Microsoft 2015 Annual Report Download - page 21

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20
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis (“MD&A”) is intended to help the reader understand the results
of operations and financial condition of Microsoft Corporation. MD&A is provided as a supplement to, and should be
read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements.
OVERVIEW
Microsoft is a technology leader focused on building best-in-class platforms and productivity services for a mobile-
first, cloud-first world. We strive to empower every person and every organization on the planet to achieve more. We
develop and market software, services, and devices that deliver new opportunities, greater convenience, and
enhanced value to people’s lives.
We generate revenue by developing, licensing, and supporting a wide range of software products, by offering an
array of services, including cloud-based services to consumers and businesses, by designing, manufacturing, and
selling devices that integrate with our cloud-based services, and by delivering relevant online advertising to a global
audience. Our most significant expenses are related to compensating employees, designing, manufacturing,
marketing, and selling our products and services, datacenter costs in support of our cloud-based services, and
income taxes.
Much of our focus in fiscal year 2015 was toward transforming our organization to support our strategy of building
best-in-class platforms and productivity services for a mobile-first, cloud-first world. We achieved product
development milestones, implemented organizational changes, and made strategic and tactical moves to support the
three central ambitions that support our strategy: reinventing productivity and business processes; building the
intelligent cloud platform; and creating more personal computing.
Highlights from fiscal year 2015 included:
• Momentum continued to grow in our Commercial Cloud and productivity offerings as we surpassed an $8
billion annualized run rate* at the end of the year.
• Office 365 Commercial seats grew 74%, and Office 365 is now deployed in four out of five Fortune 500
enterprises, with more than half of that install base using premium workloads. We also added over 50,000
small- and medium-sized business customers each month.
• Server products and services revenue increased 9%, driven by growth across our cloud and on-premises
server products. Azure revenue and compute usage increased by triple digits in the fourth quarter year
over year, and we ended fiscal year 2015 with more than 17,000 Enterprise Mobility Services customers.
• We reached over 8 million paid Dynamics seats and refreshed and enhanced Microsoft Dynamics ERP
products. We also introduced new social, productivity, mobility, customer service, and marketing
capabilities in Dynamics CRM.
• We currently have more than 15 million Office 365 consumer subscribers, with new customers signing up
at a current pace of nearly one million per month. We also surpassed 150 million downloads of Office
mobile to iOS and Android devices.
• Bing exceeded 20% U.S. market share as we focused our advertising business on search. In June 2015,
we entered into agreements with AOL and AppNexus to outsource our display sales efforts.
• In hardware, we released Surface 3 and expanded distribution of Surface Pro and the related gross
margin percentage grew with increased revenue, and introduced new categories like HoloLens – all with
an eye toward generating new growth in Windows more broadly.
• Xbox console volumes grew to over 12 million, and Xbox Live users increased 22%.
* Annualized run rate was calculated by multiplying June 2015 revenue by twelve months.