Microsoft Corporation (Microsoft) operates as a technology company.
The company strives to create local opportunity, growth, and impact in every country around the world. The company’s platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency. The company is creating the tools and platforms that deliver better, faster, and more effective solutions to support new startups, improve educational and health outcomes, and empower human ingenuity. From infrastructure and data, to business applications and collaboration, the company provides unique, differentiated value to customers.
The company is building a distributed computing fabric – across cloud and the edge – to help every organization build, run, and manage mission-critical workloads anywhere. The company is enabling metaverse experiences at all layers of its stack, so customers can more effectively model, automate, simulate, and predict changes within their industrial environments, feel a greater sense of presence in the new world of hybrid work, and create custom immersive worlds to enable new opportunities for connection and experimentation. The company develops and supports software, services, devices, and solutions that deliver new value for customers and help people and businesses realize their full potential.
The company offers an array of services, including cloud-based solutions that provide customers with software, services, platforms, and content, and it provides solution support and consulting services. The company also delivers relevant online advertising to a global audience.
The company’s products include operating systems, cross-device productivity and collaboration applications, server applications, business solution applications, desktop and server management tools, software development tools, and video games. The company also designs and sells devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices, and related accessories.
The company operates through three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.
Productivity and Business Processes segment
Productivity and Business Processes segment consists of products and services in the company’s portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:
Office Commercial (Office 365 subscriptions, the Office 365 portion of Microsoft 365 Commercial subscriptions, and Office licensed on-premises), comprising Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Microsoft Viva.
Office Consumer, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other Office services.
LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions.
Dynamics business solutions, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Customer Insights, Power Apps, and Power Automate; and on-premises ERP and CRM applications.
Office Commercial is designed to increase personal, team, and organizational productivity through a range of products and services. Growth depends on the company’s ability to reach new users in new markets, such as frontline workers, small and medium businesses, and growth markets, as well as add value to the company’s core product and service offerings to span productivity categories, such as communication, collaboration, analytics, security, and compliance. Office Commercial revenue is mainly affected by a combination of continued installed base growth and average revenue per user expansion, as well as the continued shift from Office licensed on-premises to Office 365.
Office Consumer is designed to increase personal productivity through a range of products and services. Growth depends on the company’s ability to reach new users, add value to its core product set, and continues to expand its product and service offerings into new markets. Office Consumer revenue is mainly affected by the percentage of customers that buy Office with their new devices and the continued shift from Office licensed on-premises to Microsoft 365 Consumer subscriptions. Office Consumer Services revenue is mainly affected by the demand for communication and storage through Skype, Outlook.com, and OneDrive, which is largely driven by subscriptions, advertising, and the sale of minutes.
LinkedIn connects the world’s professionals to make them more productive and successful and transforms the way companies hire, market, sell, and learn. The company’s vision is to create economic opportunity for every member of the global workforce through the ongoing development of the world’s first Economic Graph, a digital representation of the global economy. In addition to LinkedIn’s free services, LinkedIn offers monetized solutions: Talent Solutions, Marketing Solutions, Premium Subscriptions, and Sales Solutions. Talent Solutions provide insights for workforce planning and tools to hire, nurture, and develop talent. Talent Solutions also includes Learning Solutions, which help businesses close critical skills gaps in times where companies are having to do more with existing talent. Marketing Solutions help companies reach, engage, and convert their audiences at scale. Premium Subscriptions enables professionals to manage their professional identity, grow their network, and connect with talent through additional services like premium search. Sales Solutions help companies strengthen customer relationships, empower teams with digital selling tools, and acquire new opportunities. LinkedIn has over 850 million members and has offices around the globe. Growth will depend on the company’s ability to increase the number of LinkedIn members and the company’s ability to continue offering services that provide value for its members and increase their engagement. LinkedIn revenue is mainly affected by demand from enterprises and professional organizations for subscriptions to Talent Solutions, Sales Solutions, and Premium Subscriptions offerings, as well as member engagement and the quality of the sponsored content delivered to those members to drive Marketing Solutions.
Dynamics provides cloud-based and on-premises business solutions for financial management, enterprise resource planning (ERP), customer relationship management (CRM), supply chain management, and other application development platforms for small and medium businesses, large organizations, and divisions of global enterprises. Dynamics revenue is driven by the number of users licensed and applications consumed, expansion of average revenue per user, and the continued shift to Dynamics 365, a unified set of cloud-based intelligent business applications, including Power Apps and Power Automate.
Competitors to Office include software and global application vendors, such as Apple, Cisco Systems, Meta, Google, IBM, Okta, Proofpoint, Slack, Symantec, Zoom, and numerous web-based and mobile application competitors, as well as local application developers. Apple distributes versions of its pre-installed application software, such as email and calendar products, through its PCs, tablets, and phones. Cisco Systems is using its position in enterprise communications equipment to grow its unified communications business. Google provides a hosted messaging and productivity suite. Slack provides teamwork and collaboration software. Zoom offers videoconferencing and cloud phone solutions. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. Web-based offerings competing with individual applications have also positioned themselves as alternatives to the company’s products and services.
Dynamics competes with cloud-based and on-premises business solution providers, such as Oracle, Salesforce, and SAP.
Intelligent Cloud segment
Intelligent Cloud segment consists of the company’s public, private, and hybrid server products and cloud services that can power modern business and developers. This segment primarily comprises:
Server products and cloud services, including Azure and other cloud services; SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs); and Nuance and GitHub.
Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and Nuance professional services.
Server Products and Cloud Services
Azure is a comprehensive set of cloud services that offer developers, IT professionals, and enterprises freedom to build, deploy, and manage applications on any platform or device. Customers can use Azure through the company’s global network of datacenters for computing, networking, storage, mobile and web application services, AI, Internet of Things (IoT), cognitive services, and machine learning. Azure enables customers to devote more resources to development and use of applications that benefit their organizations, rather than managing on-premises hardware and software. Azure revenue is mainly affected by infrastructure-as-a-service and platform-as-a-service consumption-based services, and per user-based services, such as Enterprise Mobility + Security.
The company’s server products are designed to make IT professionals, developers, and their systems more productive and efficient. Server software is integrated server infrastructure and middleware designed to support software applications built on the Windows Server operating system. This includes the server platform, database, business intelligence, storage, management and operations, virtualization, service-oriented architecture platform, security, and identity software. The company also licenses standalone and software development lifecycle tools for software architects, developers, testers, and project managers. GitHub provides a collaboration platform and code hosting service for developers. Server products revenue is mainly affected by purchases through volume licensing programs, licenses sold to original equipment manufacturers (OEM), and retail packaged products. Client Access Licenses (CALs) provide access rights to certain server products, including SQL Server and Windows Server, and revenue is reported along with the associated server product.
Nuance and GitHub include both cloud and on-premises offerings. Nuance provides healthcare and enterprise artificial intelligence (AI) solutions. GitHub provides a collaboration platform and code hosting service for developers.
Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and Nuance Professional Services, assist customers in developing, deploying, and managing Microsoft server solutions, Microsoft desktop solutions, and Nuance conversational AI and ambient intelligent solutions, along with providing training and certification to developers and IT professionals on various Microsoft products.
Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings.
IBM and Oracle lead a group of companies focused on the Java Platform Enterprise Edition that competes with the company’s enterprise-wide computing solutions. Commercial competitors for the company’s server applications for PC-based distributed client-server environments include CA Technologies, IBM, and Oracle. The company’s web application platform software competes with open source software, such as Apache, Linux, MySQL, and PHP. In middleware, the company competes against Java vendors.
The company’s database, business intelligence, and data warehousing solutions offerings compete with products from IBM, Oracle, SAP, Snowflake, and other companies. The company’s system management solutions compete with server management and server virtualization platform providers, such as BMC, CA Technologies, Hewlett-Packard, IBM, and VMware. The company’s products for software developers compete against offerings from Adobe, IBM, Oracle, and other companies, and also against open-source projects, including Eclipse (sponsored by CA Technologies, IBM, Oracle, and SAP), PHP, and Ruby on Rails.
More Personal Computing segment
More Personal Computing segment consists of products and services that put customers at the center of the experience with the company’s technology. This segment primarily comprises:
Windows, including Windows OEM licensing (Windows OEM) and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; and Windows Internet of Things.
Devices, including Surface and PC accessories.
Gaming, including Xbox hardware and Xbox content and services, comprising first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, third-party disc royalties, advertising, and other cloud services.
Search and news advertising.
The Windows operating system is designed to deliver a more personal computing experience for users by enabling consistency of experience, applications, and information across their devices. Windows OEM revenue is impacted significantly by the number of Windows operating system licenses purchased by OEMs, which they pre-install on the devices they sell.
Windows Commercial revenue, which includes volume licensing of the Windows operating system and Windows cloud services such as Microsoft Defender for Endpoint, is affected mainly by the demand from commercial customers for volume licensing and Software Assurance (SA), as well as advanced security offerings. 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.
Patent licensing includes the company’s programs to license patents it owns for use across a broad array of technology areas, including mobile devices and cloud offerings.
Windows IoT extends the power of Windows and the cloud to intelligent systems by delivering specialized operating systems, tools, and services for use in embedded devices.
The company designs and sells devices, including Surface and PC accessories. The company’s devices are designed to enable people and organizations to connect to the people and content that matter most using Windows and integrated Microsoft products and services. Surface is designed to help organizations, students, and consumers be more productive. Growth in Devices is dependent on total PC shipments, the ability to attract new customers, its product roadmap, and expanding into new categories.
The company’s gaming platform is designed to provide a variety of entertainment through a unique combination of content, community, and cloud. The company’s exclusive game content is created through Xbox Game Studios, a collection of first-party studios creating iconic and differentiated gaming experiences. The company continues to invest in new gaming studios and content to expand its IP roadmap and leverage new content creators. These unique gaming experiences are the cornerstone of Xbox Game Pass, a subscription service and gaming community with access to a curated library of over 100 first- and third-party console and PC titles.
The gamer remains at the heart of the Xbox ecosystem. The company continues to open new opportunities for gamers to engage both on- and off-console with both the launch of Xbox Cloud Gaming, the company’s game streaming service, and continued investment in gaming hardware. Xbox Cloud Gaming utilizes Microsoft’s Azure cloud technology to allow direct and on-demand streaming of games to PCs, consoles, and mobile devices, enabling gamers to take their favorite games with them and play on the device most convenient to them.
Xbox enables people to connect and share online gaming experiences that are accessible on Xbox consoles, Windows-enabled devices, and other devices. Xbox is designed to benefit users by providing access to a network of certified applications and services and to benefit the company’s developer and partner ecosystems by providing access to a large customer base. Xbox revenue is mainly affected by subscriptions and sales of first- and third-party content, as well as advertising. Growth of the company’s Gaming business is determined by the overall active user base through Xbox enabled content, availability of games, providing exclusive game content that gamers seek, the computational power and reliability of the devices used to access its content and services, and the ability to create new experiences through first-party content creators.
Search and News Advertising
The company’s Search and news advertising business is designed to deliver relevant search, native, and display advertising to a global audience. The company has several partnerships with other companies, including Yahoo, through which it provides and monetizes search queries. Growth depends on its ability to attract new users, understand intent, and match intent with relevant content and advertiser offerings.
On June 6, 2022, the company acquired Xandr, Inc., a technology platform with tools to accelerate the delivery of its digital advertising solutions.
Windows faces competition from various software products and from alternative platforms and devices, mainly from Apple and Google.
Devices face competition from various computer, tablet, and hardware manufacturers who offer a unique combination of high-quality industrial design and innovative technologies across various price points. These manufacturers, many of which are also current or potential partners and customers, include Apple and the company’s Windows OEMs.
Xbox and the company’s cloud gaming services face competition from various online gaming ecosystems and game streaming services, including those operated by Amazon, Apple, Meta, Google, and Tencent. The company also competes with other providers of entertainment services, such as video streaming platforms. The company’s gaming platform competes with console platforms from Nintendo and Sony, both of which have a large, established base of customers.
The company’s Search and news advertising business competes with Google and a wide array of websites, social platforms like Meta, and portals that provide content and online offerings to end users.
The company has operations centers that support operations in their regions, including customer contract and order processing, credit and collections, information processing, and vendor management and logistics. The regional center in Ireland supports the European, Middle Eastern, and African region; the center in Singapore supports the Japan, India, Greater China, and the Asia-Pacific region; and the centers in Fargo, North Dakota, Fort Lauderdale, Florida, Puerto Rico, Redmond, Washington, and Reno, Nevada support Latin America and North America. In addition to the operations centers, the company operates datacenters throughout the Americas, Europe, Australia, and Asia, as well as in the Middle East and Africa.
To serve the needs of customers around the world and to improve the quality and usability of products in international markets, the company localizes many of its products to reflect local languages and conventions. Localizing a product may require modifying the user interface, altering dialog boxes, and translating text.
The company’s devices are primarily manufactured by third-party contract manufacturers. For the majority of its products, the company has the ability to use other manufacturers if a vendor becomes unavailable or unable to meet its requirements.
Research and Development
Product and Service Development, and Intellectual Property
The company develops most of its products and services internally through the following engineering groups.
Cloud and AI, focuses on making IT professionals, developers, and their systems more productive and efficient through development of cloud infrastructure, server, database, CRM, ERP, software development tools and services (including GitHub), AI cognitive services, and other business process applications and services for enterprises.
Experiences and Devices, focuses on instilling a unifying product ethos across the company’s end-user experiences and devices, including Office, Windows, Teams, consumer web experiences (including search and news advertising), and the Surface line of devices.
Security, Compliance, Identity, and Management, focuses on cloud platform and application security, identity and network access, enterprise mobility, information protection, and managed services.
Technology and Research, focuses on the company’s AI innovations and other forward-looking research and development efforts spanning infrastructure, services, and applications.
LinkedIn, focuses on the company’s services that transform the way customers hire, market, sell, and learn.
Gaming, focuses on developing hardware, content, and services across a large range of platforms to help grow its user base through game experiences and social interaction.
The company is a leader among technology companies in pursuing patents and has a portfolio of over 69,000 U.S. and international patents issued and over 19,000 pending worldwide.
Distribution, Sales, and Marketing
The company markets and distributes its products and services through the following channels: OEMs, direct, and distributors and resellers. The company’s sales force performs a variety of functions, including working directly with commercial enterprises and public-sector organizations worldwide to identify and meet their technology and digital transformation requirements; managing OEM relationships; and supporting system integrators, independent software vendors, and other partners who engage directly with its customers to perform sales, consulting, and fulfillment functions for its products and services.
The company distributes its products and services through OEMs that pre-install its software on new devices and servers they sell. The largest component of the OEM business is the Windows operating system pre-installed on devices. OEMs also sell devices pre-installed with other Microsoft products and services, including applications such as Office and the capability to subscribe to Office 365.
There are two broad categories of OEMs. The largest category of OEMs are direct OEMs as the company’s relationship with them is managed through a direct agreement between Microsoft and the OEM. The company has distribution agreements covering one or more of its products with virtually all the multinational OEMs, including Dell, Hewlett-Packard, Lenovo, and with many regional and local OEMs. The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers, which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft.
Many organizations that license the company’s products and services transact directly with it through Enterprise Agreements and Enterprise Services contracts, with sales support from system integrators, independent software vendors, web agencies, and partners that advise organizations on licensing its products and services (Enterprise Agreement Software Advisors or ESA). Microsoft offers direct sales programs targeted to reach small, medium, and corporate customers, in addition to those offered through the reseller channel. A large network of partner advisors support many of these sales.
The company also sells commercial and consumer products and services directly to customers, such as cloud services, search, and gaming, through its digital marketplaces and online stores. In fiscal year 2021, the company closed its Microsoft Store physical locations and opened its Microsoft Experience Centers. Microsoft Experience Centers are designed to facilitate deeper engagement with its partners and customers across industries.
Distributors and Resellers
Organizations also license the company’s products and services indirectly, primarily through licensing solution partners (LSP), distributors, value-added resellers (VAR), and retailers. Although each type of reselling partner may reach organizations of all sizes, LSPs are primarily engaged with large organizations, distributors resell primarily to VARs, and VARs typically reach small and medium organizations. ESAs are also typically authorized as LSPs and operate as resellers for the company’s other volume licensing programs. Microsoft Cloud Solution Provider is the company’s main partner program for reselling cloud services.
The company distributes its retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. Individual consumers obtain these products primarily through retail outlets. The company distributes its devices through third-party retailers. The company has a network of field sales representatives and field support personnel that solicit orders from distributors and resellers and provide product training and sales support.
The company’s Dynamics business solutions are also licensed to enterprises through a global network of channel partners providing vertical solutions and specialized services.
The company offers options for organizations that want to purchase its cloud services, on-premises software, and Software Assurance (SA). The company licenses software to organizations under volume licensing agreements to allow the customer to acquire multiple licenses of products and services instead of having to acquire separate licenses through retail channels. The company uses different programs designed to provide flexibility for organizations of various sizes.
The company’s customers include individual consumers, small and medium organizations, large global enterprises, public-sector institutions, Internet service providers, application developers, and OEMs.
Microsoft Corporation was founded in 1975. The company was incorporated in 1981.