Microsoft 2005 Annual Report Download - page 61

NOTES TO FINANCIAL STATEMENTS (CONTINUED)
PAGE 60
September 2004 the jury returned a verdict for us, finding that we did not infringe the patents. The plaintiffs have appealed. In
Amado v. Microsoft, filed in U.S. District Court for the Central District of California on March 7, 2003, the plaintiff has accused
the link table functionality available in Microsoft Access when used with Microsoft Excel. After a jury trial, we were found to
infringe one claim of the patent and damages were awarded in the amount of $8.9 million. The judge later found for us on its
defense of laches, which reduced the damages award to $5.9 million. The court also imposed an injunction against further
distribution of the accused feature as part of Microsoft Access, but stayed the injunction pending appellate review. We have
appealed. In BTG v. Microsoft, filed in U.S. District Court for the Northern District of California on July 2, 2004, the plaintiff has
accused our Windows and Office products of infringing several patents. The patents are directed to “update” technology, active
desktop concepts and off-line browsing. No trial date has been set. In AVG v. Microsoft, the plaintiff filed a number of cases in
the Eastern District of Texas against us, our major OEMs, other computer game console makers (Sony and Nintendo), and
computer game publishers on August 23, 2004. The case concerns graphics functionality in Windows and Xbox. The first case
against us is scheduled for trial in January 2006. Adverse outcomes in some or all of the pending patent cases may result in
significant monetary damages or injunctive relief against us, adversely affecting distribution of our operating system or
application products. The risks associated with an adverse decision may result in material settlements.
Other. We are also subject to a variety of other claims and suits that arise from time to time in the ordinary course of our
business. While management currently believes that resolving claims against us, individually or in aggregate, will not have a
material adverse impact on our financial position or results of operations, these matters are subject to inherent uncertainties
and management’s view of them may change in the future. Were an unfavorable final outcome to occur, there exists the
possibility of a material adverse impact on our financial position and on the results of operations for the period in which the
effect becomes reasonably estimable.
As of June 30, 2005, we had accrued liabilities totaling $1.7 billion in other current liabilities and $961 million in other long-
term liabilities for all of the above matters.
NOTE 18 SEGMENT INFORMATION
Segment revenue and operating income/(loss) is as follows:
(In millions)
Y
ear Ended June 30 2003 2004 2005
Revenue
Client $ 10,304 $11,283 $12,048
Server and Tools 6,786 8,007 9,143
Information Worker 9,636 10,895 11,523
Microsoft Business Solutions 641 753 793
MSN 2,396 2,444 2,411
Mobile and Embedded Devices 153 239 334
Home and Entertainment 2,779 2,870 3,211
Reconciling amounts (508) 344 325
Consolidated $ 32,187 $36,835 $39,788
Operating income/(loss)
Client $ 8,306 $ 8,975 $ 9,396
Server and Tools 1,879 2,302 2,888
Information Worker 7,500 8,112 8,616
Microsoft Business Solutions (143) (115) (163 )
MSN (384) 383 469
Mobile and Embedded Devices (162) (98) (19 )
Home and Entertainment (938) (894) (359 )
Reconciling amounts (6,513) (9,631) (6,267 )
Consolidated $ 9,545 $ 9,034 $14,561
SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting
information about operating segments. This standard requires segmentation based on our internal organization and reporting of
revenue and operating income based upon internal accounting methods. Our financial reporting systems present various data
for management to run the business, including internal profit and loss statements prepared on a basis not consistent with U.S.