Microsoft 2013 Annual Report Download - page 8

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provide management with a comprehensive financial view of our key businesses. The segments enable the alignment of
strategies and objectives across the development, sales, marketing, and services organizations, and they provide a
framework for timely and rational allocation of development, sales, marketing, and services resources within businesses.
Additional information on our operating segments and geographic and product information is contained in
Note 21 – Segment Information and Geographic Data of the Notes to Financial Statements. In July 2013, we announced a
change in organizational structure as part of our transformation to a devices and services company. As we evolve how we
allocate resources and analyze performance in the new structure, it is possible that our segments may change.
Windows Division
Windows Division develops and markets operating systems for computing devices, related software and online services,
Surface RT and Pro devices, and PC accessories. This collection of software, hardware, and services is designed to
empower individuals, companies, and organizations and to simplify everyday tasks through seamless operations across
the user’s hardware and software. Windows 8 is the first version of the Windows operating system that supports both x86
and ARM chip architectures and that focuses on touch. With this version, Windows is able to scale across more form
factors, including mobile devices designed for consuming information and media, and devices that have high performance
computing capabilities.
Windows Division revenue growth is impacted by growth of the computing device market worldwide. Currently,
approximately 65% of total Windows Division revenue comes from Windows operating systems purchased by original
equipment manufacturers (“OEMs”), which they pre-install on the devices they sell.
In addition to computing device market volume, Windows revenue is impacted by:
• the proliferation of new computing devices that emphasize touch and mobility functionality;
• device market changes driven by shifts between developed markets and emerging markets, and consumer
devices and business devices;
• attachment of Windows to devices shipped;
• changes in inventory levels within the OEM channel;
• pricing changes and promotions, pricing variation that occurs when the mix of devices manufactured shifts from
local and regional system builders to large, multinational OEMs, and different pricing of Windows versions
licensed;
• demand of commercial customers for volume licensing and software assurance;
• sales of packaged software; and
• sales of Surface RT and Pro devices.
Principal Products and Services: Windows operating system; Windows Services suite of applications and web
services, including Outlook.com and SkyDrive; Surface RT and Pro devices; and PC accessories.
The general availability of Surface RT and Windows 8 started on October 26, 2012. The general availability of Surface Pro
started on February 9, 2013. A preview of Windows 8.1 was released on June 26, 2013.
Competition
The Windows operating system faces competition from various commercial software products and from alternative
platforms and devices, mainly from Apple and Google. We believe Windows competes effectively by giving customers
choice, value, flexibility, security, an easy-to-use interface, compatibility with a broad range of hardware and software
applications, including those that enable productivity, and the largest support network for any operating system. The
Windows 8 operating system includes the Windows Store, an online application marketplace. This marketplace benefits
our developer and partner ecosystems by providing access to a large customer base and benefits Windows users by
providing centralized access to certified applications.