Microsoft 2008 Annual Report Download - page 3

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PAGE 2
To our shareholders, customers, partners, and employees:
Fiscal 2008 was a successful year for Microsoft that saw the company deliver outstanding financial results,
introduce significant innovations across the breadth of our product portfolio, and make key investments that
position the company for strong future growth.
Thanks to the continued success of our core Windows and Office businesses, and double-digit growth in all our
business groups, revenue jumped to $60.4 billion in fiscal 2008, an increase of 18 percent compared with the
previous fiscal year. Operating income grew by 21 percent, reaching $22.5 billion for the year. Earnings per share
reached $1.87. We returned $16.5 billion to shareholders through stock buybacks and dividends.
Throughout fiscal 2008 we saw strong adoption of Windows Vista, which has sold more than 180 million licenses,
and the 2007 Microsoft Office system, which has sold more than 120 million licenses. Microsoft Office SharePoint
Server 2007 passed the 100 million mark for licenses sold and recorded more than $1 billion in revenue.
During the year, we brought a wide range of new innovations to market. We launched Microsoft Windows Server
2008 and Microsoft Visual Studio 2008. We released Windows Vista Service Pack 1 and introduced advances in
our search and online advertising technologies. We rolled out Surface – a groundbreaking new device that
transforms a tabletop into a computing surface that enables people to interact with digital content using gestures,
touch, and physical objects – in a number of retail and hotel locations. We unveiled new products and services for
the healthcare industry. We announced important changes to our technology and business practices to increase
the openness of our products and drive greater interoperability and choice for developers, partners, customers,
and competitors.
We also announced important strategic acquisitions to strengthen our offerings in key markets and add to our
broad innovation portfolio. The acquisitions of AdECN, Rapt, and YaData, for example, bring leading-edge
capabilities for advertisers and publishers to our advertising platform. With the acquisitions of Multimap, Fast
Search & Transfer, and Farecast, we added important new technologies to our consumer and enterprise search
services. As part of our mobile computing initiatives, we acquired Musiwave, a leading provider of mobile music
entertainment services; Danger, which provides software and services that power consumer handsets; and
MobiComp, a pioneer in mobile data backup and restoration. By acquiring Calista Technologies and Kidaro, we
continue to position ourselves as a leader in the critical market for virtualization.
In February 2008, we submitted a proposal to acquire Yahoo! The proposed transaction was designed to
accelerate our strategy in online search and advertising. After careful consideration, we determined that the
economics of the deal terms demanded by Yahoo! and the need to move forward quickly in partnership on
regulatory review and to integrate the two companies meant that the deal was no longer in the best interest of our
shareholders. Although we withdrew our offer, we remain committed to being a leader in online search and
advertising – we have the right people in place, and we continue to make investments that will enable us to
succeed.
Transformation Through Innovation
At the heart of our success lies our commitment to innovation. No company in our industry invests more in
research and development or has the same depth and breadth of talented researchers, scientists, and engineers
working across the globe to create new technology breakthroughs.
In 2008, we invested $8.2 billion in research and development, an increase of almost 15 percent compared with
fiscal 2007. During the year, we opened a new software development center in Vancouver, British Columbia;
established the Microsoft Embedded Systems Development Center in Aachen, Germany; and launched the
Internet Services Research Center within Microsoft Research in Redmond, Wash. We also opened Microsoft
Research New England in Cambridge, Mass. The company’s sixth major research facility, Microsoft Research
New England brings computer scientists and social scientists together to develop new computing and online
experiences.
Across our products and technologies, we introduced compelling innovations in fiscal 2008 that deliver valuable
new capabilities to our customers. With the release of Windows Server 2008, we introduced Microsoft Hyper-V, a
technology that enables multiple operating systems to run on a single computer. Called virtualization, this
approach is helping companies reduce costs and energy consumption and it is transforming the way computing
capabilities are delivered and managed.