SOURCE: TBR AND MICROSOFT year as Bing continues to gain market Group share in the U.S. TBR TBR MICROSOFT PERCENT REVENUE BY SEGMENT 40% Microsoft Office (comprised of Office, SharePoint, Exchange and Lync) as well Microsoft 30% as Microsoft Dynamics CRM drove Percent of Revenue Business Division MBD’s revenue growth of 23.8% in 20% 1Q11. 10% Entertainment & Devices reported 0% Entertainment & 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 16.2% year-to-year growth, driven Windows Division Microsoft Business Division Server and Tools Entertainment and Devices Online Services Group Devices primarily by Xbox Kinect and Xbox 360. SOURCE: TBR AND MICROSOFT15 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Product Strategies TBRMicrosoft is diversifying its product offerings under the umbrellatheme of cloud computing Microsoft’s “we’re all in” cloud strategy is universal, as shown by its commitment to spend 90% of its R&D budget on its cloud solution strategy in 2H11 • Microsoft announced the release of System Center 2012 and Windows Intune, two private-cloud centered solutions that broaden Microsoft’s capabilities within enterprise systems management. System Center 2012 is specifically engineered for high-performing collaboration with Hyper-V. • In 1Q11, Microsoft announced a partnership with Toyota, and will jointly develop a solution through Azure (Microsoft’s dedicated cloud development platform) to provide advanced telematics services for Toyota customers – launching an innovative partnership and extending Microsoft’s cloud brand into a new segment. TBR Position • TBR believes slow growth in mature markets will continue to force Microsoft to adapt its products into cloud- based solutions to maintain growth and market share within the emerging cloud market. Product Strategies Software Services Services Strategies Stack Offerings • Gear product functionality and capabilities • Enable and facilitate partner delivery of toward SMB customers, delivering ease of services and solutions to end-customers. BI Consult use versus enterprise-level functionality. • Participate and cooperate in partner • Counter open source threats with engagements as a product expert. selective participation and risk mitigation. Apps Premium • Increase annuity service agreements to • Expand target markets by investing in provide revenue stability. consumer and enterprise products. MW • Deliver services to enterprise end-users, • Leverage desktop strength as customers Base forging a direct relationship with Microsoft. transition to SaaS. DB Support • Deliver the education and training needed • Provide well-received platforms to to foster the Microsoft ecosystem. support partner customization and OS Education development.16 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Go to Market & Product Strategies TBRMicrosoft will jump-start growth in mature markets through the useof verticalization and partnerships Vertical markets are a substantial portion of Microsoft’s expansion plan, as mature software markets are driving vendors to search for new sources of revenue growth • Microsoft’s vertical expansion in 2011 will hinge upon growing its partner network, enabling the company to capitalize on opportunities presented by growing verticals. • Key partnerships with Dell and Stellaris Health Network, as well as with athenahealth, helped Microsoft expand into the healthcare industry by offering web-based analytics and collaboration services to hospitals. • In 1Q11, Microsoft announced a new partner ecosystem directed toward the media and entertainment industry (M&E), focused on guiding M&E customers into the cloud via Microsoft’s Azure platform. TBR Position • TBR believes the continued expansion of Microsoft’s partner ecosystem and programs will enable the company to expand into other industry segments, not just M&E – a critical move for the company to overcome slowed growth in mature markets. Estimated Microsoft Revenue Indirect Sales Strategies Mix by LOB Direct Sales Strategies • Leverage partners to provide sales • Target largest accounts coverage across the globe. 10% directly to meet customer LE needs for continuity and • Support partners with marketing resources, development funds and 25% deep global relationships. training/certification. SME • Partner with VARs and SIs to • Implement tiered rebate programs maintain channel to target specific markets or involvement across all 35% products. accounts. SMB • Overcome customer • Cooperate with partners on joint sales engagements. apprehension regarding SaaS 30% through offering Microsoft- • Share support sales and delivery Consumer hosted solutions. opportunities as a differentiator.17 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRMicrosoft acquires Skype to be the communications anchor across itsportfolio Acquisition/Alliance Assessment Acquisition Strategy Skype will be the glue that holds together Microsoft’s consumer communications business The Skype acquisition (the largest in the • Just after its 1Q11 earnings release in May, Microsoft announced the company’s history at $8.5 billion) will support acquisition of Skype for $8.5 billion cash. While Microsoft will most Microsoft’s communication capabilities from likely not see direct profit from Skype, the acquisition helps galvanize a functional, but likely not a financial, Microsoft’s communications offerings across both the consumer and perspective. Skype will provide the business markets. functionality for Microsoft to fully integrate • TBR believes the acquisition of Skype positions Microsoft to go toe-to- its communications across devices in both the toe with Apple’s FaceTime, Google Video Chatting in the consumer consumer and business markets. space, and Cisco’s WebEx and TelePresence offerings in the enterprise market. • Skype, a company known for providing video and voice calling capabilities on PCs and mobile phones via the Internet, brings to Microsoft approximately 660 million active users across consumer and business markets. • The addition of Skype allows Microsoft to effectively integrate its existing products in all three spaces, including Microsoft Office Platform and Windows OS on PCs, Windows Phone 7, and the Xbox 360 and Kinect, attracting consumers with an unprecedented communication opportunity. • Microsoft can utilize Skype to bolster its LiveMeeting offering, allowing enterprise users to communicate and collaborate with each other in live meetings across mobile devices, PCs and tablets, through voice SOURCE: SKYPE and video capabilities.18 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRPartnerships and acquisitions enable Microsoft to monetize growingmarket opportunities Key Microsoft Partner and Acquisition Announcements Acquisition/ Action Impact or Changes Partner Skype brings a level of functionality to Microsoft’s communication portfolio that will allow Microsoft to compete with major players in both the business and consumer Acquire Skype Skype markets. Integration of Skype will allow Microsoft’s Live Meeting to compete with the likes of Cisco’s TelePresence and WebEx in the business market, and Apple’s FaceTime in the consumer market. Announced Microsoft and Toyota formed a strategic partnership build a global platform for partnership Toyota Toyota’s Telematics services. The platform will be built using the Windows Azure with Toyota platform, and will extend Microsoft’s vertical reach into the automotive industry. Announced Dell & Microsoft partnered with Dell & Stellaris Health Network to create and deliver partnership Stellaris analytics, informatics and business intelligence SaaS solutions for community with Dell & hospitals. The solution was developed with Stellaris, a community hospital system Health Stellaris Health and combines Microsoft Amalga, and with Dell’s cloud infrastructure. Network Network Microsoft’s acquisition of Canesta will grant Microsoft the access to Canestas 3-D Acquire sensor chip, enabling the company to capitalize on 3-D sensing technology and Canesta expand beyond gaming and Kinect to use the technology in other devices. Microsoft Canesta also received Canesta’s customer contracts, expanding Microsoft’s customer base. The acquisition of AVIcode will provide Microsoft customers with a new set of Acquire software to help monitor applications in a .NET framework. The software will AVIcode provide managers an end-user point of view for services while also bridging AVIcode datacenter and cloud service applications.19 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRPartnerships and acquisitions enable Microsoft to monetize growingmarket opportunities (cont.) Key Microsoft Partner and Acquisition Announcements Acquisition/ Action Impact or Changes Partner The purchase of Sentillion continues to drive Microsoft’s healthcare Acquire Sentillion industry impact and will add to the outcome of Health Solutions Group’s Sentillion medical applications. Announced Microsoft will combine its Azure platform with Intuit’s Partner Platform, allowing developers and channel partners to deliver enhanced solutions to partnership with Intuit QuickBooks users. Microsoft plans to extend access for QuickBooks users to Intuit Microsoft Online services through the Intuit App Center. NetApp and Microsoft have engaged in a three-year agreement to enhance Announced collaboration and technical solutions. The solutions will allow improved communications and informed decision-making while lowering costs, agreement with NetApp increasing performance and reaching new efficiency levels. Through this NetApp agreement, Microsoft will push cloud computing flexibility and host service solutions. In February, Eclipsys and Microsoft announced an agreement to deliver Announced healthcare IT solutions that allow medical professionals to access data across multiple clinical and financial systems in the hospital. The solutions Partnership Eclipsys will combine Eclipsys’ industry-leading Sunrise Enterprise with Microsoft’s With Eclipsys Amalga UIS to enhance analytic capabilities, allowing hospitals to connect as a whole.20 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Alliance & Acquisition Strategies TBRMicrosoft leverages four key programs to advance partner-drivenbusiness Key Microsoft Partner Programs Program Targets Impact or Changes • MPN replaces MPP (Microsoft Partner Program), providing a greater focus on Microsoft Microsoft’s certifications and partner differentiation. Partner global partner • With >95% of revenue generated through partners, channel conflict is minimal Network (MPN) program to non-existent. • Microsoft’s training/certification programs make platform skills plentiful. Microsoft Microsoft’s • MSDN retains a strong following in the desktop developer community. Developer developer • Oracle, IBM and open-source alternatives present competition for enterprise- Network focused developers. community (MSDN) • Cloud Essentials and Cloud Accelerate are Microsoft’s first cloud-specific Resellers and partner programs, introduced at the Worldwide Partner Conference in 2010. Cloud Essentials SIs • Both programs provide internal use rights for Microsoft cloud services and and Accelerate training, and Accelerate provides enhanced support for cloud sales and implementation activities. Microsoft • MSPA is a single support program for ISVs and SIs that provides technical and Partner advisory support to reduce risk in working with Microsoft technology. Advantage ISVs and SIs • MSPA is a flexible program that provides a single contact point for partners (MSPA) with Microsoft across the development and deployment lifecycle, with a focus on building partner business and end-user success.21 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Geographic Analysis TBRAlthough the Americas contributes the most revenue, APAC continuesto outpace other regions in year-to-year growthGeographic Revenue Strategies MICROSOFT REVENUE BY REGION Revenue from the Americas grew 9.3% year-to-year TBR $7,500 U.S./ in 1Q11, and the region continues to contribute the Americas highest proportion to total revenue, at 36.2% this $6,000 $5,947 quarter. Growth in the Americas is mainly within the Revenue (in $Millions) $4,500 million U.S, as demand for products such as Xbox 360 remains high. $3,000 Unstable economic conditions in EMEA continue to $1,500 EMEA cause Microsoft’s performance in the region to $- fluctuate, as reflected by inconsistent positive and 1Q10 2Q10 3Q10 4Q10 1Q11 $3,351 negative year-to-year revenue growth in recent million Americas OEM EMEA APAC quarters. Microsoft improved incrementally in theSOURCE: TBR & MICROSOFT region in 1Q11, posting 3.6% growth on the year. Although APAC contributes the lowest proportion to MICROSOFT REVENUE BY REGION APAC TBR total revenue, the region continues to outpace $18,000 OEM $2,780 other regions in growth, with a 55.3% year-to-year $16,000 $14,000 $4,350 Million increase in 1Q11. APAC’s rapid adoption of IT opens In $ millions $12,000 $4,040 APAC $10,000 $1,790 $2,780 many growth opportunities for Microsoft. $8,000 $3,351 EMEA $3,234 $6,000 $4,000 Americas OEM OEM revenue grew 7.7% year-to-year in 1Q11, $5,439 $5,947 $2,000 accounting for 26.5% of total revenue – down 140 $0 $4,450 1Q10 1Q11 basis points from 1Q10. Calendar Quarter SOURCE: TBR AND MICROSOFT22 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Resource Management Strategy TBRNew leaders will advance Microsoft’s cloud and enterprise strategiesfrom planning to execution TBR Strategy TBR MICROSOFT TWO-YEAR EMPLOYEE EXPENSE • Following difficult prior quarters, Microsoft Expense per Employee (Annualized) $600,000 100,000 Number of Microsoft Software remains focused on consolidating and $500,000 95,000 $400,000 strengthening Americas revenue growth. 90,000 Employees $300,000 • Microsoft will balance that commitment with $200,000 85,000 planned investment in international markets as $100,000 80,000 well as in segment-centric product solutions. $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 75,000 Est. Operating Expense Per Employee Number of Employees Executive Changes SOURCE: TBR AND MICROSOFT • Satya Nadella was promoted to President of Microsoft’s Servers & Tools Business, and brings experience in both business applications and cloud MICROSOFT HEADCOUNT services to the role. TBR 100,000 3,800 3,800 • TBR believes Nadella’s appointment reinforces 90,000 80,000 8,719 8,196 Manufacturing & Microsoft’s goals of adapting its core product set to Total Headcount 70,000 17,500 17,250 Distribution the cloud. 60,000 General & Administrative 50,000 • Microsoft appointed Chris Capossela as SVP of the 40,000 36,465 36,200 Services Consumer Channels and Central Marketing Group, 30,000 Research & 20,000 a new group that combines Microsoft’s Retail, 10,000 23,517 23,274 Development Mobile Operator and Distribution units. 0 Sales & Marketing 1Q10 1Q11 • Executives exiting include Mich Mathews (SVP of Calendar Quarter Central Marketing) and Kevin Timmons (GM of Datacenter Services), who has defected to Apple. SOURCE: TBR AND MICROSOFT23 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Resource Management Strategy TBRMicrosoft continues to cut headcount across the board year-to-yearas it works to trim expenses Est. 1Q11 Growth Function Key Changes & Drivers Keep on the Radar FTEs YTY Although Microsoft’s Sales & Marketing Microsoft’s Sales & Marketing headcount is expected to rise expense has been increasing to support Sales & 0.9% year-to-year to 23,296 product innovation, it is not reflected in 23,274 –1.0% Marketing employees in 2Q11, as continued headcount, as Microsoft cut S&M innovation will increase sales and headcount by 500 FTEs from 1Q10. marketing need. Microsoft continues to cut G&A headcount TBR expects Microsoft’s G&A at a rate of 6.0% per year, as the company headcount to increase General & works to trim overhead costs. Sequentially, 8,196 –6.0% incrementally in 2Q11 as Admin Microsoft integrates Skype into its headcount declined by approximately 112 FTEs. business. Although Microsoft’s R&D expenses increased in 1Q11, it did not translate to a TBR believes R&D headcount will year-to-year headcount increase. fall back to its previous level of R&D 36,200 –1.3% 36,000 employees in 2Q11, and Sequentially however, R&D headcount rose by roughly 200 FTEs due to the integration remain flat year-to-year. of Canesta. Services & Support headcount continues to Despite increased demand for Services & remain flat at 17,250 employees, with services and support, Microsoft’s 17,250 –0.7% Support 1Q11 the fourth consecutive quarter of headcount remains flat at 17,250 incremental growth. from quarter to quarter.24 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Resource Management Strategy TBRMicrosoft Corp. 1Q11 Organizational Chart25 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Income Statement TBR MICROSOFT CORP. Consolidated Statement of Income (i n $ Thous a nds Except per Sha re Da ta ) TBR CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. FISCAL QUARTER 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 Est. Net Sales $ 14,503,000 $ 16,039,000 $ 16,195,000 $ 19,953,000 $ 16,428,000 $ 17,400,000 Cost of Sales $ 2,755,000 $ 3,170,000 $ 3,139,000 $ 4,833,000 $ 3,897,000 $ 3,654,000 Gross Profit 11,748,000 12,869,000 13,056,000 15,120,000 12,531,000 13,746,000 Sales and Marketing 3,203,000 3,602,000 2,806,000 3,825,000 3,393,000 3,567,000 General and Administrative 1,152,000 987,000 938,000 945,000 1,160,000 956,667 Research and Development 2,220,000 2,350,000 2,196,000 2,185,000 2,269,000 2,237,750 Operating Income 5,173,000 5,930,000 7,116,000 8,165,000 5,709,000 6,984,583 Investment Income 168,000 94,000 114,000 332,000 316,000 177,000 EBITD 5,341,000 6,024,000 7,230,000 8,497,000 6,025,000 7,161,583 Provision for Income Taxes 1,335,000 1,506,000 1,820,000 1,863,000 793,000 1,790,000 Net Income $ 4,006,000 $ 4,518,000 $ 5,410,000 $ 6,634,000 $ 5,232,000 $ 5,371,583 Net Income per Share $ 0.45 $ 0.51 $ 0.62 $ 0.77 $ 0.61 Diluted Shares Outstanding 8,876,000,000 8,821,000,000 8,695,000,000 8,570,000,000 8,510,000,000 AS A PERCENTAGE OF REVENUE Net Sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 19.0% 19.8% 19.4% 24.2% 23.7% 21.0% Gross Margin 81.0% 80.2% 80.6% 75.8% 76.3% 79.0% SG&A 30.0% 28.6% 23.1% 23.9% 27.7% 26.0% R&D 15.3% 14.7% 13.6% 11.0% 13.8% 12.9% Operating Margin 35.7% 37.0% 43.9% 40.9% 34.8% 40.1% Investment Income (Expense) 1.2% 0.6% 0.7% 1.7% 1.9% 1.0% EBITD 36.8% 37.6% 44.6% 42.6% 36.7% 41.2% Income Taxes 9.2% 9.4% 11.2% 9.3% 4.8% 10.3% Net Margin 27.6% 28.2% 33.4% 33.2% 31.8% 30.9% YEAR-TO-YEAR CHANGE Net Sales 6.3% 22.4% 25.3% 4.9% 13.3% 8.5% Cost of Goods Sold -2.1% 22.6% 10.5% 33.2% 41.5% 15.3% Gross Profit 8.4% 22.4% 29.5% -1.8% 6.7% 6.8% SG&A 11.8% 7.7% 6.0% 0.6% 4.5% -1.4% R&D and Engineering 0.4% 5.6% 6.3% 5.1% 2.2% -4.8% Operating Income 16.6% 48.7% 58.8% -4.1% 10.4% 17.8% Investment Income (Expense) 143.3% -39.4% -59.7% -10.3% 88.1% 88.3% EBITD 31.9% 45.4% 51.7% -4.3% 12.8% 18.9% Income Taxes 24.4% 37.3% 52.8% -16.1% -40.6% 18.9% Net Income 34.6% 48.4% 51.4% -0.4% 30.6% 18.9% SOURCE: TBR AND MICROSOFT26 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Balance Sheet TBR MICROSOFT CORP. Consolidated Balance Sheets (i n $ Thous a nds ) TBR CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 FISCAL QUARTER 3Q10 4Q10 1Q11 2Q11 3Q11 ASSETS Current Assets Cash & Cash Equivalents $ 8,155,000 $ 5,505,000 $ 8,161,000 $ 4,023,000 $ 7,021,000 Short-term Investments $ 31,511,000 $ 31,283,000 $ 36,012,000 $ 37,299,000 $ 43,129,000 Accounts Receivable - Net 9,137,000 13,014,000 9,646,000 12,874,000 10,033,000 Deferred Income Taxes 2,222,000 2,184,000 2,344,000 2,548,000 2,586,000 Inventory 501,000 740,000 1,242,000 861,000 1,056,000 Other 2,992,000 2,950,000 2,176,000 2,149,000 2,438,000 Total Current Assets 54,518,000 55,676,000 59,581,000 59,754,000 66,263,000 Property, Plant, Equip. (Net of Dep.) 7,372,000 7,630,000 7,771,000 7,799,000 7,969,000 Other, Net 23,020,000 22,807,000 24,188,000 24,188,000 25,495,000 Total Assets $ 84,910,000 $ 86,113,000 $ 91,540,000 $ 91,741,000 $ 99,727,000 LIABILITIES AND EQUITY Current Liabilities Accounts Payable $ 3,279,000 $ 4,025,000 $ 3,654,000 $ 3,863,000 $ 3,829,000 Short-Term Debt $ 2,249,000 $ 1,000,000 $ 1,000,000 $ - $ - Accrued Compensation 2,885,000 3,283,000 2,252,000 2,402,000 2,917,000 Income Taxes Payable 901,000 1,074,000 2,136,000 1,439,000 839,000 Short-term Unearned Revenues 11,171,000 13,652,000 12,767,000 12,063,000 11,887,000 Securities Lending Payable 2,794,000 182,000 909,000 1,355,000 1,245,000 Other 3,145,000 2,931,000 3,139,000 3,190,000 3,325,000 Total Current Liabilities 26,424,000 26,147,000 25,857,000 24,312,000 24,042,000 Long-term Unearned Revenues 1,089,000 4,939,000 1,152,000 1,354,000 11,915,000 Other 11,687,000 8,852,000 17,589,000 17,333,000 9,133,000 Total Liabilities 39,200,000 39,938,000 44,598,000 43,825,000 46,275,000 Stockholders Equity Common Stock & PIC 62,517,000 62,856,000 61,935,000 61,646,000 63,234,000 Retained Earnings (16,807,000) (16,681,000) (14,993,000) (13,165,000) (9,782,000) Total Stockholders Equity 45,710,000 46,175,000 46,942,000 48,481,000 53,452,000 Total Liabilities & Equity $ 84,910,000 $ 86,113,000 $ 91,540,000 $ 92,306,000 $ 99,727,000 FINANCIAL RATIOS Days Sales Outstanding 56.7 73.0 53.6 58.1 55.0 Fixed Asset Turnover 7.9 8.6 8.4 10.3 8.3 Days Cash Outstanding 246.2 206.4 245.5 186.4 274.7 Total Asset Turnover 0.69 0.75 0.73 0.87 0.69 Debt/Asset Ratio 0.46 0.46 0.49 0.48 0.46 Current Ratio 2.06 2.13 2.30 2.46 2.76 Return on Assets 21.9% 22.7% 24.2% 23.6% 24.0% Return on Equity 41.6% 43.2% 45.9% 44.4% 45.3% Average Annual Revenue Per Employee $ 661,591 $ 705,269 $ 743,762 $ 754,292 $ 772,691 Employee Count 90,001 88,596 88,414 88,414 88,800 SOURCE: TBR AND MICROSOFT27 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Financial Models TBRMicrosoft Business Unit Revenue Model TBR MICROSOFT OPERATING MARGIN MODEL BY BUSINESS (IN $ MILLIONS) CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. TOTAL REVENUE* $ 14,503 $ 16,039 $ 16,195 $ 19,953 $ 16,428 $ 17,400 REVENUE BY PRODUCT Windows Division $ 4,415 $ 4,548 $ 4,785 $ 5,054 $ 4,445 $ 4,457 Server and Tools $ 3,575 $ 4,012 $ 3,959 $ 4,390 $ 4,104 $ 4,614 Online Services Group $ 566 $ 565 $ 527 $ 691 $ 648 $ 581 Microsoft Business Division $ 4,243 $ 5,250 $ 5,126 $ 6,032 $ 5,252 $ 5,775 Entertainment and Devices $ 1,665 $ 1,600 $ 1,795 $ 3,698 $ 1,935 $ 1,973 Total Revenue $ 14,503 $ 16,039 $ 16,195 $ 19,953 $ 16,428 $ 17,400 OPERATING PROFIT Windows Division $ 3,061 $ 3,063 $ 3,323 $ 3,251 $ 2,764 $ 3,309 Server and Tools $ 1,255 $ 1,546 $ 1,630 $ 1,776 $ 1,419 $ 1,572 Online Services Group $ (713) $ (696) $ (560) $ (543) $ (726) $ (318) Microsoft Business Division $ 2,622 $ 3,284 $ 3,388 $ 3,965 $ 3,165 $ 3,759 Entertainment and Devices $ 165 $ (172) $ 382 $ 679 $ 225 $ 77 Total Operating Profit $ 5,173 $ 5,930 $ 7,116 $ 8,165 $ 5,709 $ 5,930 OPERATING MARGIN BY DIVISION Windows Division 69.3% 67.3% 69.4% 64.3% 62.2% 74.2% Server and Tools 35.1% 38.5% 41.2% 40.5% 34.6% 34.1% Online Services Group -126.0% -123.2% -106.3% -78.6% -112.0% -54.8% Microsoft Business Division 61.8% 62.6% 66.1% 65.7% 60.3% 65.1% Entertainment and Devices 9.9% -10.8% 21.3% 18.4% 11.6% 3.9% Combined Operating Margin 35.7% 37.0% 43.9% 40.9% 34.8% 34.1% OPERATING PROFIT GROWTH (YEAR-TO-YEAR) Windows Division 21.8% 41.3% 124.1% -39.7% -9.7% 12.3% Server and Tools -6.6% 14.6% 31.8% 19.1% 13.1% 5.6% Online Services Group -24.0% 4.9% -17.4% -16.5% -1.8% 32.4% Microsoft Business Division -8.9% 16.6% 19.8% 31.7% 20.7% 19.7% Entertainment and Devices 632.3% -32.3% 46.9% 81.1% 36.4% -49.3% Total Operating Growth 16.6% 48.7% 58.8% -4.1% 10.4% -0.2% * TBR has not displayed reconciling amounts; however, reconciling amounts do contribute to total revenue. SOURCE: TBR ANALYSIS AND MICROSOFT28 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Financial Models TBRGeographic Model MICROSOFTS REVENUE BY REGION (IN $ MILLIONS) TBR CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. Americas $ 5,439 $ 5,806 $ 5,863 $ 7,223 $ 5,947 $ 6,299 EMEA $ 3,234 $ 3,272 $ 3,304 $ 4,070 $ 3,351 $ 3,550 Japan and Asia Pacific $ 1,790 $ 2,611 $ 2,659 $ 3,790 $ 2,780 $ 2,872 OEM $ 4,040 $ 4,350 $ 4,370 $ 4,870 $ 4,350 $ 4,680 Total $ 14,503 $ 16,039 $ 16,195 $ 19,953 $ 16,428 $ 17,400 PERCENTAGE OF TOTAL REVENUE Americas 37.5% 36.2% 36.2% 36.2% 36.2% 36.2% EMEA 22.3% 20.4% 20.4% 20.4% 20.4% 20.4% Japan and Asia Pacific 12.3% 16.3% 16.4% 19.0% 16.9% 16.5% OEM 27.9% 27.1% 27.0% 24.4% 26.5% 26.9% Total 100% 100% 100% 100% 100% 100% YEAR-TO-YEAR GROWTH Americas -1.6% 13.1% 8.0% 2.6% 9.3% 15.8% EMEA -3.7% 12.5% 15.2% -0.5% 3.6% 9.8% Japan and Asia Pacific 15.3% 37.0% 69.8% 29.2% 55.3% 60.4% OEM 25.9% 38.1% 42.8% -1.8% 7.7% 15.8% Total 6.3% 22.4% 25.3% 4.9% 13.3% 20.0% SEQUENTIAL GROWTH Americas -22.7% 6.8% 1.0% 23.2% -17.7% -12.8% EMEA -20.9% 1.2% 1.0% 23.2% -17.7% -12.8% Japan and Asia Pacific -39.0% 45.8% 1.8% 42.5% -26.6% -24.2% OEM -18.5% 7.7% 0.5% 11.4% -10.7% -3.9% Total -23.8% 10.6% 1.0% 23.2% -17.7% -12.8% SOURCE: TBR ESTIMATES29 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Financial Models TBRHeadcount Model TBR MICROSOFT HEADCOUNT MODEL CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. Sales & Marketing 23,517 23,084 23,255 23,056 23,274 23,296 Sales 12,017 12,084 12,255 12,056 12,274 12,296 Direct Sales 6,894 6,798 6,798 7,478 7,308 6,798 Indirect Sales 4,123 4,286 4,457 3,578 3,966 4,498 Sales Support 1,000 1,000 1,000 1,000 1,000 1,000 Marketing 11,500 11,000 11,000 11,000 11,000 11,000 G&A 8,719 8,462 8,109 8,308 8,196 8,454 Services 17,500 17,250 17,250 17,250 17,250 17,250 Manufacturing and Distribution 3,800 3,800 3,800 3,800 3,800 3,800 R&D 36,465 36,000 36,000 36,000 36,200 36,000 Total Employees 90,001 88,596 88,414 88,414 88,720 88,800 SOURCE: TBR AND MICROSOFT30 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Financial Models TBROperating Expense and Margin Model TBR MICROSOFT OPERATING EXPENSE AND MARGIN MODEL (IN $ THOUSANDS) CALENDAR QUARTER 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. Total Revenue $ 14,503,000 $ 16,039,000 $ 16,195,000 $ 19,953,000 $ 16,428,000 $ 17,400,000 Cost of Sales $ 2,755,000 $ 3,170,000 $ 3,139,000 $ 4,833,000 $ 3,897,000 $ 3,654,000 Sales and Marketing Expense $ 3,203,000 $ 3,602,000 $ 2,806,000 $ 3,825,000 $ 3,393,000 $ 3,567,000 G&A Expense $ 1,152,000 $ 987,000 $ 938,000 $ 945,000 $ 1,160,000 $ 956,667 R&D Expense $ 2,220,000 $ 2,350,000 $ 2,196,000 $ 2,185,000 $ 2,269,000 $ 2,237,750 Total Operating Expense $ 9,330,000 $ 10,109,000 $ 9,079,000 $ 11,788,000 $ 10,719,000 $ 10,415,417 AS A PERCENTAGE OF REVENUE Cost of Sales 19.0% 19.8% 19.4% 24.2% 23.7% 21.0% Sales and Marketing Expense 22.1% 22.5% 17.3% 19.2% 20.7% 20.5% G&A Expense 7.9% 6.2% 5.8% 4.7% 7.1% 5.5% R&D Expense 15.3% 14.7% 13.6% 11.0% 13.8% 12.9% Operating Margin 35.7% 37.0% 43.9% 40.9% 34.8% 40.1% YEAR-TO-YEAR CHANGE Cost of Sales -2.1% 22.6% 10.5% 33.2% 41.5% 28.6% Sales and Marketing 7.4% 12.8% 0.6% 5.7% 5.9% 27.8% G&A 26.2% -7.7% 26.6% -15.9% 0.7% 29.1% R&D 0.4% 5.6% 6.3% 5.1% 2.2% 8.4% Total Operating Expense 4.6% 11.4% 7.6% 12.8% 14.9% 23.4% SOURCE: TBR AND MICROSOFT31 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Graphs TBRFinancial Strategy Graphs TBR LICENSE REVENUE GROWTH YEAR-TO-YEAR MAINTENANCE REVENUE GROWTH YEAR-TO-YEAR TBR 25.0% 50.0% 18.3% 38.8% 20.0% 34.4% 23.3% 15.0% 12.0% 30.0% 13.2% 8.1% 10.0% 10.0% 3.0% 3.0% 3.0% 5.0% 3.0% -10.0% -1.0% 0.0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFT SOURCE: TBR AND MICROSOFT TBR PROF. SERVICES & CONSULTING REVENUE GROWTH TBR GROSS MARGIN YEAR-TO-YEAR 100.0% 20.0% 80.2% 80.6% 76.3% 81.0% 75.8% 79.0% 12.4% 80.0% 8.5% 10.0% 60.0% 4.9% 3.6% 3.3% 3.1% 40.0% 0.0% 20.0% -10.0% 0.0% 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFT SOURCE: TBR AND MICROSOFT32 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Graphs TBRGo-to-Market & Product Strategies Graphs ANNUAL SOFTWARE LICENSE & MAINTENANCE ANNUAL SOFTWARE LICENSE REVENUETBR PER SALESPERSON REV. PER DEVELOPER TBR $2,500 $5,000 $4,048.0 $1,872.7 $4,000 In $ Thousands $2,000In $ Thousands $2,788.1 $2,970.5 $3,150.7 $3,193.2 $3,225.5 $1,282.0 $1,368.0 $1,446.1 $1,445.7 $1,478.3 $3,000 $1,500 $1,000 $2,000 $500 $1,000 $0 $0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFTSOURCE: TBR AND MICROSOFTTBR ANNUAL MAINTENANCE REVENUE PER SALESPERSON TBR ANNUAL PROF. SERVICES & CONSULTING REVENUE $2,000 PER SALESPERSON $375 $1,434.7 $243.1 $246.1 $309.9 $237.1 In $ Thousands $1,500 $300 In $ Thousands $1,102.2 $1,104.9 $1,097.3 $1,123.7 $1,134.5 $238.0 $238.4 $1,000 $225 $150 $500 $75 $0 $0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE MICROSOFT SOURCE: TBR AND MICROSOFT SOURCE: TBR AND MICROSOFT33 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Graphs TBRResource Management Balance Sheet Metric Graphs TBR RETURN ON EQUITY TBR RETURN ON ASSETS 60.0% 30.0% 21.9% 22.7% 24.2% 23.6% 24.0% 41.6% 43.2% 45.9% 25.0% 44.4% 45.3% 45.0% 20.0% 30.0% 15.0% 10.0% 15.0% 5.0% 0.0% 0.0% 1Q10 2Q10 3Q10 4Q10 1Q11 1Q10 2Q10 3Q10 4Q10 1Q11 MICROSOFT SBQ AVERAGE MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFT SOURCE: TBR AND MICROSOFT TBR DAYS CASH OUTSTANDING 350.00 274.74 300.00 Number of Days 246.15 245.48 250.00 206.43 186.39 200.00 150.00 100.00 50.00 0.00 1Q10 2Q10 3Q10 4Q10 1Q11 MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFT34 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Graphs TBRResource Management Efficiency GraphsTBR ANNUAL R&D EXPENSE PER DEVELOPER ANNUAL SALES & MARKETING EXPENSE PER TBR SALES & MARKETING EMPLOYEE $400.0 $900.0 $312.5 $738.0In $ Thousands $300.0 $544.5 In $ Thousands $242.1 $245.7 $248.6 $248.6 $572.4 $568.9 $582.8 $585.5 $235.5 $600.0 $200.0 $100.0 $300.0 $0.0 $0.0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE MICROSOFT SBQ AVERAGESOURCE: TBR AND MICROSOFT SOURCE: TBR AND MICROSOFT TBR ANNUAL G&A EXPENSE PER G&A EMPLOYEE $800.0 $518.1 $589.9 In $ Thousands $600.0 $468.6 $473.2 $484.1 $491.7 $400.0 $200.0 $0.0 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Est. MICROSOFT SBQ AVERAGE SOURCE: TBR AND MICROSOFT35 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Graphs TBRFuture Outlook Graph TBR 1Q11 SBQ VENDOR POSITION AND PROJECTION: MICROSOFT 10.00 9.00 Trailing 12-Month Average SBQ Corporate Score 8.00 Growth = 14.7% 2Q11 Est. 7.00 6.00 5.00 4Q10 1Q11 4.00 3.00 2.00 1.00 0.00 -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Quarterly Revenue Growth Year-to-year SOURCE: TBR AND MICROSOFT36 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Recent Acquisitions ESTIMATED ACQUISITION COMPANY ACQUISITION SYNERGIES NO. OF DATE EMPLOYEES Skype adds a network of approximately 660 million active users Skype May 2011 across both the business and consumer markets, and enhances 880 Microsoft’s communications capabilities across its portfolio. Canesta’s patent of its 3-D sensing chip will enable Microsoft to November Canesta incorporate the technology into products beyond just Kinect and N/A 2010 gaming and expand its portfolio. AVIcode software will be combined with Microsoft’s System Center to provide managers with an end-user point of view for AVIcode October 2010 N/A services and bridge the gap between datacenter and cloud applications. December Opalis brings runbook automation functionality that will be Opalis 70 2009 offered as a feature of Microsoft. December Sentillion will enhance Microsoft Amalga Unified Intelligence Sentillion 110 2009 System to better suit healthcare professionals. November SourceGear’s Teamprise Unit will provide Microsoft with tools SourceGear 27 2009 that improve interoperability among operating systems. Interactive Supercomputing is a small business that specializes in Interactive September parallel computing for desktops for high-performance 10-24 Supercomputing 2009 computing. The technology is expected to be rolled into new Microsoft software.37 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Recent Acquisitions ESTIMATED ACQUISITION COMPANY ACQUISITION SYNERGIES NO. OF DATE EMPLOYEES BigPark is a small Vancouver-based game start-up founded by BigPark former Electronic Arts Canada and Distinctive Software executives. May 2009 50 BigPark has been working on an Xbox-exclusive game over the past year. Greenfield The $486 million purchase of Greenfield Online, owner of Ciao Online August 2008 GmbH, extends Microsoft’s search and e-commerce services in 800 Europe. DATAllegro DATAllegro is a provider of large-volume, high-performance data July 2008 warehouse appliances. DATAllegro will extend the capabilities of 93 the Microsoft SQL Server. Zoomix July 2008 Zoomix is an Israeli data management company providing 25 technology that cleans, organizes and manages data. Powerset is a natural language search company that will join Powerset July 2008 Microsoft’s core Search Relevance team and improve the 63 company’s search technology. MobiComp provides technologies that enable mobile data backup MobiComp June 2008 40 and restoration, as well as mobile posting of social content. Navic provides campaign management tools for targeting Navic 110 June 2008 audiences across television advertising inventory. Navic will join Networks Microsoft’s Advertiser and Publisher Solutions (APS) Group.38 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Recent Acquisitions ESTIMATED ACQUISITION COMPANY ACQUISITION SYNERGIES NO. OF DATE EMPLOYEES Farecast’s Travel Prediction Engine, which helps consumers forecast Farecast April 2008 27 changes in travel services, will be integrated into MSN Travel. Kidaro’s desktop virtualization tools will be combined with the Kidaro March 2008 35 Microsoft toolset to enhance security and manageability. Rapt specializes in yield management software programs and Rapt March 2008 85 services for online publishers. Microsoft will use Caligari to enhance the mapping system on Virtual Caligari February 2008 20 Earth. Microsoft will integrate YaData’s technology into its advertising YaData February 2008 18 platform to enable advertisers to better target consumers.39 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships (Hardware) COMPANY SCOPE OF PARTNERSHIP In June 2007, Dell and Microsoft jointly announced the signing of a Microsoft Large Account Reseller (LAR) agreement, which enables Dell to extend its partnership with Dell Microsoft to offer customized license types, namely Enterprise Agreement (EA) and Select, to large enterprise and institutional customers. In July 2008, Hewlett-Packard and Microsoft announced increased efforts to target SMB- Hewlett- focused channel partners through the HP/Microsoft Frontline Partnership program, which Packard includes customer campaigns, marketing money and sales and marketing collateral. After acquiring IBM’s PC manufacturing business, Lenovo became the world’s third-largest computer manufacturer. For the China market, Lenovo has committed to increasing the Lenovo percentage of PCs bundled with Windows XP Starter Edition as opposed to Linux. Lenovo, however, will bundle Sun’s StarOffice productivity suite instead of Microsoft’s Office suite. Fujitsu In 2008, Fujitsu Siemens Computers was awarded Microsoft Partner of the Year for OEM Siemens Hardware Solutions in the categories of Device Manufacturing and System Building.40 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships (Hardware) COMPANY SCOPE OF PARTNERSHIP Features in Windows Server 2003 take advantage of the xSeries platform, as well as blades. Powered by IBM Enterprise X-Architecture technology, the x440 is a 4U rack-optimized, IBM industry-standard server that supports up to 16-way processing by interconnecting two 440 chassis as a single 8U configuration with high-speed scalability cables. In the server area, NEC and Microsoft have been working together since 1993 to maximize reliability and performance through the joint development of server products. This NEC collaboration is being extended to develop and expand the global sales of next-generation, high-end servers and Fault Tolerant (FT) servers. Unisys deploys Microsoft Exchange Server 2007 with Unified Messaging in hosted, in-sourced Unisys and managed environments and migrates messaging and application environments from legacy systems, such as Lotus Notes, to Exchange.41 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships (Software) COMPANY SCOPE OF PARTNERSHIP Nokia and Microsoft announced a global alliance in early August 2009 to combine Microsoft Office Mobile and Communication solutions with Nokia’s smartphone, which has upward of Nokia 200 million customers to date. The goal is to give consumers seamless and integrated technology in one place. PATROL for Microsoft Exchange Servers provides a high level of availability and performance for Exchange servers. The product helps ensure end-user satisfaction through centralized BMC Software and proactive management, advanced problem notification, automated recovery actions, intelligent event correlation and comprehensive service reporting. Citrix and Microsoft are working together closely to extend this partnership to new Microsoft platforms such as Hyper-V, bringing customers added value in server virtualization Citrix solutions with Citrix XenServer, application virtualization solutions with Citrix XenApp and desktop virtualization solutions with Citrix XenDesktop. CA supports Microsoft Windows Server 2003 across its six major product lines: Unicenter, BrightStor, eTrust, CleverPath, AllFusion and Advantage. The support provides customers CA with comprehensive infrastructure, storage, security, information and application lifecycle management solutions for their next-generation OS and .NET platforms.42 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships (Software) COMPANY SCOPE OF PARTNERSHIP A preferred member of Microsoft’s worldwide Alliance Member Program, EMC displays advanced solutions for the Microsoft platform at Microsoft Technology Centers (MTCs) across EMC the U.S. and Europe. MTCs provide regional access to expert knowledge and best practices for the development and deployment of Microsoft solutions. The deal will provide tools for developers to write programs to work with Oracle’s corporate database products, which compete with Microsoft’s SQL Server database software. The intent is Oracle to provide mutual customers with a more productive developer environment for building Oracle applications on the Microsoft Windows platform. SAP and Microsoft have extended their partnership in a non-exclusive joint development agreement aimed at uniting their desktop and business applications. The product, called Duet, is SAP designed to provide a direct and transparent link between SAP processes and Microsoft’s Office applications. According to SAP, customers have been asking for a connection between the two environments.43 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships(Service Partners – Consulting and Integration) COMPANY SCOPE OF PARTNERSHIP Accenture is one of Microsoft’s most significant global services partners; when the two companies began to encounter great demand for their technical expertise on the Accenture Microsoft platform, they started Avanade, a jointly operated company, in 2000. Avanade employs more than 3,900 consultants and generates over $600 million in annual revenue. Dell and Microsoft work together to test and certify Windows Server 2003 R2 on Dell Dell server and storage solutions. Dell also provides Infrastructure Migration Services and tools to help organizations assess and upgrade current infrastructure. HP employs more than 22,000 Microsoft-trained professionals, including over 3,600 Hewlett- Microsoft Certified System Engineers and Microsoft Certified Solution Developers, and Packard intends to grow that total to more than 30,000. The Microsoft and HP partnership was extended in 2010, as the companies are jointly targeting cloud computing opportunities. The Exchange 2000 Active Directory integration provides features such as unified administration of Exchange 2000 and Windows XP/2000 objects with one set of tools. The Siemens use of Lightweight Directory Access Protocol gives e-mail directory access to a wide range of client software. At the IBM Center for Microsoft Technologies (ICMT), more than 130 software engineers, IBM & test and quality specialists and enterprise solutions staffers adapt Microsoft’s software IBM Global products to IBM products. The ICMT also provides worldwide Level 3 support for Microsoft Services products on IBM hardware.44 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Global Strategic Alliances and Partnerships (Distribution) COMPANY SCOPE OF PARTNERSHIP Microsoft and Avnet Technology Solutions partnered in 2005 to provide SMB customers with a consolidated source for software, hardware, consulting and support services. The Avnet partnership expands the global distribution and accessibility of the Microsoft E-Business Suite and JD Edwards EnterpriseOne and JD Edwards World offerings to SMB customers. Ingram Micro and Microsoft partnered in 2005 to make Microsoft technology available to the SMB marketplace through Ingram Micro’s resellers, including Microsoft Database and Microsoft Fusion Middleware. Ingram Micro is the world’s largest technology distributor Ingram Micro and a leading company in technology sales, marketing and logistics. Ingram Micro also works with small resellers of Microsoft’s products as an authorized dealer in Microsoft’s VAD Remarketer Program. Tech Data distributes IT products to more than 90,000 customers in over 100 countries. As part of an agreement to increase the availability of Microsoft Database and Microsoft Fusion Middleware technology to the SMB marketplace, Tech Data has increased the Tech Data number of incremental resellers of Microsoft products to SMB customers. Tech Data also works with small resellers of Microsoft’s products as an authorized dealer in Microsoft’s VAD Remarketer Program. CDW is a direct reseller of technology products in the U.S. and Canada. Microsoft lists CDW CDW as its sole “North American Strategic Reseller.” In Microsoft’s announcement about selling Microsoft Enterprise Linux, CDW was mentioned as a reseller, as were Dell and HP.45 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
    • Appendix - Tables TBRMicrosoft’s Product Portfolio Platforms & Services Business Division Entertainment & Devices • Windows Azure • MS Office • Xbox 360 • Bing • MS Project • Xbox • Windows 7 • MS Visio • Xbox Live! • Windows XP • SharePoint • IPTV Platform • Windows Vista • LiveMeeting and OneNote • PC and Online Games • Windows Server • Dynamics GP • Consumer Hardware and Software • SQL Server • Dynamics NAV • Windows Mobile • Visual Studio • Dynamics CRM • Windows Embedded Device OS • Premier Product Support Services • Dynamics SL • Windows Automotive • Developer Tools • Dynamics AX • Training, Certification and Press • Dynamics Marketplace • Professional Product Support • Enterprise Reporting • Microsoft Consulting Services • Small Business Manager • Windows Live Portal • Small Business Accounting • MSN Network • Microsoft Business Network • MSN Subscriptions • Retail Management • Hotmail • Microsoft Partner Program • MSN Messenger • Office Communicator • Office Live Meeting • Office Communications Server • Microsoft Exchange Server • Office RoundTable • Office Communicator Mobile • Office Communicator Web Access • Office 36546 1Q11 Microsoft Corp.| Software Business Quarterly ©2011 Technology Business Research, Inc.
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