Microsoft 2002 Annual Report Download - page 39

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MSFT 41 / 2002 FORM 10-K
Part II
Item 8
NOTE 3 UNEARNED REVENUE
A portion of Microsoft’s revenue under volume licensing programs is earned ratably over the period of the license agreement. Also, revenue attributable to
undelivered elements, including technical support and Internet browser technologies, is based on the average sales price of those elements when sold
separately, and is recognized ratably on a straight-line basis over the product’s life cycle. The percentage of revenue recognized ratably for undelivered
elements ranges from approximately 20% to 25% for Windows XP Home, approximately 10% to 15% for Windows XP Professional, and approximately 10%
to 15% for desktop applications, depending on the terms and conditions of the license and prices of the elements. Product life cycles are currently estimated
at three years for Windows operating systems and 18 months for desktop applications.
The components of unearned revenue were as follows:
In millions
June 30 2001 2002
Volume licensing programs $1,922 $4,158
Undelivered elements 2,818 2,830
Other 874 755
Unearned revenue $5,614 $7,743
Unearned revenue by product was as follows:
In millions
June 30 2001 2002
Desktop Applications $2,189 $3,489
Desktop Platforms 2,586 3,198
Enterprise Software and Services 391 791
Desktop and Enterprise Software and Services 5,166 7,478
Consumer Software, Services, and Devices, and Other 448 265
Unearned revenue $5,614 $7,743
Of the $7.74 billion of unearned revenue at June 30, 2002, $2.28 billion is expected to be recognized in the first quarter of fiscal 2003, $1.64 billion in the
second quarter of fiscal 2003, $1.18 billion in the third quarter of fiscal 2003, $817 million in the fourth quarter of fiscal 2003, and $1.82 billion thereafter.