Microsoft 2010 Annual Report Download - page 10

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9
Our cloud-based services offerings also have many competitors. Windows Azure faces competition from Google,
Salesforce.com, and VMWare. SQL Azure faces competition from IBM and Oracle.
We believe that our server products, cloud-based services and Enterprise Services provide customers with
advantages in innovation, performance, total costs of ownership, and productivity by delivering superior applications,
development tools, and compatibility with a broad base of hardware and software applications, security, and
manageability.
Online Services Division
The Online Services Division (“OSD”) consists of online information offerings such as Bing, MSN portals and
channels, as well as an online advertising platform with offerings for both publishers and advertisers. We earn
revenue primarily from online advertising, including search, display, and advertiser and publisher tools. We continue
to launch updated and new online offerings and expect to continue to do so in the future. During fiscal year 2010, we
launched new releases of Bing, MSN and Advertising Platforms. In addition, on December 4, 2009, we entered into a
definitive agreement with Yahoo! whereby Microsoft will provide the exclusive algorithmic and paid search platform
for Yahoo! Web sites. We believe this agreement will allow us over time to improve the effectiveness and increase
the value of our search offering through greater scale in search queries and an expanded and more competitive
search and advertising marketplace.
Products and Services: Bing; Microsoft adCenter; MSN; and Atlas online tools for advertisers and publishers.
Competition
OSD competes with Google, Yahoo!, and a wide array of Web sites and portals that provide content and online
offerings to end users. We compete with these organizations to provide advertising opportunities for merchants.
Competitors are continuously developing Internet offerings that seek to provide more effective ways of connecting
advertisers with audiences. We believe our search engine, Bing, helps users make faster, more informed decisions
by providing relevant search results, expanded search services, and a broad selection of content. We have also
enhanced the user interface to bring a richer search experience. We also invest in improving the scale of our
advertising platform to serve both owned and operated, as well as third-party online properties. We will continue to
introduce new products and services to improve the user online experience. We believe that we can compete
effectively by attracting new users, understanding their intent, and matching their intent with relevant content,
advertiser offerings and software services. We will also attract advertisers by providing them access to targeted end-
users on a high traffic network.
Microsoft Business Division
Microsoft Business Division (“MBD”) offerings consist of the Microsoft Office system and Microsoft Dynamics
business solutions. Microsoft Office system products are designed to increase personal, team, and organization
productivity through a range of programs, services, and software solutions. Growth of revenue from the Microsoft
Office system offerings, which generate over 90% of MBD revenue, depends on our ability to add value to the core
Office product set and to continue to expand our product offerings in other information worker areas such as content
management, enterprise search, collaboration, unified communications, and business intelligence. Microsoft
Dynamics products provide business solutions for financial management, customer relationship management
(“CRM”), supply chain management, and analytics applications for small and mid-size businesses, large
organizations, and divisions of global enterprises.
Approximately 80% of MBD revenue is generated from sales to businesses, which includes Microsoft Office system
revenue generated through volume licensing agreements and Microsoft Dynamics revenue. Revenue from this
category generally depends upon the number of information workers in a licensed enterprise and is therefore
relatively independent of the number of PCs sold in a given year. Approximately 20% of MBD revenue is derived
from sales to consumers, which includes revenue from retail packaged product sales and OEM revenue. This
revenue is generally affected by the level of PC shipments and product launches.
Products and Services: Microsoft Office; Microsoft SharePoint; and Microsoft Dynamics ERP and CRM, as
well as Microsoft Office Web Apps, which are the online companions to Microsoft Word, Excel, PowerPoint and
OneNote.