Microsoft 2004 Annual Report Download - page 11

PAGE 11
Portable Media Center, MSTV, MSN TV, Windows Automotive, the Windows Media Center Extender, and other
electronic devices built on Windows CE and Windows XP Embedded.
• Entertainment: Likewise, we believe there is significant opportunity in delivering compelling entertainment
experiences in key scenarios such as music, TV, movies, photos and games. Our vision centers on creating new
and exciting ways for people to have fun with friends and family with Media Center PCs, devices like Xbox and
Portable Media Center, and many of the other applications and services that Microsoft and our partners deliver.
• Advertising/Information: The value that MSN and our platform bring to advertisers is already significant, as
evidenced by the fact that our MSN advertising business today is a $1 billion-plus business. We believe the
potential to expand advertising in all our online offerings is significant. In fiscal 2005, we will invest in and deliver
improvements in search, music and other information services that should continue to provide good growth
opportunities. We believe our industry has only scratched the surface in search. We are making significant
investments to improve the user experience and deliver the information people want more efficiently and
effectively.
• Communications: Broadband and wireless technology is increasing the amount of time people spend online.
Younger and savvier Internet users want communications experiences to build their social network on any device.
We believe professionals and information workers want integrated, secure functionality that help them manage
their personal and professional lives: personalized email, instant messaging, contact management, shared
calendars, and relationship management. We are pursuing these opportunities by developing communications
offerings designed to provide the greatest benefit to consumers and device manufacturers. For example, our
Windows Mobile software is the basis for new mobile smartphones and for Portable Media Center devices from
leading consumer electronics companies.
DISTRIBUTION, SALES AND MARKETING
We distribute our products primarily through the following channels: OEM; distributors and resellers; and online services.
Our six major geographic sales and marketing organizations are the North American Region; the Latin American Region;
the Europe, Middle East, and Africa Region; Japan; the Asia-Pacific Region and Greater China.
OEM. Our operating systems are licensed primarily to OEMs under agreements that grant the OEMs the right to build
computing devices based on our operating systems, principally PCs. Under similar arrangements, we also market and
license certain server operating systems, desktop applications, hardware devices, and consumer software products to
OEMs. We have OEM agreements covering one or more of our products with virtually all of the major PC OEMs, including
Acer, Actebis, Dell, eMachines, Fujitsu, Gateway, HP, IBM, NEC, Samsung, Siemens Computers, Sony, and Toshiba. A
substantial amount of OEM business is also conducted with system builders, which are low-volume customized PC
vendors operating in local markets.
Distributors and Resellers. We distribute our finished goods products primarily through independent non-exclusive
distributors, authorized replicators, resellers, and retail outlets. Organizations license our products primarily through Large
Account Resellers (LARs), Direct Market Resellers (DMRs), and value-added resellers. Many organizations that license
products through Enterprise Agreements (EAs) now transact directly with us, with sales support from our Enterprise
Software Advisor channel partners. These Enterprise Software Advisors typically are also authorized as LARs and
operate as resellers for our other licensing programs. Although each type of reselling partner reaches organizations of all
sizes, LARs are primarily engaged with large organizations and value-added resellers typically reach the breadth of small-
and medium-sized organizations. Some of our distributors include Ingram Micro and Tech Data, and some of our largest
resellers include Software Spectrum, Software House International, Dell, CDW, and Insight Enterprises. Individual
consumers obtain our products primarily through retail outlets, including Best Buy, Wal-Mart, and Target. We have a
network of field sales representatives and field support personnel that solicits orders from distributors and resellers and
provides product training and sales support.
We license software to organizations under arrangements that allow the end-user customer to acquire multiple licenses
of product. These arrangements are designed to provide organizations with a means of acquiring multiple licenses,
without having to acquire separate packaged product through retail channels. In delivering organizational licensing
arrangements to the market, we use different programs designed to provide flexibility for organizations of various sizes.
While these programs may differ in various parts of the world, generally they are as follows: