Microsoft 2009 Annual Report Download - page 21

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PAGE 21
Server and Tools licenses products, applications, tools, content, and services that are designed to make information
technology professionals and developers more productive and efficient. Server and Tools offerings consist of server
software licenses and client access licenses (“CAL”) for Windows Server, Microsoft SQL Server, and other server
products. We also offer developer tools, training, certification, Microsoft Press, Premier product support services,
and Microsoft Consulting Services. Server products can be run on-site, in a partner-hosted environment, or in a
Microsoft-hosted environment. We use multiple channels for licensing, including pre-installed OEM versions,
licenses through partners, and licenses directly to end customers. We sell licenses both as one-time licenses and as
multi-year volume licenses.
Fiscal year 2009 compared with fiscal year 2008
Server and Tools revenue increased reflecting growth in both product and services revenue. Server and server
application revenue (including CAL) and developer tools revenue increased $809 million or 8%, primarily driven by
growth in SQL Server, Enterprise CAL Suites, and System Center revenue. This growth reflects recognition of
deferred revenue from previously signed agreements and continued adoption of the Windows Server Platform and
applications. Consulting and Premier product support services revenue increased $215 million or 8%, primarily due
to revenue from annuity support agreements. Foreign currency exchange rates accounted for a $140 million or one
percentage point increase in revenue.
Server and Tools operating income increased primarily due to growth in product revenue, partially offset by
increased research and development expenses and cost of revenue. Research and development expenses
increased $168 million or 9%, primarily driven by increased headcount-related expenses. Cost of revenue increased
$84 million or 3%, reflecting the growth in support, online, and consulting services.
Fiscal year 2008 compared with fiscal year 2007
Server and Tools revenue increased reflecting growth in product and services revenue and included a favorable
impact from foreign currency exchange rates of $464 million or four percentage points. Server and server application
revenue (including CAL revenue) and developer tools revenue increased $1.4 billion or 16%, primarily driven by
growth in volume licensing of Windows Server and SQL Server products. This growth reflects broad adoption of the
Windows Platform and applications with the releases of Windows Server 2008 and Visual Studio 2008 during fiscal
year 2008. Consulting and Premier product support services revenue increased $593 million or 29%, primarily due to
higher demand for consulting and support services by corporate enterprises.
Server and Tools operating income increased primarily due to growth in product revenue, partially offset by
increased sales and marketing expenses, cost of revenue, and research and development expenses. Sales and
marketing expenses increased $458 million or 13%, due to higher expenses associated with our corporate sales
force. Cost of revenue increased $404 million or 19%, reflecting the growth in Consulting and Premier product
support services. Research and development expenses increased $177 million or 10%, primarily driven by increased
headcount-related expenses. Headcount-related expenses increased 6%, driven by an increase in headcount from
the prior year-end.
Online Services Business
(In millions, except percentages) 2009 2008 2007
Percentage
Change 2009
Versus 2008
Percentage
Change 2008
Versus 2007
Revenue $3,088 $3,214 $2,434 (4)% 32%
Operating loss $(2,253) $(1,222 ) $(604) (84)% (102)%