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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _____ TO ____
______________
COMMISSION FILE NUMBER 0-14278
MICROSOFT CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1144442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE MICROSOFT WAY, REDMOND, WASHINGTON 98052-6399
(Address of principal executive office)(Zip Code)
Registrant's telephone number, including area code: (206) 882-8080
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
The aggregate market value of the common stock held by non-affiliates of the
registrant as of September 9, 1994 was $19,715,785,692.
The number of shares outstanding of the registrant's common stock as of
September 9, 1994 was 580,345,861.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1994 Annual Report to Shareholders are incorporated by
reference into Parts I, II and IV.
Portions of the definitive Proxy Statement dated
September 27, 1994 to be delivered to shareholders in connection
with the Annual Meeting of Shareholders to be held October 28,
1994 are incorporated by reference into Part III.
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MICROSOFT CORPORATION
FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1994
INDEX
PART I
Item 1. Business 1
Item 2. Properties 10
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Executive Officers of the Registrant 11
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters 14
Item 6. Selected Financial Data 14
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations 14
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosures 14
PART III
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners and Management 15
Item 13. Certain Relationships and Related Transactions 15
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 16
Signatures 22
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PART I
Item 1. Business
GENERAL
Microsoft Corporation (the "Company" or "Microsoft") was founded as a
partnership in 1975 and was incorporated in 1981. The Company operates in one
business segment - the development, manufacture, marketing, licensing, and
support of a wide range of software products, including operating systems for
personal computers (PCs), office machines, and personal information devices;
applications programs; and languages; as well as personal computer books,
hardware, and multimedia products. Microsoft(R) products are available for
most PCs, including Apple(R) computers and those running Intel(R)
microprocessors.
Microsoft's business strategy emphasizes the development of a broad line of
microcomputer software products for business and personal use, marketed through
multiple channels of distribution. The Company is divided into three main
groups: the Products Group; the Sales and Support Group; and the Operations
Group.
The Products Group is comprised of five main divisions, each responsible for a
particular area of software development, technology development, and product
marketing. The Personal Operating Systems Division designs and develops
operating systems for desktop PCs. The Business Systems Division is
responsible for enterprise-wide computing solutions, including client-server
architectures, networking products, and workgroup applications. The Desktop
Applications Division creates productivity applications. The Developer
Division creates database products, as well as programming language products
and software development tools. The Consumer Division develops products
designed for the home, school, and small business market, including multimedia
consumer products and computer input devices (hardware).
Microsoft also has an Advanced Technology Division, which is involved in
research of new technologies for the evolution of personal computing and the
development of innovative consumer software architectures.
The Sales and Support Group is responsible for building long-term business
relationships with customers. This group is aligned with one of three customer
types: end users, organizations, and OEMs (original equipment manufacturers).
The Sales and Support group manages the channels that serve those customers.
These channels include the U.S. and Canada, Europe, Other International, and
OEM. The group also provides support for the Company's products through
Product Support Services, Consulting Services, and Solutions Providers.
The Operations Group is responsible for managing business operations and
overall business planning. This includes the process of manufacture and
delivery of finished goods, licenses, subscriptions, and fulfillment orders;
the publishing efforts of Microsoft Press; and other corporate functions.
PRODUCTS PERSONAL OPERATING SYSTEMS
The Personal Operating Systems Division develops desktop operating systems
software, which controls PCs, allocates computer memory, schedules the
execution of applications software, and manages the flow of information and
communication among the various components of the PC. The Company's primary
proprietary operating systems for PCs are: the Microsoft MS-DOS(R) operating
system, the Microsoft Windows(TM) operating system, and Microsoft Windows(TM)
for Workgroups.
MS-DOS: Microsoft MS-DOS is a single-user, single-tasking operating system
designed for PCs that utilize Intel microprocessor chips. Since the
introduction of MS-DOS on the IBM PC in 1981, the Company has enhanced MS-DOS
as new technologies are developed and user needs have arisen. MS-DOS is
preinstalled by OEMs on most PCs.
WINDOWS: Microsoft Windows is a graphical operating system for MS-DOS-based
PCs. Microsoft Windows supports high-performance Windows-based applications,
and offers ease of use and aesthetic appeal, scalable TrueType(R) fonts,
built-in multimedia functionality, and straightforward integration into
corporate computing environments.
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WINDOWS FOR WORKGROUPS: Windows for Workgroups integrates network and
workgroup functionality directly into the Windows operating system. With
Windows for Workgroups, users can share files, data, and printers, with ease of
access and security.
WINDOWS 95: Microsoft is developing a new personal operating system, designed
to replace MS-DOS, Windows, and Windows for Workgroups as the Company's desktop
operating system offering. Windows 95 will be a fully integrated 32-bit
operating system, compatible with existing software applications and capable of
performing as the platform for the next generation of applications, games, PCs,
and peripherals.
BUSINESS SYSTEMS
The Business Systems division is focused on delivering a broad range of
business solutions for organizations. The division develops and markets an
integrated product line of software for creating business solutions, including
operating systems for servers and workstations, as well as applications for
business servers. Server applications development is divided into the areas of
databases, connectivity, and workgroup applications.
WINDOWS NT: Microsoft Windows NT Workstation is a 32-bit, multithreaded
operating system for client-server computing. It is capable of running on
Intel 386, 486, and Pentium(TM) systems and exploiting the next generation of
microprocessor systems, including most RISC architectures and multiprocessor
systems. Windows NT has the power to serve as a business workstation to
integrate client-server business applications with existing Windows-based
desktop applications or as a technical workstation to run high-end engineering
or scientific applications. The operating system provides integrated mail and
networking with remote access, pre-emptively scheduled multitasking, and
support for background communication sessions. Windows NT also provides for
the automatic migration of information from previously installed versions of
Windows. The Windows NT(TM) Server, in addition to the features of Windows NT
Workstation, provides extensive network management features, administration
tools, support for Macintosh(R) clients, and fault tolerance. It is a platform
for database, communications, and mail servers.
SQL SERVER: The Company also offers Microsoft SQL Server. Originally
developed cooperatively by Microsoft and Sybase, Inc., SQL Server is a
high-performance relational database management system for client-server
architectures and personal computer local area networks. SQL Server supports
the Structured Query Language, which is a commonly used language through
which application programs communicate with relational databases. The Company
provides SQL Server for Windows NT and SQL Server for OS/2.
LAN MANAGER: The Company also markets Microsoft LAN Manager, which is a
network operating system offering the user the ability to run applications,
share files and devices, and perform remote processing in a true client-server
computing environment, from MS-DOS, Windows, or Microsoft Operating System/2
(MS(R) OS/2) workstations. LAN Manager runs on MS OS/2, UNIX Systems, and VAX
VMS systems. LAN Manager clients and servers can interoperate in a network
with Windows NT, Windows NT Server, and Windows for Workgroup systems.
MICROSOFT MAIL: The Company markets Microsoft Mail for PC networks. Microsoft
Mail includes client software for the Microsoft Windows, MS-DOS, Macintosh, and
OS/2 platforms. In addition, this workgroup application offers large,
corporate users support for multiple network environments. A companion
product, Microsoft Mail for AppleTalk(R) networks, is used by companies with
Macintosh servers. Microsoft Mail Remote for Windows offers software for
remote clients used by travelers or those working at home to stay in touch with
the office mail system.
SCHEDULE+: In 1992, the Company introduced the first of its workgroup
applications to take advantage of the Microsoft Mail messaging system,
Microsoft Schedule+. Schedule+ is a calendaring and scheduling program that
helps individuals and groups manage their time and resources. The program
searches other workgroup members' schedules to determine meeting availability
times, provides invitees the means to accept, decline, or tentatively accept
invitations to meetings, and automatically notifies attendees if a meeting is
canceled or rescheduled.
MICROSOFT AT WORK: The Company announced a new architecture which focuses on
making digital office machines more functional and easier to use while creating
digital connections between office machines to allow information to flow freely
among many device types throughout the workplace. The Microsoft At Work(TM)
software components are planned to be incorporated into office devices, making
these products easier to use, compatible with one another and compatible with
PCs running the Microsoft Windows operating system. Partners in the Microsoft
At Work initiative include more than 70 companies representing the office
automation, communications, and computer industries.
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DESKTOP APPLICATIONS SOFTWARE
The Desktop Applications Division develops applications software, which
provides the microcomputer with instructions for the performance of end user
tasks. The Company's desktop applications software is designed for use by a
broad class of end users, regardless of business, industry, or market segment.
Primary examples of desktop applications software are word processing,
spreadsheet, and presentation graphics programs. The Company's desktop
applications programs are developed principally for Windows and Macintosh
operating systems.
MICROSOFT OFFICE
Microsoft Office is a suite of software products featuring seamless integration
of the most commonly used desktop applications. The Company's suite of
products is based upon a document-centric concept, with common commands and
extensive use of object linking and embedding (OLE) cross-application
capabilities. Microsoft Office comes in two editions, Standard and
Professional. The Standard Edition includes Microsoft Word, Microsoft Excel,
the Microsoft PowerPoint(R) presentation graphics program, and a workstation
license for Microsoft Mail. The Standard Edition is available for Windows and
Macintosh operating systems. The Microsoft Office Professional Edition for
Windows adds the Microsoft Access(R) database.
WORD PROCESSING
The Company's word processing program is Microsoft Word. Microsoft Word for
the MS-DOS operating system was introduced in 1983. Since its first release,
Microsoft Word has been enhanced with innovations that make it easier for users
to do everyday word processing tasks. Microsoft Word for Windows provides all
the features that users of word processing products expect in the Windows
graphical environment, plus the ability to handle graphics, tables, spreadsheet
data, charts, and images imported from other Windows-based software programs.
The Company also has a version for the Macintosh operating system.
SPREADSHEETS
The Company's spreadsheet program is Microsoft Excel, which is available for
the Windows and Macintosh operating systems. It is an integrated spreadsheet
with database and business graphics capabilities. Microsoft Excel allows full
linking and embedding of objects that permits users to view and edit graphics
or charts from other Windows-based programs from the worksheet in which the
object is stored. Microsoft Excel graphics capabilities can be linked to its
spreadsheets to allow simultaneous changes to charts as changes are made to the
spreadsheets. Microsoft Excel was first introduced in 1985 for the Apple
Macintosh. Microsoft Excel for Windows was introduced in 1987.
GRAPHICS
Microsoft PowerPoint is a presentation graphics program for producing slides,
transparencies, overheads, and prints. The Company markets versions of
PowerPoint for Microsoft Windows and the Macintosh.
PROJECT MANAGEMENT
Microsoft Project is a critical path project scheduling and resource allocation
program that runs on Windows and Macintosh operating systems. The product can
perform as a budgeting, monitoring, and cost estimating tool for large business
projects and as a critical path and schedule planning tool.
DEVELOPER PRODUCTS
The Developer Division provides software development tools, database products,
and technical information to Windows developers worldwide. These products and
services help independent software developers, corporate developers, solutions
developers, and hobbyists create a wide variety of applications, primarily for
Windows and Windows NT.
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DATABASE PRODUCTS
Database products control the maintenance and utilization of structured data
organized into a set of records or files. The Company offers database products
which span the needs of individual users up to large corporations. These
products include Microsoft Access, Microsoft FoxPro(R), Microsoft SQL Server,
and a variety of database connectivity technologies. Microsoft Access is a
relational database management application, also offered in conjunction with
Microsoft Office, which provides access to structured business data.
Microsoft FoxPro is a desktop database development tool which is compatible
with the industry standard xBase development language. FoxPro supports xBase
applications on MS-DOS, Windows, Windows NT, Macintosh, and UNIX. The Open
Database Connectivity (ODBC) product provides access and connectivity to read
and write to various databases from other computer industry vendors from within
Microsoft Windows applications.
SOFTWARE DEVELOPMENT TOOLS AND COMPUTER LANGUAGES
Software development tools and computer languages allow software developers to
write programs in a particular computer language and translate programs into a
binary machine-readable set of commands that activate and instruct the
hardware. The Company develops and markets a number of software development
environments, language compilers, and software testing tools. In 1994, the
Company shipped Microsoft Visual C++(TM) development system for 16 and 32-bit
application development on Windows and Windows NT. The Microsoft Visual
Basic(TM) programming system for the Windows operating system provides easy
access to a wide variety of data sources by integrating the Microsoft Access
database engine and the ability to leverage investments in commercial
applications through OLE 2.0. Additionally, the Company offers professional,
highly-integrated development environments in the Assembly and FORTRAN
languages for MS-DOS, Windows, and Windows NT.
DEVELOPER INFORMATION PRODUCTS
The Company supplies software developers with technical and support information
which is critical for successful development on Windows and Windows NT.
Developers subscribe to the Microsoft Developer Network (MSDN) information
service and receive quarterly updates on CD-ROMs, magazines, and electronically
via several on-line information services.
CONSUMER PRODUCTS
The Microsoft Consumer division develops and markets useful, enjoyable, and
fundamental software and services for small businesses, schools, and homes.
The division is developing a synergistic product line focusing on several
categories of home software usage, including Personal Tools, Personal
Transactions, Family Reference/Information, Lifestyle, Entertainment, and Kids.
Many of the Family Reference/Information and Lifestyle titles are available on
CD-ROM. The Consumer division is also responsible for hardware input devices
such as the Microsoft Mouse and the Microsoft BallPoint Mouse.
PERSONAL TOOLS
The Company's leading Personal Tools products are Microsoft Works and Microsoft
Publisher. The Company markets versions of Microsoft Works that run on the
Windows, MS-DOS, and Macintosh operating systems. Microsoft Works is an
integrated software program that contains word processing with spell-checking
and thesaurus; spreadsheet with charting; and database with reporting
capabilities. Microsoft Works allows the easy exchange of information from one
tool to another. A large percentage of Microsoft Works is licensed through the
OEM channel in addition to the finished goods channels. Microsoft Publisher is
an easy-to-use, entry-level desktop publishing tool for the Windows operating
system. Publisher features PageWizards(TM) design assistants, an interactive
tool that automates the design process of 12 custom publications, including
newsletters, calendars, greeting cards, and invitations.
PERSONAL TRANSACTIONS
Microsoft Money is a financial organization product that provides the user with
a variety of features for tracking personal or business expenses. Introduced
in 1991, Microsoft Money runs on the Windows operating system and provides easy
tracking of account balances, income, and expenses, as well as quick reporting
and charting of financial information.
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FAMILY REFERENCE/INFORMATION
Reference and information titles include Microsoft Encarta(TM) and Microsoft
Bookshelf(R), which are both available for Windows and Macintosh operating
systems. The Encarta multimedia encyclopedia database blends 9 million words
of text in 26,000 articles with a wealth of innovative, interactive information
presented through animations, videos, maps, charts, sounds, and pictures.
Bookshelf is a multimedia reference library for the desktop PC that integrates
seven well-respected and authoritative works on one compact disc. As a source
of general reference information, Bookshelf includes a dictionary, world atlas,
world almanac, thesaurus, concise encyclopedia, and two books of quotations.
LIFESTYLE
Lifestyle titles include Microsoft Dinosaurs, Microsoft Dangerous Creatures,
Microsoft Ancient Lands, and Microsoft Cinemania(TM), an interactive guide to
the movies with entries for 19,000 films. Musical titles include Microsoft
Beethoven: The Ninth Symphony, Microsoft Stravinsky: The Rite of Spring,
Microsoft Mozart: Dissonant Quartet, Microsoft Multimedia Strauss for Windows,
and Microsoft Musical Instruments.
ENTERTAINMENT
The Company also has a line of entertainment products. The Company has
marketed Microsoft Flight Simulator(TM) since 1983. Licensed from Bruce Artwick
Organization Ltd., Microsoft Flight Simulator has been updated several times
and is available for MS-DOS and Macintosh operating systems. Microsoft Golf
was introduced in 1992. Licensed from Access Software, Inc., the product is a
realistic simulation of the sport of golf for the Windows operating system.
KIDS
Titles for children include Microsoft Creative Writer and Microsoft Fine
Artist. Creative Writer is a full-featured creative writing and publishing
program; Fine Artist is a comprehensive art program. Both products take
advantage of the computer's ability to integrate text, high-quality graphics,
sound, and animation to produce an enriching creative experience for children.
In September 1994, The Company released the first in a series of products based
on the popular children's books and television series, Magic School Bus.
INPUT DEVICES
The Company's major hardware product is the Microsoft Mouse, a hand-held
pointing device that facilitates editing of text on the screen. It can be used
with MS-DOS and Windows operating systems and works with many applications
products from Microsoft and other companies. The mouse for the Intel
microprocessor-based PC was first introduced in 1983. The mouse is sold
separately or with Microsoft Windows.
In 1991, the Company began marketing the Microsoft BallPoint(R) Mouse, designed
especially for use with laptop and notebook computers. The BallPoint Mouse is
shipped with a universal clamp that fits on the keyboards of most laptop
computers and a positioner that allows the user to adjust the angle of the
mouse to the keyboard. In August 1994, the Company began shipping the
Microsoft Natural Keyboard, an ergonomically superior keyboard input device.
MICROSOFT PRESS
Founded in 1983, Microsoft Press publishes books about software products from
Microsoft and other software developers and about current developments in the
industry. Books published by Microsoft Press typically are written and
copyrighted by independent authors who submit their manuscripts to the Company
for publication and who receive royalties based on net revenues generated by
the product.
Microsoft Press contracts with an independent commercial printer for the
manufacturing of its books. Publisher's Resources, Inc. acts as the Company's
main fulfillment house in the United States, maintaining the majority of the
inventory of Microsoft Press books. Books are marketed by independent sales
representatives and by Microsoft Press sales personnel. Internationally,
Microsoft Press has numerous international agreements with publishers for the
worldwide distribution of its books. Microsoft Press has granted a publisher
in England the right to distribute English language versions of its books in
all countries except the United States, Canada, Central and South America, and
certain Asian countries. In most cases, Microsoft Press provides each
publisher with a book's manuscript, and the publisher arranges for its
translation and the printing, marketing, and distribution of the translated
version.
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LOCALIZATION
Microsoft has a practice of localizing its products, including user messages
and documentation, for distribution in other countries. Thus, in France, for
example, all user messages and documentation are in French and all monetary
references are in French francs, and in the United Kingdom, monetary references
are in pounds and user messages and documentation reflect certain British
conventions. Various Microsoft products have been localized into more than 30
languages.
MARKETING AND DISTRIBUTION
Microsoft aligns its sales and marketing people with three customer types: end
users, organizations, and OEMs. The Company's sales and marketing staff builds
long-term relationships with these customers of Microsoft products. Microsoft
has four major channels of distribution which deliver product to end users:
finished goods in the U.S. and Canada, Europe, and Other International; and
OEM.
The end user customer unit has responsibility for activities that target end
users who make individual buying decisions for the PCs they use at work or
home. As such, the end user unit handles distributor and reseller
relationships; reseller sales terms and conditions; channel marketing and
promotions; end user marketing programs; support policies; and seminars,
events, and sales training for resellers. Key products are the Company's
personal operating systems and consumer and desktop applications.
The organization customer unit has responsibility for activities that target
groups of users in large, medium, and small organizations. The unit works with
Solutions Providers, the Microsoft Consulting Services division, and directly
with organizations to create enterprise-wide solutions to business computing
problems. The unit handles computing strategy for organizations; consulting
strategy for organizations and Solutions Providers; vertical marketing
programs; and large account licensing programs. Additionally, the unit is
responsible for the technical training of Solutions Providers and channel
resellers; support policies; and seminars, events, and sales training for
resellers and Solutions Providers. Key products are the Company's business
systems, developer software, and software licensed via large corporate account
programs.
The OEM customer unit includes the sales force which works with original
equipment manufacturers who include Microsoft software on their PCs.
FINISHED GOODS CHANNELS
DISTRIBUTORS AND RESELLERS: The Company markets its products in the finished
goods channels primarily through independent, non-exclusive distributors and
resellers. Distributors include Computer 2000, Ingram Micro, and Merisel.
Resellers include Corporate Software, Egghead Software, Softmart, and Software
Spectrum. Microsoft has a network of field sales representatives and field
support personnel who solicit orders from distributors and resellers and
provide product training and sales support.
LARGE ACCOUNTS: The Company has a program designed to make it easier for large
organizations to acquire and maintain Microsoft products. The program,
Microsoft Select, offers flexible software acquisition, licensing, and
maintenance options specially designed to meet the needs of large multinational
organizations. Targeted audiences include technology specialists and
influential end users in large enterprises. Marketing efforts and fulfillment
are generally coordinated with the Microsoft network of large account
resellers.
SOLUTIONS PROVIDERS: The Microsoft Solutions Providers is a comprehensive
support relationship with independent companies who provide integration,
development, training, and support for business computing solutions. The
program supports value-added resellers, system integrators, consultants, and
training organizations. Under this business partnership strategy, the Company
provides sales and product information, development services, early access to
Microsoft products, and customer support tools including priority telephone
support, education, and business development support. To ensure high-quality
technical services for the Company's products, Microsoft Solutions Providers
are required to have Microsoft-certified professionals on staff.
CONSULTING SERVICES: The Company's Consulting Services Division assists
customers in using the Company's computer operating systems, applications, and
communications products. The group works with Solutions Providers and helps
create enterprise-wide computing solutions for large corporate accounts.
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DIRECT MARKETING: Microsoft uses direct marketing techniques aimed at existing
and potential users of the Company's products. Programs are typically directed
through the mail, utilizing lists of targeted individuals. The Company uses
direct marketing to promote sales of new versions of products to existing
users. Fulfillment of product to the end user is accomplished by either direct
shipment or through resellers.
INTERNATIONAL SALES SITES: The Company has established marketing, support,
and/or distribution subsidiaries in Argentina, Australia, Austria, Belgium,
Brazil, Canada, Chile, Colombia, the Czech Republic, Denmark, Dubai, Ecuador,
Finland, France, Germany, Greece, Hong Kong, Hungary, India, Ireland, Israel,
Italy, Japan, Malaysia, Mexico, Morocco, the Netherlands, New Zealand, Norway,
People's Republic of China, Peru, Poland, Portugal, Puerto Rico, Russia,
Singapore, South Africa, South Korea, Spain, Sweden, Switzerland, Taiwan,
Thailand, Turkey, the United Kingdom, and Venezuela.
The Company's international operations, both OEM and finished goods, are
subject to certain risks common to foreign operations in general, such as
governmental regulations, import restrictions, and foreign exchange rate
fluctuations. Information with respect to international operations and export
sales may be found on page 17 of the 1994 Annual Report to Shareholders, which
is incorporated herein by reference.
OEM CHANNEL
The Company's operating systems are licensed primarily to OEMs under agreements
that grant the OEMs the right to distribute copies of Microsoft's products with
the OEMs' microcomputers. The Company also markets certain language and
applications programs to OEMs under similar arrangements. In addition, the
Company markets the Microsoft Mouse and BallPoint Mouse to OEMs for
distribution to buyers of the OEMs' computers. In almost all cases, the
products are distributed under Microsoft trademarks. The Company has OEM
agreements covering one or more of its products with virtually all of the major
microcomputer OEMs, including AST Research, DEC, Dell, Compaq, Fujitsu, Gateway
2000, IBM, NEC, Olivetti, Packard Bell, Toshiba, Unisys, and Zenith.
ADVERTISING
The Company works closely with large advertising and direct marketing firms.
Advertising, direct marketing, worldwide packaging, and marketing materials are
targeted to various end-user segments. The Company utilizes broad consumer
medium (television, radio, and business publications) and trade publications.
Microsoft also invests heavily in direct marketing and customer satisfaction
areas. In 1995, the Company plans to spend more than $100 million on a broad
campaign emphasizing Microsoft brand identity.
PRODUCT SUPPORT
The Company's Product Support Services group, with locations in the
U.S. and in Microsoft subsidiaries, provides product support coverage options
to meet the needs of users of Microsoft products. The Company hires
individuals with proven product expertise and provides them with productivity
tools, continuous product education and training, and consistent processes to
deliver quality support for Microsoft products. Coverage options range from
standard no-charge toll telephone support to fee-based offerings providing
unlimited 800# telephone and electronic technical support across all Microsoft
products 24 hours per day, 7 days per week.
Users have access to Microsoft KnowledgeBase, a repository of over
55,000 technical articles that is updated regularly with useful information
regarding Microsoft products. Microsoft provides access to KnowledgeBase via
CompuServe(R), GEnie(TM), Prodigy, America Online, and Internet. Additionally,
the Company offers two information subscription services: Microsoft TechNet and
Microsoft Developer Network.
As a supplement or alternative to direct support, the Company enhances the
third party support channel by providing Microsoft Solutions Providers with
education, training, tools, and support. Microsoft Solutions Providers
include Authorized Training Centers, which offer advanced product education and
certification on Microsoft products; and Authorized Support Centers, which
provide a wide spectrum of multinational support, multivendor support, and
integration services.
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CUSTOMERS
As described above, Microsoft has three customer types: end users,
organizations, and OEMs. The Company believes that most of the end users of
its products are individuals in businesses, government agencies, educational
institutions, and at home. These end users obtain Microsoft products primarily
through distributors, resellers, and OEMs, which include certain Microsoft
products with their hardware. Notes to Financial Statements on page 13 of the
1994 Annual Report to Shareholders describe customers that represent more than
10% of the Company's revenues. The Company's practice is to ship its products
promptly upon receipt of purchase orders from its customers and, consequently,
backlog is not significant.
PRODUCT DEVELOPMENT
The microcomputer software industry is characterized by rapid technological
change, which requires a continuous high level of expenditures for enhancing
existing products and developing new products. The Company is committed to
continued expenditures for research and product development.
Most of the Company's software products are developed internally. The Company
also purchases technology, licenses intellectual property rights, and oversees
third party development for certain products. Product documentation is also
created internally. Internal development enables Microsoft to maintain closer
technical control over the products and gives the Company the freedom to
designate which modifications and enhancements are most important and when they
should be implemented. The Company has created a substantial body of
proprietary development tools and has evolved a development methodology for
creating and enhancing its products. These tools and methodology are also
designed to simplify a product's portability among different operating systems
or computers.
The Company believes that a crucial factor in the success of a new product is
getting it to market quickly to respond to a new user need or an advance in
hardware design, without compromising product quality. The Company strives to
become as informed as possible at the earliest possible time about
technological advances and changing usage patterns.
During fiscal years 1992, 1993, and 1994, the Company spent $352 million, $470
million, and $610 million, respectively, on product research and development
activities. Those amounts represented 12.8%, 12.5%, and 13.1%, respectively,
of net revenues in each of those years.
COMPETITION
The microcomputer software market is intensely competitive and subject to rapid
change. The Company's competitors include many independent software vendors,
such as Lotus Development, Oracle, and Novell. These companies generally have
a narrower focus than the Company in product offerings such as spreadsheets,
relational databases, word processors, and networking software.
Large personal computer OEMs are devoting significant resources to creating
operating systems, notably IBM, Apple Computer, and Sun Microsystems.
Microsoft markets its operating systems products to OEMs and end users. The
Company competes for that business with the large OEMs and joint ventures of
OEMs, and independent systems software vendors, such as Novell.
The Company believes that the principal competitive factors in marketing
microcomputer software are the product's reputation, features and functions,
ease of use, reliability, price relative to performance, timeliness of
delivery, and availability and quality of support services. There is no
assurance that the Company's competitive position will not be adversely
affected by one or more of these factors in the future.
See "Outlook: Issues and Risks" on page 6 of the 1994 Annual Report to
Shareholders, which is incorporated herein by reference.
8
11
PRODUCT PROTECTION
Microsoft regards the intellectual property used in its software as proprietary
and attempts to protect it with copyrights, patents, trade secret laws,
internal and external nondisclosure safeguards, and restrictions on disclosure
and transfer that are incorporated into its software license agreements.
Despite these restrictions, it is possible for competitors and users to copy
aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Existing laws protecting intellectual property
are helpful but imperfect aids in preventing unauthorized copying and use of
the Company's products. Monitoring and identifying unauthorized copying and
use of software can be difficult, and software piracy is a persistent problem
for the software industry. Piracy is particularly acute in international
markets. Some of the Company's products distributed internationally use
electronic copy protection to assist in preventing unauthorized copies, but the
more typical Company antipiracy strategy is to work with others in the industry
to secure the passage of appropriate laws protecting software, to educate the
market and persuade users about the benefits of legitimate software, and to
participate in selective enforcement actions.
MANUFACTURING
The Company has manufacturing facilities located in the United States, Puerto
Rico, and Ireland. The Company's manufacturing operations involve the
duplication of disks, assembly of purchased parts, and final packaging.
Quality control tests are performed on purchased parts, duplicated disks, and
finished products. The chief materials and components used in Microsoft
products include disks, books, and multicolor printed materials. The Company
is often able to acquire component parts and materials on a volume discount
basis. The Company has multiple sources for raw materials, supplies, and
components.
The Company contracts a portion of its manufacturing activity to third parties.
Outside manufacturers produce software products, documentation, and hardware
such as mouse pointing devices. There are other custom manufacturers in the
event that products become unavailable from current sources.
EMPLOYEES
As of June 30, 1994, the Company employed 15,257 people, 10,264 domestically
and 4,993 internationally. Of the total, 4,417 were in product research and
development, 8,079 in sales, marketing, and support, 1,344 in manufacturing and
distribution, and 1,417 in finance and administration. Microsoft's success is
highly dependent on its ability to attract and retain qualified employees.
Competition for employees is intense in the software industry. To date, the
Company believes it has been successful in its efforts to recruit qualified
employees, but there is no assurance that it will continue to be as successful
in the future. None of the Company's employees are subject to collective
bargaining agreements. The Company believes that relations with its employees
are excellent.
9
12
Item 2. Properties
The Company's corporate offices consist of approximately two million square
feet of office building space located in Redmond, Washington. There are two
sites that total approximately 300 acres of land. The Company is constructing
a 225,000 square foot office building, which is expected to be completed in the
spring of 1995. Additionally, construction has started on another series of
office buildings with approximately 675,000 square feet of space. Occupancy is
expected by the end of calendar 1995. The Company owns all of its corporate
campus.
The Company's domestic manufacturing and distribution operation consists of a
265,000 square foot facility situated on 23 acres in nearby Snohomish County,
Washington, and a 45,000 square foot disk duplication facility in Humacao,
Puerto Rico. The Puerto Rican facility, which began operation in April 1990,
is leased under a 10-year lease, with an option to renew for an additional 10
years. The Company's European manufacturing operation consists of a 155,000
square foot facility situated on 12 acres in Dublin, Ireland. The Ireland site
also includes a 25,000 square foot office building for international
localization.
The Company owns a 65,000 square foot office building on seven acres of land
near London, England. In Les Ulis, France, the Company owns a 110,000 square
foot office building on four acres of land.
In addition, the Company leases office space in numerous locations in the
United States and many other countries.
Item 3. Legal Proceedings
The Company is currently involved in litigation with Apple Computer, Inc. and
Wang Laboratories, Inc. The information set forth in Notes to Financial
Statements on page 15 of the 1994 Annual Report to Shareholders is incorporated
herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the last quarter
of fiscal 1994.
10
13
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company as of September 9, 1994 were as
follows:
NAME AGE POSITION WITH THE COMPANY
William H. Gates 38 Chairman of the Board; Chief Executive Officer
Steven A. Ballmer 38 Executive Vice President, Sales and Support
Michael J. Maples 52 Executive Vice President, Products
Roger J. Heinen, Jr. 43 Senior Vice President, Developer Division
Frank M. (Pete) Higgins 36 Senior Vice President, Desktop Applications Division
Joachim Kempin 52 Senior Vice President, OEM Sales Division
Paul A. Maritz 39 Senior Vice President, Systems Division
Nathan P. Myhrvold 35 Senior Vice President, Advanced Technology
William H. Neukom 52 Senior Vice President, Law and Corporate Affairs; Corp. Secretary
Jeffrey S. Raikes 36 Senior Vice President, Microsoft North America
Bernard P. Vergnes 49 Vice President, Microsoft; President, Microsoft Europe
James E. Allchin 42 Vice President, Business Systems Division
Michael W. Brown 48 Vice President, Finance; Chief Financial Officer
Raymond A. Emery 52 Vice President, Operations
Richard W. Fade 39 Vice President, Advanced Technology Sales
Michel Lacombe 43 Vice President, End User Customer Business Unit, Europe
Jonathan D. Lazarus 43 Vice President, Strategic Relations
Robert L. McDowell 48 Vice President, Strategic Enterprise Services
Craig J. Mundie 45 Vice President, Advanced Consumer Technology
Michael R. Murray 39 Vice President, Human Resources
G. Christopher Peters 35 Vice President, Office Business Unit
Richard F. Rashid 42 Vice President, Research
Darryl E. Rubin 40 Vice President, Software Strategy
Brad A. Silverberg 40 Vice President, Personal Operating Systems Division
Rolf B. Skoglund 40 Vice President, Organization Customer Business Unit, Europe
Christopher F. Smith 59 Vice President, International Operations
Charles G. V. Stevens 37 Vice President, Far East
Patricia Q. Stonesifer 38 Vice President, Consumer Division
Deborah N. Willingham 38 Vice President, Product Support Services
Mr. Gates was a founder of the Company and has been its Chief Executive Officer
and Chairman of the Board since the Company's predecessor partnership was
incorporated in 1981. From 1975 to 1981, Mr. Gates was a partner with Paul
Allen, Microsoft's other founder, in the predecessor partnership.
Mr. Ballmer was named Executive Vice President, Sales and Support in February
1992. He had been Senior Vice President, Systems Software since 1989. From
1984 until 1989, Mr. Ballmer served as Vice President, Systems Software. Since
joining the Company in 1980, Mr. Ballmer has also served as Assistant to the
President; Vice President, Corporate Staffs; and Vice President, Marketing.
Mr. Maples was named Executive Vice President, Products in February 1992. He
had been Senior Vice President, Applications Software since 1991. Mr. Maples
joined the Company as Vice President, Applications Software in 1988, after 23
years with International Business Machines Corporation. At IBM, Mr. Maples was
Director of Software Strategy from 1986 to 1988, and prior to 1986 held a
variety of positions in marketing and product development.
11
14
Mr. Heinen joined Microsoft as Senior Vice President, Developer Division in
January 1993. He had been Senior Vice President and General Manager of the
Macintosh Software Division at Apple Computer, Inc. from 1990 to 1993. Prior
to 1990, Heinen was a corporate consulting engineer for software at Digital
Equipment Corporation.
Mr. Higgins was named Senior Vice President, Desktop Applications Division in
March 1993. He had been Vice President, Desktop Applications Division since
1992 and previously, Vice President, Analysis Business Unit since 1991. Mr.
Higgins joined Microsoft in 1983 and has held various positions in product and
program management, including General Manager of the Analysis Business Unit.
Mr. Kempin was named Senior Vice President, OEM Sales Division in August 1993.
He had been Vice President, OEM Sales since 1987. Mr. Kempin had served as
General Manager of Microsoft's German subsidiary since its inception in 1983.
Mr. Maritz was named Senior Vice President, Systems Division in February 1992.
He had been Vice President, Advanced Operating Systems since 1989. Mr. Maritz
joined Microsoft in 1986 and served as General Manager for Networks and XENIX.
Mr. Myhrvold was named Senior Vice President, Advanced Technology in July 1993.
He had been Vice President, Advanced Technology and Business Development since
1989. Mr. Myhrvold joined Microsoft in 1986 and served as Director of Special
Projects prior to his promotion.
Mr. Neukom was named Senior Vice President, Law and Corporate Affairs in
February 1994. He joined the Company in 1985 as Vice President. Mr. Neukom
formerly was a member of the Seattle law firm of Shidler McBroom Gates & Lucas
(now Preston Gates & Ellis), the Company's outside law firm.
Mr. Raikes was named Senior Vice President, Microsoft North America in January
1992. He had been Vice President, Office Systems since 1990. Mr. Raikes came
to Microsoft in 1981 and has held a variety of management positions, including
General Manager of the Office Business Unit.
Mr. Vergnes is a Senior Vice President of Microsoft and was named President,
Microsoft Europe in April 1992. He had been Vice President, Europe since
1989. Mr. Vergnes served as General Manager of Microsoft's French subsidiary
since its inception in 1983.
Mr. Allchin was named Vice President, Business Systems Division, effective July
1991. Prior to joining Microsoft in 1991, Mr. Allchin spent seven years at
Banyan Systems, Inc., where he held numerous positions, most recently Senior
Vice President and Chief Technology Officer.
Mr. Brown was named Chief Financial Officer in August 1994 and Vice President,
Finance in April 1993. He had been Treasurer since February 1990, after
joining Microsoft in January 1990. Previously, Mr. Brown was a partner in the
accounting firm Deloitte & Touche, the Company's independent auditors.
Mr. Emery was named Vice President, Operations in April 1993. He had been
General Manager of Worldwide Manufacturing since joining Microsoft in July
1990. From 1988 to 1990, Mr. Emery was Divisional General Manager of
Prestolite Electric, Inc.
Mr. Fade was named Vice President, Advanced Technology Sales in June 1994. He
had served as Vice President, Far East Region since August 1992. Since
joining Microsoft in 1986, he has served as Director, Far East OEM Sales;
Director, U.S. OEM Sales; and Group Sales Manager, Microsoft OEM Division.
Mr. Lacombe was named Vice President, End User Customer Unit, Europe in April
1994. Mr. Lacombe joined Microsoft in 1983 as retail sales manager in the
Company's French subsidiary before being promoted to general manager of the
subsidiary in 1989. He was appointed Regional Director of Southern Europe in
May 1991.
Mr. Lazarus was named Vice President, Strategic Relations in April 1994. He
had served as Vice President, Systems Marketing since April 1992. Mr. Lazarus
had been General Manager of System Software Marketing after having joined
Microsoft in 1986 as the Director of Systems Strategy and Publisher of
Microsoft Systems Journal.
Mr. McDowell joined Microsoft as Vice President, Strategic Enterprise Services
in March 1990. Mr. McDowell came to Microsoft from Ernst & Young,
where he was a partner and National Director of Strategic Business Systems.
From 1983 to 1989, he was a partner with Arthur Young.
12
15
Mr. Mundie was named Vice President, Advanced Consumer Technology in July
1993. He joined Microsoft as General Manager, Advanced Consumer Technology
Group in December 1992. Previously, Mr. Mundie had been CEO of Alliant
Computer Systems Corporation, which declared bankruptcy on May 25, 1992 and was
liquidated.
Mr. Murray was named Vice President, Human Resources and Administration in
December 1991. He joined Microsoft in 1989 as General Manager of the Network
Business Unit. Previously, Mr. Murray was President of Dataline, a systems
integrator. He also held general management positions at Hewlett-Packard,
Convergent Technologies, and Apple Computer.
Mr. Peters was named Vice President, Office Product Unit, effective November
1993. Prior to his promotion, he was general manager of the Word business
unit. Mr. Peters was involved in the development of several key products since
joining Microsoft in 1981.
Mr. Rashid was named Vice President, Research, effective July 1994. Since
joining Microsoft in 1991, he was director of research. Mr. Rashid was
Professor of Computer Science at Carnegie Mellon University, where he was on
the faculty since 1979.
Mr. Rubin was named Vice President, Software Strategy, effective February 1990.
Mr. Rubin joined Microsoft in 1986 and prior to his promotion held several
management positions in the Network Development Division, most recently as
Chief Architect.
Mr. Silverberg joined Microsoft in August 1990 as Vice President, Personal
Operating Systems Division. From 1987 until joining Microsoft, Mr. Silverberg
served as Vice President, Engineering for Borland International, Inc.
Mr. Skoglund was named Vice President, Organization Customer Unit, Europe in
April 1994. Mr. Skoglund joined Microsoft in 1985 as general manager of the
Company's Swedish subsidiary. He was appointed Regional Director of Northern
Europe in May 1991.
Mr. Smith was named Vice President, International Operations, effective July
1990. From 1987, when Mr. Smith joined Microsoft, until his promotion, he
served as Senior Director, European Operations.
Mr. Stevens was named Vice President, Far East, effective June 1994. He had
been general manager of worldwide business strategy for the sales and support
divisions and before that general manager of database products. Mr. Stevens
joined Microsoft in 1984.
Ms. Stonesifer was named Vice President, Consumer Division in June 1993. She
had been Vice President, Support since 1992 and General Manager of Product
Support Services since 1991. Previously, she was General Manager of Microsoft
Canada and before that, General Manager for Microsoft Press. Prior to joining
Microsoft in 1988, Ms. Stonesifer was with Que Corporation, a publisher of
books for computer users.
Ms. Willingham was named Vice President, Product Support Services in April
1994. She joined Microsoft in 1993 as general manager of end user support, and
was later responsible for worldwide technical support strategy and all U.S.
technical support personnel and operations. Prior to joining Microsoft, Ms.
Willingham was director of IBM's Worldwide Manufacturing Technical Center in
its application business systems unit.
13
16
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder Matters
The information set forth on page 18 of the 1994 Annual Report to Shareholders
is incorporated herein by reference.
Item 6. Selected Financial Data
The information set forth on page 19 of the 1994 Annual Report to Shareholders
is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth on pages 3, 4, 5, 6, 7, 11, and 12 of the 1994
Annual Report to Shareholders is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following financial statements and supplementary financial information for
the Company and report of independent auditors set forth on pages 2, 8, 9,
10, and 13 through 17 of the 1994 Annual Report to Shareholders are incorporated
herein by reference:
o Income Statements for each of the three years in the period ended June
30, 1994
o Balance Sheets as of June 30, 1994 and 1993
o Statements of Stockholders' Equity for each of the three years in the
period ended June 30, 1994
o Cash Flows Statements for each of the three years in the period ended
June 30, 1994
o Report of Independent Auditors
o Notes To Financial Statements
o Quarterly Financial And Market Information
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
None.
14
17
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to Directors may be found under the caption "Election
of Directors and Management Information" on pages 1 and 2 of the Company's
Proxy Statement dated September 27, 1994, for the Annual Meeting of
Shareholders to be held October 28, 1994 (the "Proxy Statement"). Such
information is incorporated herein by reference. Information with respect to
Executive Officers may be found on pages 11 through 13 hereof, under the
caption "Executive Officers of the Registrant."
Item 11. Executive Compensation
The information in the Proxy Statement set forth under the captions
"Information Regarding Executive Officer Compensation" on pages 4 through 7 and
"Information Regarding the Board and its Committees" on page 2 is incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Information Regarding Beneficial
Ownership of Principal Shareholders, Directors, and Management" on page 3 of
the Proxy Statement is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions" on page 7 of
the Proxy Statement is incorporated herein by reference.
15
18
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Documents filed as part of Form 10-K
1. Financial Statements
The financial statements of the Company as set forth under Item 8 of
this report on Form 10-K are incorporated herein by reference.
2. Financial Statement Schedules
Schedule Page
Number Description Number
-------- ----------- ------
II Amounts Receivable from Related Parties and Underwriters, Promoters,
and Employees other than Related Parties 18
VIII Valuation and Qualifying Accounts 19
X Supplementary Income Statement Information 20
The independent auditors' report with respect to the above-listed
financial statement schedules appears on page 21 of this report on Form
10-K. Financial statement schedules other than those listed above have
been omitted since they are either not required, not applicable, or the
information is otherwise included.
3. Exhibit Listing
Exhibit
Number Description
------- -----------
3.1 Restated Articles of Incorporation
3.2 Bylaws
10.1 Microsoft Corporation 1991 Stock Option Plan
10.2 Microsoft Corporation 1981 Stock Option Plan (1)
10.3 Microsoft Corporation Stock Option Plan for Non-Employee Directors
10.4 Microsoft Corporation Stock Option Plan for Consultants and Advisors
10.5 Microsoft Corporation 1991 Employee Stock Purchase Plan
10.6 Microsoft Corporation Savings Plus Plan
10.7 Trust Agreement dated June 1, 1993 between Microsoft Corporation and First
Interstate Bank of Washington (2)
10.8 Form of Indemnification Agreement (2)
11. Computation of Earnings Per Share
13. 1994 Annual Report to Shareholders
21. Subsidiaries
23. Independent Auditors' Consent
27. Financial Data Schedule
16
19
(a) Documents filed as part of Form 10-K (Continued)
3. Exhibit Listing (Continued)
Exhibit
Number Description
------- -----------
99.1 Financial Statements for the Microsoft Corporation 1991 Employee Stock Purchase
Plan for the Three Years Ended June 30, 1994
99.2 Financial Statements for the Microsoft Corporation Savings Plus Plan for the Year Ended
December 31, 1993 and the Nine Months Ended December 31, 1992
________________
(1) Incorporated by reference to Registration Statement 33-37623 on Form S-8.
(2) Incorporated by reference to Annual Report on Form 10-K For The Fiscal
Year Ended June 30, 1993.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of fiscal 1994.
17
20
SCHEDULE II --- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(In thousands)
Balance
Balance Additions Deductions at End of Period
at Beginning --------------------- ------------------------ --------------------
of Period Principal Interest Collected Written Off Current Long-term
------------ --------- -------- --------- ----------- ------- ---------
Year ended June 30, 1992:
Brad A. Silverberg (1) $264 $ -- $13 $ 52 $ -- $ -- $225
Paul J. Leach (2) -- 250 1 251 -- -- --
---- ---- --- ---- ---- ---- ----
$264 $250 $14 $303 $ -- $ -- $225
==== ==== === ==== ==== ==== ====
Year ended June 30, 1993:
Brad A. Silverberg (1) $225 $ -- $ 5 $230 $ -- $ -- $ --
Craig J. Mundie (3) -- 250 6 -- -- -- 256
---- ---- --- ---- ---- ---- ----
$225 $250 $11 $230 $ -- $ -- $256
==== ==== === ==== ==== ==== ====
Year ended June 30, 1994:
Craig J. Mundie (3) $256 $ -- $16 $ -- $ -- $ -- $272
==== ==== === ==== ==== ==== ====
____________________
(1) Consisted of a promissory note for $300,000 dated August 20, 1990, bearing
interest at 8 1/2% simple interest during the first year and 5 1/2% during
the second year. For the third year the interest rate was 3.48%. The note
was paid February 11, 1993.
(2) Consisted of a 90-day interest free promissory note for $250,000 dated
September 3, 1991. After 90 days, the note bore interest at 10% per annum
simple interest and was paid December 27, 1991.
(3) Consists of a promissory note for $250,000 dated February 5, 1993 which
bears interest at the rate of 6.25% per annum simple interest. The note is
due in five years, with accelerated payments in accordance with a stock
option exercise schedule.
18
21
Schedule VIII --- VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Balance at Charged to Charged to Balance at
Beginning Costs and Other End of
of Period Expenses Accounts Deductions Period
---------- ---------- ---------- ---------- ---------
Allowance for doubtful accounts:
Year ended June 30, 1992. . . . . . $36 $26 -- $ 5 $57
Year ended June 30, 1993. . . . . . 57 47 -- 28 76
Year ended June 30, 1994. . . . . . 76 27 -- 11 92
19
22
SCHEDULE X --- SUPPLEMENTARY INCOME STATEMENT INFORMATION (1)
(In millions)
Charged to Costs and Expenses
Year Ended June 30
-----------------------------
1992 1993 1994
---- ---- ----
Royalties . . . . . . . . . . . . . . . . . . $21 $ 36 $ 60
Advertising costs . . . . . . . . . . . . . . 87 101 107
- -------------------
(1) The amounts for maintenance and repairs; amortization of intangible assets,
preoperating costs and similar deferrals; and taxes other than payroll and
income taxes are not reported as these items did not exceed 1% of total
revenues.
20
23
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Microsoft Corporation:
We have audited the financial statements of Microsoft Corporation and
subsidiaries as of June 30, 1994 and 1993, and for each of the three years in
the period ended June 30, 1994, and have issued our report thereon dated July
20, 1994; such financial statements and report are included in your 1994 Annual
Report to Shareholders and are incorporated herein by reference. Our audits
also included the financial statement schedules of Microsoft Corporation and
subsidiaries, listed in Item 14(a)2. These financial statement schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
/s/ DELOITTE & TOUCHE
Seattle, Washington
July 20, 1994
21
24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Redmond, State of Washington, on September 23, 1994.
MICROSOFT CORPORATION
By /s/ Michael W. Brown
---------------------------------
Michael W. Brown,
Vice President, Finance;
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
Registrant and in the capacities indicated on September 23, 1994.
SIGNATURE TITLE
--------- -----
/s/ William H. Gates Chairman of the Board of Directors
- ---------------------------------- amd Chief Executive Officer
William H. Gates
/s/ Paul G. Allen Director
- ----------------------------------
Paul G. Allen
/s/ Richard A. Hackborn Director
- ----------------------------------
Richard A. Hackborn
/s/ David F. Marquardt Director
- ----------------------------------
David F. Marquardt
/s/ Robert D. O'Brien Director
- ----------------------------------
Robert D. O'Brien
/s/ Wm. G. Reed, Jr. Director
- ----------------------------------
Wm. G. Reed, Jr.
/s/ Jon A. Shirley Director
- ----------------------------------
Jon A. Shirley
/s/ Michael W. Brown Vice President, Finance; Chief Financial
- ---------------------------------- Officer (Principal Financial and
Michael W. Brown Accounting Officer)
22
25
MICROSOFT CORPORATION
Exhibit Index
Exhibit
Number Description
------- -----------
3.1 Restated Articles of Incorporation
3.2 Bylaws
10.1 Microsoft Corporation 1991 Stock Option Plan
10.2 Microsoft Corporation 1981 Stock Option Plan (1)
10.3 Microsoft Corporation Stock Option Plan for Non-Employee Directors
10.4 Microsoft Corporation Stock Option Plan for Consultants and Advisors
10.5 Microsoft Corporation 1991 Employee Stock Purchase Plan
10.6 Microsoft Corporation Savings Plus Plan
10.7 Trust Agreement dated June 1, 1993 between Microsoft Corporation and
First Interstate Bank of Washington (2)
10.8 Form of Indemnification Agreement (2)
11. Computation of Earnings Per Share
13. 1994 Annual Report to Shareholders
21. Subsidiaries
23. Independent Auditors' Consent
27. Financial Data Schedule
99.1 Financial Statements for the Microsoft Corporation 1991 Employee Stock
Purchase Plan for the Three Years Ended June 30, 1994
99.2 Financial Statements for the Microsoft Corporation Savings Plus Plan for the Year
Ended December 31, 1993 and the Nine Months Ended December 31, 1992
________________
(1) Incorporated by reference to Registration Statement 33-37623 on Form
S-8.
(2) Incorporated by reference to Annual Report on Form 10-K For The Fiscal
Year Ended June 30, 1993.