Microsoft 2012 Annual Report Download - page 78

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NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC DATA
In its operation of the business, management, including our chief operating decision maker, the company’s Chief
Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared
on a basis not consistent with U.S. GAAP. The segment information within this note is reported on that basis. Our five
segments are Windows & Windows Live Division; Server and Tools; Online Services Division; Microsoft Business
Division; and Entertainment and Devices Division.
Due to the integrated structure of our business, certain revenue earned and costs incurred by one segment may benefit
other segments. Revenue on certain contracts may be allocated among the segments based on the relative value of the
underlying products and services. Costs that are identifiable are allocated to the segments that benefit to incent cross-
collaboration among our segments so that one segment is not solely burdened by the cost of a mutually beneficial activity.
Allocated costs may include those relating to development and marketing of products and services from which multiple
segments benefit, or those costs relating to services performed by one segment on behalf of other segments. Each
allocation is measured differently based on the specific facts and circumstances of the costs being allocated.
In addition, certain costs incurred at a corporate level that are identifiable and that benefit our segments are allocated to
them. These allocated costs include costs of: field selling; employee benefits; shared facilities services; and customer
service and support. Each allocation is measured differently based on the specific facts and circumstances of the costs
being allocated. Certain other corporate-level activity is not allocated to our segments, including costs of: broad-based
sales and marketing; product support services; human resources; legal; finance; information technology; corporate
development and procurement activities; research and development; legal settlements and contingencies; and employee
severance.
We have recast certain prior period amounts within this note to conform to the way we internally managed and monitored
segment performance during the current fiscal year, including moving Forefront Protection for Office, an anti-malware
solution, from Server and Tools to the Microsoft Business Division, as well as conforming management reporting and U.S.
GAAP reporting for stock-based compensation.
The principal products and services provided by each segment are summarized below:
Windows & Windows Live Division – Windows & Windows Live Division offerings consist of the Windows 7 operating
system, software and services through Windows Live, and PC hardware products.
Server and Tools – Server and Tools product and service offerings include Windows Server, Windows Azure, Microsoft
SQL Server, Windows Embedded device platforms, and Enterprise Services. Enterprise Services comprise Premier
product support services and Microsoft Consulting Services.
Online Services Division – Online Services Division offerings include Bing, MSN, and advertiser tools.
Microsoft Business Division – Microsoft Business Division offerings include Microsoft Office, SharePoint, Exchange,
Lync, and Microsoft Dynamics business solutions.
Entertainment and Devices Division – Entertainment and Devices Division offerings include the Xbox 360
entertainment platform, including Kinect for Xbox 360, Skype, and Windows Phone.