Microsoft 2004 Annual Report Download - page 6

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BUSINESS DESCRIPTION
PAGE 6
GENERAL
Over the last three decades, technology has transformed the way people work, play, and communicate. Today, people
access information and communicate with individuals from around the world in an instant. Groundbreaking technologies
have opened the door to innovations in every field of human endeavor, delivering new opportunity, convenience, and
value to people’s lives. Since our founding in 1975, we have been a leader in this transformation. As a reflection of that
role, and to help us focus on the opportunities that lie ahead we have established a new corporate mission: To enable
people and businesses throughout the world to realize their full potential.
PRODUCT SEGMENTS
Our product segments provide management with a comprehensive financial view of our key businesses. The segments
provide a framework for the alignment of strategies and objectives across the development, sales, marketing, and
services organizations, and for the timely and rational allocation of development, sales, marketing, and services resources
within businesses. The segments also help focus strategic planning efforts on key objectives and initiatives across our
broad businesses.
The product segments are designed to allocate resources internally and provide a framework to determine
management responsibility. Due to our integrated business structure, operating costs included in one segment may
benefit other segments. Therefore, these segments are not designed to measure operating income or loss that is directly
related to the products included in each segment. Inter-segment cost commissions are estimated by management and
used to compensate or charge each segment for such shared costs and to incent shared effort. Due to our integrated
business structure, segments should not be viewed as discrete or easily separable businesses.
Our seven product segments are: Client; Server and Tools; Information Worker; Microsoft Business Solutions; MSN;
Mobile and Embedded Devices; and Home and Entertainment. See Note 18 – Segment Information of the Notes to
Financial Statements for financial information regarding segment reporting.
Client. The Client segment has overall responsibility for product delivery, engineering, and technical architecture for the
Microsoft Windows operating system and new media technology, as well as our relationships with manufacturers of
personal computers, including multinational and regional original equipment manufacturer (OEM) accounts. The segment
includes sales and marketing expenses for the Windows Client operating system and product development efforts for the
Windows platform.
The Client segment includes Windows XP and other standard Windows operating systems. Windows XP extends the
personal computing experience by uniting PCs, devices, and services, while enhancing reliability, security, and
performance. With emerging form factors such as the Tablet PC and Media Center, and with investments in technology
such as Windows Media, we believe the “Windows PC” continues to evolve with innovations that enable people to use
computers in more ways, in more places, and more often than ever before.
Windows XP Home Edition is designed for individuals or families and includes capabilities for digital photo, music,
video, home networking, and communications. Windows XP Professional, designed for business users and people who
demand the most from their computing experience, includes all the features of Home Edition, along with advanced
security, performance, manageability, and multilingual features to help customers improve their productivity and
connectivity. Windows XP 64-Bit Edition meets the demands of specialized technical workstation users.
The next generation of the Windows operating system, code-named Longhorn, is currently under development. This
development phase represents a significant investment for the Client business and is expected to result in a product that
is more manageable and deployable for both our business and consumer markets. While all features and functions have
not been finalized, Longhorn will include significant advances in security, digital media, user interfaces, and other areas
that are expected to enhance the user and developer experience. We are targeting broad availability of this operating
system in calendar year 2006. We are also developing a Windows storage subsystem, which will provide advanced data
organization and management capabilities, that we plan to deliver subsequent to the Longhorn operating system
introduction.
Server and Tools. The Server and Tools segment has overall responsibility for integrated product development and
marketing of Windows Server System products, including building and marketing Windows Server operating systems.
Windows Server System is integrated server infrastructure software that is designed to support end-to-end solutions built
on the Windows Server 2003 operating system. In addition, the segment provides information about the extended
Microsoft platform through a variety of content offerings, such as Web-based training for developers and IT professionals.
Through this segment, we offer a broad range of consulting services for advanced technology requirements, including