Microsoft 2014 Annual Report Download - page 8

Download and view the complete annual report

Please find page 8 of the 2014 Microsoft annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 88

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88

7
Our segments 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.
Devices and Consumer
Our D&C segments develop, manufacture, market, and support products and services designed to increase personal
productivity, help people simplify tasks and make more informed decisions online, entertain and connect people, and help
advertisers connect with audiences. Our D&C segments are made up of D&C Licensing, Computing and Gaming
Hardware, Phone Hardware, and D&C Other.
D&C Licensing
The principal products and services provided by the D&C Licensing segment are: Windows, including original equipment
manufacturer (“OEM”) licensing (“Windows OEM”) and other non-volume licensing and academic volume licensing of the
Windows operating system and related software; non-volume licensing of Microsoft Office, comprising the core Office
product set, for consumers (“Office Consumer”); Windows Phone operating system, including related patent licensing; and
certain other patent licensing revenue.
The Windows operating system is designed to empower individuals, companies, and organizations to simplify everyday
tasks through seamless operations across the user’s hardware and software.
Windows revenue growth is impacted significantly by the number of Windows operating system licenses purchased by
OEMs, which they pre-install on the devices they sell. In addition to computing device market volume, Windows revenue
is impacted by:
• the mix of computing devices based on form factor and screen size;
• differences in device market demand between developed markets and emerging markets;
• attachment of Windows to devices shipped;
• customer mix between consumer, small and medium sized businesses, and large enterprises;
• changes in inventory levels in 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;
• piracy; and
• sales of packaged software.
The versions of Office included in our D&C Licensing segment are designed to increase personal productivity through a
range of programs, services, and software solutions. Growth depends on our ability to add value to the core product set
and to continue to expand our product offerings in other areas such as content management and collaboration. Office
Consumer revenue is impacted by sales to customers that buy Office with their new devices and by product launches, as
well as the transition to Office 365 Consumer, our subscription-based cloud service that provides access to Office plus
other productivity services. Office 365 Consumer revenue is included in our D&C Other segment.
The Windows Phone operating system is designed to bring users closer to the people, applications, and content they
need. As noted above, prior to our acquisition of NDS, Microsoft and Nokia jointly created new mobile products and
services and extended established products and services to new markets through a strategic alliance. Windows Phone
revenue associated with this contractual relationship was reflected in D&C Licensing. Windows Phone revenue also
includes revenue from licensing mobile-related patents.