Microsoft 2009 Annual Report Download - page 25

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PAGE 25
Corporate-Level Activity
(In millions, except percentages) 2009 2008 2007
Percentage
Change 2009
Versus 2008
Percentage
Change 2008
Versus 2007
Corporate-level activity $(5,877 ) $(7,017 ) $(4,893) 16% (43)%
Certain corporate-level activity is not allocated to our segments. Those results include expenses such as broad-
based sales and marketing, product support services, human resources, legal, finance, information technology,
corporate development and procurement activities, research and development and other costs, legal settlements
and contingencies, and employee severance.
Fiscal year 2009 compared with fiscal year 2008
Corporate-level expenses decreased during the twelve months ended June 30, 2009, primarily reflecting decreased
general and administrative and sales and marketing expenses, partially offset by employee severance charges of
$330 million. General and administrative expenses decreased $1.4 billion or 28%, primarily due to decreased costs
for legal settlements and contingencies. We incurred $283 million of legal charges during the twelve months ended
June 30, 2009 as compared to $1.8 billion during the twelve months ended June 30, 2008. The prior year costs were
primarily related to the European Commission fine of $1.4 billion (€899 million). Sales and marketing expenses
decreased $412 million or 30%, reflecting the resource management program implemented in January 2009.
Fiscal year 2008 compared with fiscal year 2007
Corporate-level expenses increased, reflecting increased costs for legal settlements and legal contingencies and a
13% increase in headcount-related expenses. We incurred $1.8 billion of legal charges during fiscal year 2008
primarily related to the European Commission fine of $1.4 billion (€899 million) as compared with $511 million of
legal charges during fiscal year 2007. The increase in headcount-related expenses reflects an increase in headcount
from the prior year-end.
OPERATING EXPENSES
Cost of Revenue
(In millions, except percentages) 2009 2008 2007
Percentage
Change 2009
Versus 2008
Percentage
Change 2008
Versus 2007
Cost of revenue $12,155 $11,598 $
1
0,693 5%
8%
As a percent of revenue 21% 19% 21% 2ppt
(2)ppt
Cost of revenue includes manufacturing and distribution costs for products sold and programs licensed, operating
costs related to product support service centers and product distribution centers, costs incurred to drive traffic to our
website and/or acquire online advertising space (“traffic acquisition costs”), costs incurred to support and maintain
Internet-based products and services, warranty costs, inventory valuation adjustments, costs associated with the
delivery of consulting services, and the amortization of capitalized research and development costs associated with
software products that have reached technological feasibility.
Fiscal year 2009 compared with fiscal year 2008
Cost of revenue increased during the twelve months ended June 30, 2009, primarily reflecting increased online
costs, including traffic acquisition, data center and equipment, and headcount costs, partially offset by decreased
Xbox 360 platform costs.