Mission, culture, purpose – the right fuel for our ongoing journey. In 2014, the trial court granted in part and denied in part the defendantsâ motion to exclude the plaintiffsâ general causation experts. In AI, we have the most comprehensive portfolio of tools, frameworks, and infrastructure. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) This uncertainty also affects managementâs accounting estimates and assumptions, which could result in greater variability in a variety of areas that depend on these estimates and assumptions, including investments, receivables, and forward-looking guidance. The Independent Software Vendor Royalty program enables partners to integrate Microsoft products into other applications and then license the unified business solution to their end users. If our review indicates a reduction in utility below carrying value, we reduce our inventory to a new cost basis through a charge to cost of revenue. Intelligent Cloud revenue increased, driven by server products and cloud services. We invest in a range of emerging technology trends and breakthroughs that we believe offer significant opportunities to deliver value to our customers and growth for the Company. Human Development Report 2019. Advertising costs are expensed as incurred. We also fund research and development activities at the operating segment level. Metrics related to our More Personal Computing segment assess the performance of key lines of business within this segment. This segment primarily comprises: Office Commercial is designed to increase personal, team, and organizational productivity through a range of products and services. Our privacy principles include a commitment to be transparent in our privacy practices, to offer meaningful privacy choices, and to responsibly manage the data we store and process. Commercial competitors for our server applications for PC-based distributed client-server environments include CA Technologies, IBM, and Oracle. Assets are not allocated to segments for internal reporting presentations. We continue to open new opportunities for gamers to engage both on- and off-console with both the launch of Project xCloud, our game streaming service, and continued investment in gaming hardware. We are required to estimate the fair value of the investment to determine the amount of the impairment loss. Our products include operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; and video games. Our mission is enduring. Based on this evaluation, management concluded that the Companyâs internal control over financial reporting was effective as of June 30, 2020. You can contact Microsoft Investor Relations at any time to order financial documents such as annual reports and Form 10-Ks free of charge. In instances where the timing of revenue recognition differs from the timing of invoicing, we have determined our contracts generally do not include a significant financing component. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings. VIEW ONLINE. The plaintiffs have filed supplemental expert evidence, portions of which the defendants have moved to strike. They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers. In August 2018, the trial court issued an order striking portions of the plaintiffsâ expert reports. While these programs may differ in various parts of the world, generally they include those discussed below. We believe use of a discounted cash flow approach is the most reliable indicator of the fair values of the businesses. We manage the average maturity of the fixed-income portfolio to achieve economic returns that correlate to certain global fixed-income indices. 2017 Annual Report 6.6 MB. Significant judgment is exercised by the Company in determining revenue recognition for these customer agreements, and includes the following: Given these factors and due to the volume of transactions, the related audit effort in evaluating managementâs judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgment. Growth in Devices is dependent on total PC shipments, the ability to attract new customers, our product roadmap, and expanding into new categories. The outcomes of legal proceedings and claims brought against us are subject to significant uncertainty. In fiscal year 2019, our U.S. income before income taxes was $15.8 billion and our foreign income before income taxes was $27.9 billion. Our fixed-income investments are exposed to interest rate risk and credit risk. 2016 ANNUAL REPORT. In fiscal year 2019, our U.S. income before income taxes was $15.8 billion and our foreign income before income taxes was $27.9 billion. In the past, option and forward contracts were used to hedge a portion of forecasted international revenue and were designated as cash flow hedging instruments. African American/Black representation in tech roles increased from 2.5 percent to 2.8 percent, African American/Black representation in leadership roles increased from 2.3 percent to 2.4 percent, Hispanic/Latinx representation in tech roles increased from 4.2 percent to 4.5 percent, Hispanic/Latinx representation in leadership roles increased from 4.2 percent to 4.4 percent, We continue to be a leading funder and board member of. Sign in. Chief Executive Officer, Project xCloud utilizes Microsoftâs Azure cloud technology to allow direct and on-demand streaming of games to PCs, consoles, and mobile devices, enabling gamers to take their favorites games with them and play on the device most convenient to them. We design, manufacture, and sell devices, including Surface and PC accessories. Certain volume licensing programs, including Enterprise Agreements, include on-premises licenses combined with Software Assurance (âSAâ). Time: 8:00 a.m. Pacific Time Our platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. Human Resources, Christopher C. Capossela $100 invested on 6/30/15 in stock or index, including reinvestment of dividends. The largest component of the OEM business is the Windows operating system pre-installed on devices. Cisco Systems is using its position in enterprise communications equipment to grow its unified communications business. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our consolidated financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use, or disposition of company assets that could have a material effect on our consolidated financial statements would be prevented or detected on a timely basis. We compete by providing powerful, flexible, secure, integrated industry-specific, and easy-to-use productivity and collaboration tools and services that create comprehensive solutions and work well with technologies our customers already have both on-premises or in the cloud. This creates an opportunity to reach new customers and increase usage and engagement with existing customers. We recently added several new products and accessories into the Surface family, including Surface Book 3 and Surface Go 2. Our collective opportunity is to channel this intelligent cloud and intelligent edge era into tech intensity for every organization on the planet. This report provides an overview of what we have achieved in 2018 as we work towards the goals set out in the FSC Global Strategic Plan 2015-2020. Dynamics 365 for Talent with LinkedIn Recruiter and Learning gives human resource professionals a complete solution to compete for talent. Amid a rapidly changing jobs market, LinkedIn’s role in creating economic opportunity for every member of the global workforce has never been more acute. Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets without applying significant adjustments. There will be 175 zettabytes of data by 2025, and processing this data in real time will be an imperative for every organization. Xbox Live and our cloud gaming services face competition from various online gaming ecosystems and game streaming services, including those operated by Amazon, Apple, Facebook, Google, and Tencent. But helplessness is corrosive to hope, and hope plus work is what is required. We report our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Marketing Solutions help companies grow relationships between businesses. There were no changes in our internal control over financial reporting during the quarter ended June 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The usual company annual report is a word-filled extravaganza of jargon, terms, figures and text. Operating income increased $2.4 billion or 21%. There are no quick fixes. Enterprise Agreements are designed for medium or large organizations that want to license cloud services and on-premises software organization-wide over a three-year period. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. For multi-year agreements, we generally invoice customers annually at the beginning of each annual coverage period. Among Microsoft Corporation, the S&P 500 Index and the NASDAQ Computer Index. The Company remains under IRS audit, or subject to IRS audit, for tax years subsequent to 2003. LinkedIn connects the worldâs professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. COVID-19 has intensified the need for these efforts, forcing tens of millions of people out of work. Office 365 Commercial grew 33%, due to growth in seats and higher average revenue per user. Windows Commercial products and cloud services revenue increased 18%. So organizations can empower their employees, fostering a new culture for hybrid work; engage customers intelligently and virtually; transform products with new business models; and optimize operations to keep customers and employees safe and secure. All repurchases were made using cash resources. Metrics related to our Productivity and Business Processes and Intelligent Cloud segments assess the health of our core businesses within these segments. Marketing Solutions competes with online and offline outlets that generate revenue from advertisers and marketers, and Sales Solutions competes with online and offline outlets for companies with lead generation and customer intelligence and insights. Windows Commercial revenue often reflects the number of information workers in a licensed enterprise and is relatively independent of the number of PCs sold in a given year. Officer and President, Although management currently believes that resolving claims against us, individually or in aggregate, will not have a material adverse impact in our consolidated financial statements, these matters are subject to inherent uncertainties and managementâs view of these matters may change in the future. We expect existing cash, cash equivalents, short-term investments, cash flows from operations, and access to capital markets to continue to be sufficient to fund our operating activities and cash commitments for investing and financing activities, such as dividends, share repurchases, debt maturities, material capital expenditures, and the transition tax related to the TCJA, for at least the next 12 months and thereafter for the foreseeable future. We have recast certain prior period amounts to conform to the current period presentation. Product revenue includes sales from operating systems; cross-device productivity applications; server applications; business solution applications; desktop and server management tools; software development tools; video games; and hardware such as PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories. Growth depends on our ability to reach new users in new markets such as first-line workers, small and medium businesses, and growth markets, as well as add value to our core product and service offerings to span productivity categories such as communication, collaboration, analytics, security, and compliance. Executive Vice President, Microsoft 365 is empowering people and organizations to be productive and secure as they adapt to more fluid ways of working and learning. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. Changes in value are recorded in other income (expense), net. There were 64 patent infringement cases pending against Microsoft as of June 30, 2020, none of which are material individually or in aggregate. Tested managementâs identification and treatment of contract terms. LinkedIn revenue increased $1.3 billion or 20%, driven by growth across all businesses. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. We expect capital expenditures to increase in coming years to support growth in our cloud offerings. We contribute fifty cents for each dollar a participant contributes into the plans, with a maximum employer contribution of 50% of the IRS contribution limit for the calendar year. Examples of estimates and assumptions include: for revenue recognition, determining the nature and timing of satisfaction of performance obligations, and determining the standalone selling price (âSSPâ) of performance obligations, variable consideration, and other obligations such as product returns and refunds; loss contingencies; product warranties; the fair value of and/or potential impairment of goodwill and intangible assets for our reporting units; product life cycles; useful lives of our tangible and intangible assets; allowances for doubtful accounts; the market value of, and demand for, our inventory; stock-based compensation forfeiture rates; when technological feasibility is achieved for our products; the potential outcome of uncertain tax positions that have been recognized in our consolidated financial statements or tax returns; and determining the timing and amount of impairments for investments. And the combination of LinkedIn Sales Navigator and Dynamics 365 gives sales professionals tools for more effective remote selling. At times, we make select intellectual property broadly available at no or low cost to achieve a strategic objective, such as promoting industry standards, advancing interoperability, or attracting and enabling our external development community. Our effective tax rate was lower than the U.S. federal statutory rate, primarily due to earnings taxed at lower rates in foreign jurisdictions resulting from producing and distributing our products and services through our foreign regional operations centers in Ireland and Puerto Rico, and tax benefits relating to stock-based compensation.