Microsoft 2012 Annual Report Download - page 18

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results of
operations and financial condition of Microsoft Corporation. MD&A is provided as a supplement to, and should be read in
conjunction with, our financial statements and the accompanying Notes to Financial Statements.
OVERVIEW AND OUTLOOK
Microsoft is a technology leader focused on helping people and businesses throughout the world realize their full potential.
We create technology that transforms the way people work, play, and communicate across a wide range of computing
devices.
We generate revenue by developing, licensing, and supporting a wide range of software products and services, including
cloud-based services, by designing and selling hardware, and by delivering relevant online advertising to a global
audience. Our most significant expenses are related to compensating employees, designing, manufacturing, marketing,
and selling our products and services, and income taxes.
Industry Trends
Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. Each
industry shift is an opportunity to conceive new products, new technologies, or new ideas that can further transform the
industry and our business. At Microsoft, we push the boundaries of what is possible through a broad range of research
and development activities that seek to anticipate the changing demands of customers, industry trends, and competitive
forces.
Key Opportunities and Investments
Based on our assessment of key technology trends and our broad focus on long-term research and development of new
products and services, we see significant opportunities to drive future growth.
Smart connected devices
The price per unit of processing, storage, and networks continues to decline while at the same time devices increase in
capability. As a result, the capabilities and accessibility of PCs, tablets, phones, televisions, and other devices powered by
rich software platforms and applications continue to grow. At the same time, the information and services people use
increasingly span multiple devices enabled by the adoption of cloud computing.
For example, the delivery and quality of unified entertainment experiences across devices is undergoing dramatic
evolution. These rich media experiences include books, magazines, newspapers, games, movies, music, television, and
social interactions with family, friends, and colleagues. At Microsoft, our approach is to simplify and increase the
accessibility of these entertainment experiences to broaden market penetration of our software, hardware, and services.
Additionally, web content and social connections have increased tremendously as people spend more time online, while
discoverability and accessibility has been transforming from direct navigation and document links. There is significant
opportunity to deliver products and services that help users make faster, better decisions and complete tasks more simply
when using their devices. Our approach is to use machine learning to understand user intent, and differentiate our
products and services by focusing on the integration of speech, visual, social, and other elements to simplify people’s
interaction with the Internet.
We invest significant resources in enabling and developing smart connected devices that offer a unified, seamless
experience across a common platform. Whether a PC, Windows Phone, Xbox 360, or the newly announced Surface