Microsoft 2004 Annual Report Download - page 3

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Server Migration. Businesses are increasingly migrating their computer networks from UNIX servers to less expensive
ones running on PC microprocessors. This trend has helped boost sales of Windows server products; revenue from our
server and tools business increased 19 percent last year. During the past year, we have worked hard to communicate
with customers about the unique value of the Windows platform compared with Linux and other open-source software.
Several independent analysts have reported that Windows offers lower total cost of ownership, stronger security, and
more comprehensive indemnification. We are continuing to innovate in servers and tools, particularly in areas such as
manageability and security. This fiscal year, SQL Server 2005 will deliver a significantly improved database platform—
more reliable, secure, scalable, and manageable. And Visual Studio 2005 aims to reduce complexity and cost for
developers and other technology professionals.
Connected Productivity. Our Information Worker business continues to grow, with a 17 percent increase in revenue
during 2004. We believe that Word, Excel, Outlook, and other Office 2003 applications only begin to fulfill the potential of
software to help people be more productive. We have expanded the toolset with new technologies and services such as
Office SharePoint Portal Server 2003, Windows SharePoint Services, Office Live Meeting, Office Online, Office
OneNote 2003, and Office InfoPath 2003. We are also providing our partners with new tools, through the Office Solution
Accelerator program, that enable them and us to jointly bring new productivity solutions to customers. There is an
enormous market for further improvements in individual, group and organizational productivity through advances in
collaboration, communication, business intelligence, planning, and analysis.
Business Solutions. We are strongly positioned to provide software solutions tailored for the vast number of
underserved small and mid-sized businesses. Our integrated applications enable these companies to accelerate growth
and increase profits by more effectively managing their finances, supply chains, customer relationships, and other key
business processes. Several years down the road, we envision powerful new capabilities from the development of a
common platform for a new generation of business solutions highly integrated with Longhorn.
Online Search, Services, and Advertising. Our MSN business achieved its first full year of segment profitability in
2004, as advertising revenue increased 43 percent, exceeding $1 billion for the first time. This growth was driven by our
MSN.com network’s success in attracting visitors by offering rich information and communication services—including
news, sports, entertainment, search, MSN Messenger, and MSN Hotmail. We are investing in many new MSN services,
including breakthrough search, communication, and music technologies that we believe will deliver superior customer
benefits and provide us with significant revenue opportunities.
Smart Mobile Devices. The market for devices that combine a wireless phone with a handheld PC is expected to grow
significantly over the next several years. We are vigorously pursuing this opportunity with strategic investments, to ensure
that our mobile offerings provide the greatest benefit to consumers and device manufacturers. Our Windows Mobile
software is the basis for new Portable Media Center devices from leading consumer electronics companies.
Entertainment. In the huge videogame industry, Xbox continues to show strong momentum, with 15.5 million consoles
shipped since launch and more than 425 games published for it. Xbox now ranks second in units sold in the North
American and European markets, and is gaining on the market leader. Xbox Live, our interactive service with more than
one million subscribers in 24 countries, has revolutionized the online gaming business. Looking ahead, we see myriad
opportunities to create other entertaining digital experiences via platforms such as Xbox, Windows XP Media Center, and
Microsoft TV, a product family that supports a range of digital video services including interactive programming guides,
digital video recording, high-definition TV, and on-demand programming.
Operational Excellence and Citizenship
As we innovate in technology, we are equally focused on crisp execution. In particular, we are working to deliver an
unparalleled customer and partner experience. Across the company, we have created new listening, feedback, and
response systems to help us get closer to customers and respond quickly and appropriately. Using automated error-
reporting technologies, we have fixed a large majority of the computer crashes and hangs reported by customers, and our
strengthened field response system has favorably resolved most non-technical issues reported by customers.
Microsoft competes vigorously, and we always will. At the same time, we are committed to maintaining positive
relationships within our industry, including with competitors, and to forging strong relationships with governments. We are
also committed to helping make technology safer and easier to use. We work to help protect the safety of children online,
for example, through our partnership with the International Centre for Missing and Exploited Children. We are deeply