Microsoft 2011 Annual Report Download - page 14

Download and view the complete annual report

Please find page 14 of the 2011 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 83

  • 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

14
Product Development and Intellectual Property
Most of our software products and services are developed internally. Internal development allows us to maintain
competitive advantages that come from closer technical control over our products and services. It also gives us
the freedom to decide which modifications and enhancements are most important and when they should be
implemented. We strive to obtain information as early as possible about changing usage patterns and hardware
advances that may affect software design. Before releasing new software platforms, we provide application
vendors with a range of resources and guidelines for development, training, and testing. Generally, we also create
product documentation internally.
We protect our investments in innovation in a variety of ways. We work actively in the U.S. and internationally to
ensure the enforcement of copyright, trademark, trade secret, and other protections that apply to our software
products, services, business plans, and branding. We are a leader among technology companies in pursuing
patents and currently have a portfolio of over 26,000 U.S. and international patents issued and over 36,000
pending. While we employ many of our innovations exclusively in Microsoft products and services, we also
engage in outbound and inbound licensing of specific patented technologies that are incorporated into licensees’
or Microsoft’s products. From time to time, we enter into broader cross-license agreements with other technology
companies covering entire groups of patents. From time to time, we purchase or license technology that we
incorporate in our products or services.
While it may be necessary in the future to seek or renew licenses relating to various aspects of our products and
business methods, we believe, based upon past experience and industry practice, such licenses generally could
be obtained on commercially reasonable terms. We believe our continuing innovation and product development
are not materially dependent on any single license or other agreement with a third party relating to the
development of our products.
Investing in Innovation
Innovation is the foundation for Microsoft’s success. Our model for growth is based on our ability to initiate and
embrace disruptive technology trends, to enter new markets, both in terms of geographies and product areas, and
to drive broad adoption of the products and services we develop and market. Our innovation investments focus on
the emerging technology trends and breakthroughs that we believe offer significant opportunities to deliver value
to our customers and growth for the company. We maintain our long-term commitment to research and
development across a wide spectrum of technologies, tools, and platforms spanning communication and
collaboration; information access and organization; entertainment; business and e-commerce; advertising; and
devices.
While our main research and development facilities are located in Redmond, Washington, we also operate
research and development facilities in other parts of the U.S. and around the world, including Canada, China,
Denmark, England, India, Ireland, and Israel. This global approach will help us remain competitive in local
markets and enable us to continue to attract top talent from across the world. We generally fund research at the
corporate level to ensure that we are looking beyond immediate product considerations to opportunities further in
the future. We also fund research and development activities at the business segment level. Many of the
innovations created by our business segments are coordinated with other segments and leveraged across the
company.
In addition to our main research and development operations, we also operate Microsoft Research. Microsoft
Research is one of the world’s largest computer science research organizations, and works in close collaboration
with top universities around the world to advance the state-of-the-art in computer science, providing us a unique
perspective on future technology trends.
Based on our assessment of key technology trends and our broad focus on long-term research and development
of new products and services, areas where we see significant opportunities to drive future growth include smart
connected devices, cloud computing, entertainment, search, communications, and productivity.
DISTRIBUTION, SALES, AND MARKETING
We market and distribute our products and services primarily through the following channels: OEM; distributors
and resellers; and online.