Microsoft 2014 Annual Report Download - page 20

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Our future opportunity
There are several distinct areas of technology that we aim to drive forward. Our goal is to lead the industry in these areas
over the long term, which we expect will translate to sustained growth. We are investing significant resources in:
• Delivering new high-value digital work and digital life experiences to improve how people learn, work, play, and
interact with one another.
• Establishing our Windows platform across the PC, tablet, phone, server, other devices, and the cloud to drive a
thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing
new advances to market.
• Building and running cloud-based services in ways that unleash new experiences and opportunities for
businesses and individuals.
• Developing new devices that have increasingly natural ways to use them, including touch, gesture, and
speech.
• Applying machine learning to make technology more intuitive and able to act on our behalf, instead of at our
command.
We believe the breadth of our products and services portfolio, our large, global partner and customer base, our growing
ecosystem, and our ongoing investment in innovation position us to be a leader in these areas.
Economic Conditions, Challenges, and Risks
The market for software, devices, and cloud-based services is dynamic and highly competitive. Our competitors are
developing new software and devices, while also deploying competing cloud-based services for consumers and
businesses. The devices and form factors customers prefer evolve rapidly, and influence how users access services in
the cloud and in some cases the user’s choice of which suite of cloud-based services to use. We must continue to evolve
and adapt over an extended time in pace with this changing environment. To support our strategy of reinventing
productivity to empower every person and every organization to do more and achieve more, we announced a
restructuring plan in July 2014. Through this restructuring, we strive to increase agility, streamline engineering processes,
move faster and more efficiently, and simplify our organization. Even if we achieve these goals, the investments we are
making in devices and infrastructure will increase our operating costs and may decrease our operating margins.
We prioritize our investments among the highest long-term growth opportunities. These investments require significant
resources and are multi-year in nature. The products and services we bring to market may be developed internally, as
part of a partnership or alliance, or through acquisition.
Our success is highly dependent on our ability to attract and retain qualified employees. We hire a mix of university and
industry talent worldwide. Microsoft competes for talented individuals globally by offering an exceptional working
environment, broad customer reach, scale in resources, the ability to grow one’s career across many different products
and businesses, and competitive compensation and benefits. Aggregate demand for our software, services, and devices
is correlated to global macroeconomic and geopolitical factors, which remain dynamic. See a discussion of these factors
and other risks under Risk Factors in our fiscal year 2014 Form 10-K.
Unearned Revenue
Quarterly and annual revenue may be impacted by the deferral of revenue. See the discussions below regarding:
• revenue deferred on certain devices bundled with other products and services (“Bundled Offerings”); and
• revenue deferred on sales of Windows 7 with an option to upgrade to Windows 8 Pro at a discounted price
(the “Windows Upgrade Offer”).
If our customers choose to license cloud-based versions of our products and services rather than licensing transaction-
based products and services, the associated revenue will shift from being recognized at the time of the transaction to
being recognized over the subscription period or upon consumption, as applicable.