Microsoft 2009 Annual Report Download - page 10

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PAGE 10
BUSINESS (CONTINUED)
Approximately 50% of Server and Tools revenue comes from multi-year licensing agreements, approximately
20% is purchased through fully packaged product and transactional volume licensing programs, and approximately
10% comes from licenses sold to OEMs. The remainder of Server and Tools revenue comes from consulting and
product and solution support services.
Windows Server 2008 R2, the latest version of the Windows Server operating system was released to
manufacturing in July 2009 and is expected to be generally available in September 2009.
Products and Services: Windows Server operating system; Microsoft SQL Server; Visual Studio; Silverlight;
System Center products; Forefront security products; Biz Talk Server; Microsoft Consulting Services; Premier
product support services; and other products and services.
Competition
Our server operating system products face intense competition from a wide variety of server operating systems and
server applications, offered by companies with a variety of market approaches. Vertically integrated computer
manufacturers such as Hewlett-Packard, IBM, and Sun Microsystems offer their own versions of the Unix operating
system preinstalled on server hardware. Nearly all computer manufacturers offer server hardware for the Linux
operating system and many contribute to Linux operating system development. The competitive position of Linux
has also benefited from the large number of compatible applications now produced by many leading commercial and
non-commercial software developers. A number of companies supply versions of Linux, including Novell and Red
Hat.
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 enhance the interoperability of our products with their
virtualization, management, and network security solutions, and to provide each other’s customers with patent
coverage for their respective products.
We compete to provide enterprise-wide computing solutions with several companies that offer solutions and
middleware technology platforms. IBM, Oracle, 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 CA, Inc., IBM, and Oracle. Our Web
application platform software competes with open source software such as Apache, Linux, MySQL, and PHP, and
we compete against Java middleware such as Geronimo, JBoss, and Spring Framework.
Numerous commercial software vendors offer competing software applications for connectivity (both Internet and
intranet), security, hosting, and e-business servers. System Center competes with server management and server
virtualization platform providers, such as BMC, CA, Inc., Hewlett-Packard, IBM, and VMWare in the management of
information technology infrastructures. Forefront security products compete with McAfee, Symantec, and Trend
Micro in protecting both client and server applications. Our products for software developers compete against
offerings from Adobe, Borland, IBM, Oracle, Sun Microsystems, other companies, and open-source projects. Open
source projects include Eclipse (sponsored by CA, IBM, Oracle, and SAP), PHP, and Ruby on Rails, among others.
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 compatibility with a broad
base of hardware and software applications, security, and manageability.
Online Services Business
The Online Services Business (“OSB”) consists of an online advertising platform with offerings for both publishers
and advertisers, online information offerings such as Bing, MSN Portals and channels, and personal
communications services such as email and instant messaging around the world. We earn revenue primarily from
online advertising, including search, display, and email and messaging services. Revenue is also generated through
subscriptions and transactions generated from online paid services, from advertiser and publisher tools, and digital
marketing and advertising agency services. We continue to launch updated and new online offerings and expect to
continue to do so in the future. During fiscal year 2009, we launched new releases of our proprietary advertising
platforms, adCenter and adExpert, and launched a new release of our search engine named Bing. We also updated
behavioral targeting tools, launched new releases of MSN properties globally, and added applications and services
to our existing Windows Live suite.