Five Businesses: Financial Overview (Chart)

Microsoft reports finances in five business segments.

Client includes desktop OSs.

Business includes Office, Exchange, SharePoint Server, Dynamics, and other business software and online services.

Server and Tools includes Windows Server, SQL Server, and the System Center and Forefront products, as well as developer tools and consulting and support services.

Entertainment and Devices includes Xbox, consumer hardware and software, and mobile and embedded hardware and software.

Online includes consumer online services, such as Bing, Windows Live, and MSN; and Microsoft's platforms for online advertisers and publishers. (In FY'10, Windows Live will move to the Client segment, and mobile services will move to the Entertainment and Devices segment.)

Other includes income and expenses, such as legal charges, human resources expenditures, and companywide marketing efforts, that cannot be attributed to any one business segment.

This chart shows each business segment's revenue in FY'08, estimated and actual revenues in FY'09 (which ended June 30, 2009), and operating income or loss in FY'08 and FY'09. In a change from previous Financial Analysts Meetings, Microsoft did not provide segment revenue estimates for FY'10.

Note that the FY'08 earnings figures and FY'09 revenue estimates have changed slightly since last year because of changes in how Microsoft attributes revenue to each segment. This chart uses the most recently reported FY'08 revenue figures, combined with the percentage growth estimates given a year earlier at the 2008 FAM.

Business Segment Leaders (Illustration)

Microsoft's business segments each have a single president. The 2010 fiscal year marks the first time since Microsoft began reporting finances by business segment that the company's organizational structure precisely matches its financial reporting structure.

Core and Enabling Products (Chart)

This chart shows Microsoft's seven core businesses, according to CEO Steve Ballmer.In his presentation at the 2009 Financial Analyst Meeting, Ballmer discussed the company's commitment to investing in growth opportunities in spite of the difficult economy and decline in overall revenue. In his presentation, he cited seven business segments as "areas of endeavor"—that is, areas where Microsoft will continue to invest to drive growth. For these core businesses, Ballmer outlined whether they were profitable or not and gave a rough estimate of FY'09 operating expenses (OpEx), not including cost of goods sold. Ballmer also named several other "enabling" businesses, which serve primarily to shore up or guide users to the growth businesses. Microsoft expects these businesses to break even or be slightly profitable on an ongoing basis, but does not expect them to grow significantly. Finally, Ballmer outlined operating expenses in administrative and other supporting parts of the business, which he described as being "frugal" for a company of Microsoft's size.