Microsoft 2007 Annual Report Download - page 10

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PAGE 9
We have entered into business and technical collaboration agreements with Novell and other Linux providers
to build, market, and support a series of solutions to make our products work better with their solutions, and to
provide each other’s customers with patent coverage for respective products.
We compete in the business of providing enterprise-wide computing solutions with several companies that
provide solutions and middleware technology platforms. IBM and Sun Microsystems lead a group of companies
focused on the Java 2 Platform Enterprise Edition (J2EE). Commercial software developers that provide
competing server applications for PC-based distributed client/server environments include Computer Associates,
IBM, and Oracle.
Numerous commercial software vendors offer competing commercial software applications for connectivity
(both Internet and intranet), security, hosting, and e-business servers. System Center competes with BMC,
Computer Associates, and IBM in the management of information technology (“IT”) infrastructures, while Forefront
Security competes with McAfee, Symantec, and Trend Micro in protecting both client and server applications.
Non-commercial software products, including the widely-deployed Apache Web Server, also compete with our
solutions. Our products for software developers compete against offerings from Adobe, BEA Systems, Borland,
IBM, Oracle, Sun Microsystems, and other companies. We believe that our server products provide customers
with advantages in innovation, performance, total costs of ownership, and productivity, by delivering superior
applications development tools and development environment, compatibility with a broad base of hardware and
software applications, security, and manageability.
Online Services Business. The Online Services Business (“OSB”) provides personal communications
services, such as e-mail and instant messaging, and online information offerings such as Live Search and MSN
portals and channels around the world. OSB also provides a variety of online services such as MSN Internet
Access, MSN Premium Web Services, and OneCare. OSB manages many of its own properties, including home
page, health, auto and shopping. In addition, OSB creates alliances with third parties, such as CareerBuilder.com,
Expedia.com, Foxsports.com, Match.com, and MSNBC.com. OSB generates revenue primarily from online
advertising, subscriptions and transactions of online paid services, as well as MSN narrowband Internet access
subscriptions. In fiscal year 2006, OSB launched adCenter, our proprietary advertising platform, and has since
transitioned the advertising business in the U.S. and certain international markets to adCenter. In fiscal year 2007,
we launched new online initiatives, including Windows Live Search™ and Live.com in 54 international markets,
Live Local Search in the U.S. and U.K., beta versions of MSN Soapbox (expansion of the MSN Video
experience), Virtual Earth™ 3D, Windows Live Hotmail, and others.
Products. MSN Search; MapPoint; MSN Internet Access; MSN Premium Web Services (consisting of MSN
Internet Software Subscription, MSN Hotmail Plus, MSN Bill Pay, and MSN Radio Plus); Windows Live; and MSN
Mobile Services.
Competition. OSB competes with AOL, Google, Yahoo!, and a wide array of Web sites and portals that provide
content and online offerings of all types to end users. We compete with these organizations to provide advertising
opportunities for merchants. OSB also competes for narrowband Internet access users with AOL, Earthlink, and
other ISPs for dial-up internet access in the United States. Due to the continuing trend of consumers migrating
from narrowband to broadband Internet access, we expect our narrowband Internet access subscriber base to
continue to decline as we de-emphasize this portion of our business. The Internet advertising industry has grown
significantly over the past several years, and we anticipate that this trend will continue. Competitors are
aggressively developing Internet offerings that seek to provide more effective ways of connecting advertisers with
audiences through enhanced functionality in communication services, improvements in information services such
as Internet search, and improved advertising infrastructure and support services. We have developed our own
algorithmic search engine to provide end users with more relevant search results, a broader selection of content,
and expanded search services. To support the growth of our advertising business, we also are investing in our
communication services, technology, operations, and sales efforts. We will continue to introduce new products
and services, including the Windows Live set of services that are aimed at attracting additional users through
improvements in the user online experience. We believe that we can compete effectively across the breadth of
our Internet services by providing users with software innovation in the form of information and communication
services that help them find, discover, and experience what they want online and by providing merchants with
effective advertising results through improved systems and sales support.