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Embracing the Future

Microsoft is a tech company that creates tools and platforms to make things better and faster, and supports startups, education, health, and ingenuity.

They offer valuable services for infrastructure, data, business applications, and collaboration while simplifying security and management.

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What Microsoft Offers

Microsoft is a technology company that develops software, services, devices, and solutions.

They offer cloud-based solutions, support and consulting services, online advertising, and sell a variety of products including operating systems, applications, and devices.

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The Ambitions That Drive Microsoft

The Ambitions That Drive Microsoft Introduction

Microsoft's vision is achieved through three interconnected ambitions.

Reinvent Productivity and Business Processes

Microsoft offers technology and resources to create secure hybrid work environments, while also focusing on delivering continuous innovation and advancing productivity and collaboration tools and services.

Microsoft 365 combines Office 365, Windows, and Enterprise Mobility + Security to empower employees with AI-backed tools that unlock creativity, increase collaboration, and fuel innovation, while also enabling compliance coverage and data protection.

Microsoft Teams is a comprehensive platform for work that includes meetings, calls, chat, collaboration, and business process automation.

Build the Intelligent Cloud and Intelligent Edge Platform

Digital technology can provide benefits to organizations by empowering employees, optimizing operations, and engaging customers.

Microsoft invests in sustainable and fast computing and has gained advantages from three economies of scale in their cloud business.

Azure, Microsoft's cloud service, offers hybrid consistency, developer productivity, AI capabilities, and trusted security and compliance.

Microsoft prioritizes security, compliance, identity, and management throughout their entire technology stack to protect people and organizations.

Microsoft provides accessible tools for developers to create machine learning models and offers easy-to-use SQL Server in the cloud with Azure SQL Database and comprehensive data solutions with Azure Synapse.

Create More Personal Computing

Microsoft prioritizes personal computing for users, with a focus on productivity, security, and adaptability.

Windows 11 is designed to increase productivity and creativity, with improved security and privacy features.

Microsoft offers a range of services, tools, and devices for efficient browsing, organizational needs, and gaming content.

Microsoft’s Future Opportunity

Microsoft is transforming digitally to meet customer needs for affordable and improved products and services.

They are heavily investing in cloud-based services for businesses and individuals, as well as using AI to meet customer needs through natural communication methods.

Microsoft is investing in new gaming experiences across all devices and pushing innovation in console and PC gaming.

Their future growth depends on creating fresh solutions that embody their best.

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Microsoft’s Corporate Social Responsibility

Commitment To Sustainability

Microsoft is committed to sustainability and has pledged to be carbon negative by 2030 and remove all the carbon they have put into the environment since they started in 1975 by 2050.

Despite facing challenges such as increased emissions due to datacenter expansions and growth in Xbox sales caused by the COVID-19 pandemic, Microsoft has made progress in FY2021 and has promised to spend $1 billion over four years on new technologies and climate solutions.

Microsoft has also created tools to help organizations track their carbon footprint and makes sustainability investments in their products, services, and devices.

Addressing Racial Injustice & Inequity

Microsoft has a commitment to addressing racial injustice and inequity for Black and African American communities through their Racial Equity Initiative.

The initiative has three multi-year pillars with specific actions and goals to achieve by 2025.

Microsoft has made progress in representation and inclusion, exceeding their goal of increasing transaction volumes with Black- and African American-owned financial institutions, increasing their deposits with minority depository institutions, and enriching their supplier pipeline.

Investing in Digital Skills

Microsoft helped over 30 million people in 249 countries and territories during the COVID-19 pandemic through their global skills initiative.

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Human Capital Overview

Microsoft values diversity, authenticity, and meeting employee needs.

Approximately 221,000 full-time people are employed by Microsoft as of June 30, 2022, with 85,000 in operations and 73,000 in product research and development.

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Microsoft’s Culture

Microsoft prioritizes continuous learning and growth for all employees, promoting a growth mindset through various values such as customer focus, diversity and inclusivity, unity, and positive impact.

The company also values employee feedback through various listening systems, utilizing surveys and channels to gain insights into employee needs and experiences.

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Diversity and Inclusion

Microsoft aims to help people achieve more and values diversity and inclusivity in their business.

They support underrepresented communities through Employee Resource Groups and publicly disclose their progress in diversity and inclusion.

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Total Rewards

Microsoft has programs to attract and retain top talent.

Employee contributions are evaluated and collaboration is promoted.

Stock eligibility was expanded to all employees in fiscal year 2021.

In fiscal year 2022, investment was made in annual merit and stock awards, as well as base salary adjustments for certain employees.

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Pay Equity

Microsoft's white employees earn slightly less than all racial and ethnic minority employees combined.

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Wellness and Safety

Microsoft prioritizes employee safety and well-being, including support for occupational health and safety.

Microsoft offers unique benefits for overall wellness, including programs for physical, emotional, and financial wellness, as well as helping employees transition back to the office or a combination of in-office and remote work.

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Learning and Development

Microsoft prioritizes learning and innovation, and encourages its employees to seek out new ideas and embrace challenges.

The company offers a wide range of learning and development opportunities, and employees completed over 4.7 million online courses in 2022, averaging over 14 hours per employee. Additionally, all employees are required to complete learning programs related to company beliefs, compliance, and preventing harassment.

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New Ways of Working

Microsoft created a guide to help manage the hybrid workplace during the pandemic.

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Operating Segments Introduction

Microsoft reports financial performance in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

Segment and geographic data can be found in Note 19 of Microsoft's Financial Statements.

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Productivity and Business Processes

Productivity and Business Processes Introduction

Microsoft's Productivity and Business Processes segment offers a range of products and services.

Office Commercial

Microsoft's goal is to expand productivity categories and add value to their core products and services.

Office Consumer

Microsoft's Office Consumer is designed to increase productivity through various products and services.

The revenue for Office Consumer is affected by demand for communication and storage tools such as Skype, Outlook.com, and OneDrive.

LinkedIn

Microsoft connects professionals worldwide and provides insights and tools for workforce planning, talent development, and hiring.

Microsoft offers Marketing Solutions to help companies reach, engage, and convert their audiences at scale and helps companies improve customer relationships, sales, and discover new opportunities.

Microsoft makes money from LinkedIn through various paid services and advertising and offers premium subscriptions with additional services like premium search.

Dynamics

Microsoft offers software solutions for managing various aspects of business such as finances, resources, customers, and supplies.

Productivity and Business Processes Competition

Microsoft's competitors for Office software include companies like Apple, Cisco Systems, Meta, Google, IBM, Okta, Proofpoint, Slack, Symantec, and Zoom.

Microsoft competes by offering powerful, flexible, secure, and easy-to-use productivity and collaboration tools and services that create comprehensive solutions. Additionally, Microsoft faces competition from various companies in the online professional networking, recruiting, and talent management industries.

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Intelligent Cloud

Intelligent Cloud Introduction

Microsoft's Intelligent Cloud segment offers server products and cloud services for businesses and developers, as well as enterprise services.

Server Products and Cloud Services

Azure is a collection of cloud services provided by Microsoft.

It offers a range of services including computing, networking, storage, mobile and web application services, AI, IoT, cognitive services, and machine learning.

Enterprise Services

Microsoft's Enterprise Services offer server and desktop solutions.

Intelligent Cloud Competition

Microsoft faces competition from various companies such as Amazon, Google, IBM, Oracle, VMware, and open source options.

Microsoft competes with other companies in various software markets, including connectivity, security, hosting, and database.

Microsoft competes with various companies in offering database, business intelligence, data warehousing, and system management solutions, as well as products for software developers.

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More Personal Computing

More Personal Computing Introduction

Microsoft's More Personal Computing segment focuses on improving customer experience through technology.

The segment includes a variety of products, such as Windows, Surface devices, PC accessories, Xbox gaming products, and search and news advertising.

Windows

Microsoft designs Windows for consistent user experience and revenue from OEM is influenced by pre-installed licenses.

Microsoft's revenue from Windows OEM is affected by various factors.

Microsoft's Windows Commercial revenue is driven by volume licensing and advanced security offerings from commercial customers, not by the number of PCs sold.

Devices

Microsoft sells devices like Surface and PC accessories.

The Surface is designed for increased productivity for organizations, students, and consumers.

Gaming

Microsoft's gaming platform includes games, community, and cloud services.

Xbox Game Studios develops games for Xbox Game Pass, a subscription service with over 100 games. Xbox Cloud Gaming allows gamers to play their favorite games on any device. Microsoft enables online gaming experiences through Xbox consoles and other devices. Xbox revenue is affected by subscriptions, sales of content, and advertising. Growth is determined by active user base and exclusive game content.

Search and News Advertising

Microsoft's search and news advertising business displays targeted ads globally.

More Personal Computing Competition

Microsoft competes with other companies in multiple industries, including software, hardware, gaming, and advertising.

They believe their unique hardware architecture, user interface, and exclusive content give them an advantage over competitors in the gaming and entertainment industries.

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Microsoft has operations centers and datacenters worldwide to support different regions and tasks.

Microsoft serves customers globally and modifies its products for different countries by changing language and interface.

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Product and Service Development and Intellectual Property

Microsoft has multiple engineering groups, including Cloud and AI, Experiences and Devices, Security, Compliance, Identity, and Management, Technology and Research, LinkedIn, and Gaming.

They protect their intellectual property through copyright, trademark, trade secret, and other protections, and have a portfolio of over 69,000 US and international patents issued, and over 19,000 pending worldwide.

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Investing in the Future

Microsoft's success is attributed to innovation and its ability to adopt new technology trends.

The company invests heavily in research and development, boasting facilities not only in Redmond, Washington but also globally, to stay competitive and attract top talent.

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Distribution, Sales, & Marketing Introduction

Microsoft distributes their products and services through various channels, such as OEMs, direct sales, and distributors and resellers.

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OEMs

Microsoft distributes products and services through other companies.

Microsoft manages relationships with two types of Original Equipment Manufacturers (OEMs).

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Direct

Microsoft offers licensing options through Enterprise Agreements and Enterprise Services contracts, with sales support from various partners.

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Distributors & Resellers

Microsoft licenses their products and services through various partners such as LSPs, distributors, VARs, and retailers.

Their Cloud Solution Provider program is the main partner program for selling cloud services, while retail products are distributed through distributors, replicators, resellers, and retail outlets. They also have a team of sales representatives and support staff who work with distributors and resellers. Meanwhile, Dynamics business solutions are licensed to companies worldwide through partner networks.

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Licensing Options Introduction

Microsoft offers volume licensing agreements for organizations to purchase multiple licenses for their products and services, with flexible programs for organizations of different sizes.

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Volume Licensing Programs

Enterprise Agreement

Microsoft's Enterprise Agreements combine cloud services and software licenses under one agreement.

Microsoft Customer Agreement

The Microsoft Customer Agreement is a purchase agreement.

Microsoft Online Subscription Agreement

Microsoft has created an agreement for smaller companies to use their cloud services.

Microsoft Products and Services Agreement

Microsoft offers agreements for cloud services and on-premises software licensing.

Open Value

Small and medium-sized organizations can take advantage of Microsoft's Open Value agreements for both cloud services and software licensing.

Select Plus

Microsoft's Select Plus agreement is available to government and academic organizations, allowing them to buy on-premises licenses for any affiliate or department.

It lets organizations take advantage of their size by buying licenses as a single entity.

Organizations have the option to buy perpetual licenses and choose whether or not to add SA.

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Partner Programs

The Microsoft Cloud Solution Provider program enables easy licensing of cloud services and value-added services from partners.

Microsoft Services Provider License Agreement enables licensing of software products to hosting service providers and independent software vendors.

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Microsoft serves a diverse range of customers and partners.

The company aims to quickly ship products upon receiving purchase orders.

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Microsoft's Investor Relations website is a valuable resource for investors, providing free access to reports, financial metrics, and announcements, as well as corporate governance information.

The Reports Hub website offers additional reports and resources, but it's important to note that Microsoft does not report information from certain websites to the SEC. Investors should also check Microsoft's social media channels for important information.

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