Microsoft 2009 Annual Report Download - page 12

PAGE 12
BUSINESS (CONTINUED)
Competition
Competitors to the Microsoft Office system include many software application vendors such as Adobe, Apple, Corel,
Google, IBM, Novell, Oracle, Red Hat, Zoho, and local application developers in Asia and Europe. Apple may
distribute certain versions of its application software products with various models of its PCs and through its mobile
devices. Corel (WordPerfect Suite) and IBM (Smartsuite) have measurable installed bases with their office
productivity products. Corel’s suites, and many local software suites around the world, are aggressively priced for
OEMs to preinstall them on low-priced PCs. Google provides Google Apps, a hosted messaging and productivity
suite that competes with Microsoft Office, Microsoft Exchange, and Microsoft SharePoint Server, and also provides
an enterprise search offering that competes with Microsoft Search Server. IBM competes with Office system
products with its Notes and Workplace offerings. The OpenOffice.org project provides a freely downloadable cross-
platform application that also has been adapted by various commercial software vendors to sell under their brands,
including IBM, Novell, Red Hat, and Sun Microsystems. Web-based offerings such as 37Signals, Adobe, AjaxWrite,
gOffice, ShareOffice, Socialtext, ThinkFree, Zoho, or other small projects competing with individual applications, can
also provide an alternative to Microsoft Office system products. Our Microsoft Dynamics products compete with well-
known vendors such as Intuit and Sage in the market focused on providing solutions for small and mid-sized
businesses. The market for large organizations and divisions of global enterprises is intensely competitive with a
small number of primary vendors including Oracle and SAP. Additionally, Salesforce.com’s on-demand customer
relationship management offerings compete directly with Microsoft Dynamics CRM Online and Microsoft Dynamic
CRM’s on-premise offerings.
As we continue to respond to market demand for additional functionality and products, we will compete with
additional vendors, most notably in content management and enterprise search, collaboration tools, unified
communications, and business intelligence. These competitors include Autonomy, Cisco, Endeca, Google, IBM,
Oracle, and SAP. We believe our products compete effectively with all of these vendors based on our strategy of
providing flexible, easy to use solutions that work well with technologies our customers already have.
Entertainment and Devices Division
The Entertainment and Devices Division (“EDD”) is responsible for developing, producing, and marketing the Xbox
video game system, including consoles and accessories, third-party games, games published under the Microsoft
brand, and Xbox Live operations, as well as research, sales, and support of those products. In addition to Xbox,
EDD offers the Zune digital music and entertainment device and accessories; PC software games; online games;
Mediaroom, our Internet protocol television software; the Microsoft Surface computing platform; and mobile and
embedded device platforms. EDD also leads the development efforts of our line of consumer software and hardware
products including application software for Macintosh computers and Microsoft PC hardware products, and is
responsible for all retail sales and marketing for Microsoft Office and the Windows operating systems.
Products: Xbox 360 console and games; Xbox Live; Zune; Mediaroom; numerous consumer software and
hardware products (such as mice and keyboards); Windows Mobile software and services platform; Windows
Embedded device operating system; Windows Automotive; and the Microsoft Surface computing platform.
Competition
Entertainment and devices businesses are highly competitive, characterized by rapid product life cycles, frequent
introductions of new products and titles, and the development of new technologies. The markets for our products are
characterized by significant price competition. We anticipate continued pricing pressure from our competitors. From
time to time, we have responded to this pressure by reducing prices on certain products. Our competitors vary in
size from very small companies with limited resources to very large, diversified corporations with substantial financial
and marketing resources. We compete primarily on the basis of product innovation, quality and variety, timing of
product releases, and effectiveness of distribution and marketing.
Our Xbox hardware business competes with console platforms from Nintendo and Sony, both of which have a
large, established base of customers. The lifecycle for video game consoles averages five to 10 years. We released
Xbox 360, our second generation console, in November 2005. Nintendo and Sony released new versions of their
game consoles in late 2006. We believe the success of video game consoles is determined by the availability of
games for the console, providing exclusive game content that gamers seek, the computational power and reliability
of the console, and the ability to create new experiences via online services, downloadable content, and peripherals.
We think the Xbox 360 is positioned well against competitive console products based on significant innovation in
hardware architecture, new developer tools, online gaming services, and continued strong exclusive content from
our own game franchises.