Microsoft 2004 Annual Report Download - page 16

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PAGE 16
RESULTS OF OPERATIONS FOR 2002, 2003, AND 2004
Management’s Discussion and Analysis (MD&A) contains statements that are forward-looking. These statements are
based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ
materially because of factors discussed in “Issues and Uncertainties” and elsewhere in this report.
OVERVIEW
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand Microsoft
Corporation. MD&A is provided as a supplement to, and should be read in conjunction with, our financial statements and
the accompanying notes (“Notes”).
We generate revenues, income and cash flows by developing, manufacturing, licensing, and supporting a wide range
of software products for many computing devices. Our software products include operating systems for servers, personal
computers (PCs), and intelligent devices; server applications for distributed computing environments; information worker
productivity applications; business solutions applications; and software development tools. We provide consulting and
product support services, and we train and certify system integrators and developers. We sell the Xbox video game
console and games, PC games and peripherals. Online communication services and information services are delivered
through our MSN portals and channels around the world.
We also research and develop advanced technologies for future software products. Delivering breakthrough innovation
and high-value solutions through our integrated platform are the key to meeting customer needs and to our future growth.
We believe that over the last few years we have laid a foundation for long-term growth, delivering innovative new
products, creating opportunity for partners, improving customer satisfaction with key audiences, putting some of our most
significant legal challenges behind us, and solidifying internal processes. Our focus in fiscal 2005 is building on this
foundation and executing well in key areas, including continuing to innovate on our integrated software platform, delivering
compelling value propositions to customers, responding effectively to customer and partner needs, and continuing to
focus internally on product excellence, business efficacy, and accountability across the company.
Key market opportunities include:
• Meeting the needs of a growing worldwide base of PC users, which we project will top 1 billion by 2010;
• Delivering new scenarios such as collaboration, authoring, communicating, planning, and analysis for information
workers;
• Continuing to compete against Linux and Unix for commercial workloads;
• Reducing complexity and cost for IT professionals and developers;
• Delivering IT services for smaller business, and consumers;
• Creating and delivering business solutions for small and mid-market segments;
• Creating non-PC consumer electronics in areas such as mobile phones, handheld devices, home entertainment
and TV;
• Delivering compelling entertainment experiences in areas such as music, TV, movies, photos, and games;
• Expanding online advertising, and advances in search, music and other information services;
• Delivering integrated communications services for consumers and information workers.
For fiscal 2005, we believe industry-wide factors such as PC unit growth and the success of non-commercial software
could significantly affect our results of operations and financial condition. PC unit growth was very strong in fiscal 2004,
increasing approximately 13% from fiscal 2003. We do not expect similar growth to occur in fiscal 2005. We believe that
PC unit shipments will grow 7% to 9%, resulting in a forecasted fiscal 2005 Client revenue growth rate that we believe will
be between 5% and 7%.