Microsoft 2014 Annual Report Download - page 15

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14
OEMs
We distribute software through OEMs that pre-install our software on new PCs, tablets, servers, smartphones, and other
intelligent devices that they sell to end customers. The largest component of the OEM business is the Windows operating
system pre-installed on computing devices. OEMs also sell hardware pre-installed with other Microsoft products, including
server and embedded operating systems and applications such as our Microsoft Office suite. In addition to these
products, we also market our services through OEMs and service bundles such as Windows with Bing or Windows with
Office 365 subscription.
There are two broad categories of OEMs. The largest OEMs, many of which operate globally, are referred to as “Direct
OEMs,” as our relationship with them is managed through a direct agreement between Microsoft and the OEM. We have
distribution agreements covering one or more of our products with virtually all of the multinational OEMs, including Acer,
ASUS, Dell, Fujitsu, HTC, Hewlett-Packard, LG, Lenovo, Samsung, Sony, Toshiba, and with many regional and local
OEMs. The second broad category of OEMs consists of lower-volume PC manufacturers (also called “system builders”),
which source their Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor
channel rather than through a direct agreement or relationship with Microsoft.
Distributors and Resellers
Many organizations that license our products and services through enterprise agreements transact directly with us, with
sales support from solution integrators, independent software vendors, web agencies, and developers that advise
organizations on licensing our products and services (“Enterprise Agreement Direct Advisors”, or “EDAs”). Organizations
also license our products and services indirectly, primarily through license solutions partners (“LSPs”), distributors, value-
added resellers (“VARs”), OEMs, system builder channels, and retailers. Although each type of reselling partner reaches
organizations of all sizes, LSPs are primarily engaged with large organizations, distributors resell primarily to VARs, and
VARs typically reach small-sized and medium-sized organizations. EDAs typically are also authorized as LSPs and
operate as resellers for our other licensing programs, such as the Select Plus and Open licensing programs discussed
under “Licensing Options” below. Some of our distributors include Ingram Micro and Tech Data, and some of our largest
resellers include CDW, Dell, Insight Enterprises, and Software House International.
Our Microsoft Dynamics software offerings are also licensed to enterprises through a global network of channel partners
providing vertical solutions and specialized services. We distribute our retail packaged products primarily through
independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. Individual consumers obtain
these products primarily through retail outlets, such as Wal-Mart, Dixons, and Microsoft retail stores. We distribute our
hardware products, including Surface, Xbox, phones, and PC accessories, through third-party retailers and Microsoft retail
stores. Our phones are also distributed through global wireless communications carriers. We have a network of field sales
representatives and field support personnel that solicits orders from distributors and resellers, and provides product
training and sales support.
Online
Although on-premises software will continue to be an important part of our business, increasingly we are delivering
additional value to customers through cloud-based services. We provide online content and services to consumers
through Bing, MSN portals and channels, Office 365, Windows Phone Store, Xbox Live, Outlook.com, Skype, and
Windows Store. We also provide commercial cloud-based services such as Microsoft Dynamics CRM Online, Microsoft
Azure, and Office 365 consisting of online versions of Microsoft Office, Exchange, SharePoint, Lync, and Yammer. Other
services delivered online include our online advertising platform with offerings for advertisers and publishers, as well as
Microsoft Developer Network subscription content and updates, periodic product updates, and online technical and
practice readiness resources to support our partners in developing and selling our products and solutions. As we
increasingly deliver online services, we sell many of these cloud-based services through our enterprise agreements and
have also enabled new sales programs to reach small and medium-sized businesses. These new programs include direct
sales, direct sales supported by a large network of partner advisors, and resell of services through operator channels,
such as telephone, cell, and cable providers.
We also sell our products through our Microsoft retail stores and online marketplaces.