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PAGE 2
To our shareholders, customers, partners and employees:
Fiscal 2007 was an important and very successful year for Microsoft. Fueled by the launches of new versions of
our flagship Microsoft® Windows® and Office products, the rollout of the biggest wave of business software in
company history, and excellent momentum across a broad range of markets, we reached a significant milestone
in 2007 when we surpassed $50 billion in revenue. For the year, revenue reached $51.12 billion, a 15 percent
increase over fiscal 2006. Operating income totaled $18.52 billion, a jump of $2.05 billion compared with the
previous year. During 2007, we returned $31 billion in cash to shareholders through stock buybacks and
dividends.
Results such as these cap a remarkable run that has seen profit double and revenue nearly double over the past
five years. During that time, we have also returned more than $100 billion to shareholders.
Fiscal 2007 saw many successful product launches, led by the release of Windows Vista®, the newest version of
our desktop operating system. In fiscal 2007, we sold more than 55 million Windows Vista licenses. The 2007
Microsoft Office system also enjoyed an extremely successful launch, enabling us to sell more than 71 million
Microsoft Office licenses in fiscal 2007.
Other important launches included the business security product Microsoft Forefront™, the Microsoft System
Center family of IT management solutions, and new versions of many of our Microsoft Dynamics™ business
solutions. We also launched Zune™, our digital and music entertainment device; released Microsoft Windows
Mobile® 6; and introduced Microsoft Silverlight, which enables developers to create rich, interactive media
experiences and applications for the Web.
During 2007, we acquired the global digital marketing company aQuantive. Valued at approximately $6 billion, it
marks the largest acquisition in Microsoft’s history. aQuantive’s market-leading technology and its decade-long
relationships with publishers and advertisers combined with our adCenter advertising platform will enable us to
offer a world-class Internet-wide advertising platform along with tools, sales, support, and syndication to agencies,
advertisers, and publishers. We also made a number of strategic acquisitions, including Tellme Networks, a
leading provider of voice services for directory assistance, enterprise customer service and mobile search;
ScreenTonic, a pioneer in mobile advertising and Medstory, which develops Web search technology for health
information.
Long-Term Success Built on Broad Innovation and Global Talent
In 2007, we continued our 30-year commitment to innovation by investing $7.12 billion in research and
development. The value of our investment in research and development can be seen in new products such as
Microsoft Surface™, which provides a groundbreaking tabletop computing experience that lets people interact
with digital content through natural gestures and touch, and Microsoft Robotics Studio, our revolutionary software
development kit for the robotics industry. It also is evident in more established products such as the 2007
Microsoft Office system, where the new Office Ribbon interface is transforming the way people use productivity
software.
The foundation for innovation at Microsoft is a work force that consists of the top talent from around the world. In a
time of intense competition for talent in our industry, 2007 was one of the best recruiting years in company history.
Around the globe, we hired great people for technical, sales, marketing, and support roles, and added new
research and development facilities so we can continue to attract the world’s best and brightest. Equally
important, we are making industry-leading investments in career development and workplace enhancements so
our employees have the right tools and incentives to drive the company forward.
Building New Competencies in Consumer Technology and the Services Transformation
One essential difference between Microsoft and any other company in this industry is our willingness to enter new
markets and embrace disruptive business trends. Seventeen years ago, we began to diversify our company by
expanding beyond the desktop and entering the enterprise server software market. Today, server software is a
$11.18 billion business for Microsoft.
This kind of long-term commitment and vision has enabled Microsoft to create an impressive portfolio of desktop
and enterprise products that have seen strong growth during the past five years. Since fiscal 2002, for example,
Microsoft SQL Server™ revenue has grown by an annual average of 28 percent, Microsoft Dynamics—which