Microsoft

Paul Allen and Bill Gates, childhood friends with a passion in computer programming, were seeking to make a successful business utilizing their shared skills. The January 1975 issue of Popular Electronics featured Micro Instrumentation and Telemetry Systems's (MITS) Altair 8800 microcomputer. Allen noticed that they could program a BASIC interpreter for the device; after a call from Gates claiming to have a working interpreter, MITS requested a demonstration. Since they didn't actually have one, Allen worked on a simulator for the Altair while Gates developed the interpreter. Although they developed the interpreter on a simulator and not the actual device, the interpreter worked flawlessly when they demonstrated the interpreter to MITS inAlbuquerque, New Mexico in March 1975; MITS agreed to distribute it, marketing it as Altair BASIC. They officially established Microsoft on April 4, 1975, with Gates as the CEO. Allen came up with the original name of "Micro-Soft," as recounted in a 1995 Fortune magazine article. In August 1977 the company formed an agreement with ASCII Magazine in Japan, resulting in its first international office, "ASCII Microsoft". The company moved to a new home in Bellevue, Washington in January 1979. Microsoft entered the OS business in 1980 with its own version of Unix, called Xenix. However, it was MS-DOS that solidified the company's dominance. IBM awarded a contract to Microsoft in November 1980 to provide a version of the CP/M OS, which was set to be used in the upcoming IBM Personal Computer (IBM PC). For this deal, Microsoft purchased a CP/M clone called 86-DOS from Seattle Computer Products, branding it as MS-DOS, which IBM rebranded to PC-DOS. Following the release of the IBM PC in August 1981, Microsoft retained ownership of MS-DOS. Since IBM copyrighted the IBM PC BIOS, other companies had to reverse engineer it in order for non-IBM hardware to run as IBM PC compatibles, but no such restriction applied to the operating systems. Due to various factors, such as MS-DOS's available software selection, Microsoft eventually became the leading PC operating systems vendor.The company expanded into new markets with the release of the Microsoft Mouse in 1983, as well as a publishing division named Microsoft Press. Market Cap (intraday)5: 252.76B

MERGERS Microsoft has subsequently acquired 146 companies, purchased stakes in 61 companies, and made 25 divestments. Of the companies that Microsoft has acquired, 107 were based in the United States. Microsoft has not released financial details for most of these mergers and acquisitions. Since Microsoft's first acquisition in 1987, it has purchased an average of six companies a year. The company purchased more than ten companies a year between 2005 and 2008, and it acquired 18 firms in 2006, the most in a single year,including Onfolio, Lionhead Studios, Massive Incorporated, ProClarity, Winternals Software, and Colloquis. Microsoft has made five acquisitions worth over one billion dollars: Skype (2011), aQuantive (2007), Fast Search & Transfer(2008), Navision (2002), and Visio Corporation (2000). Microsoft has also purchased several stakes valued at more than a billion dollars. It obtained an 11.5% stake in Comcast for $1 billion, a 22.98% stake in Telewest Communications for $2.263 billion, and a 3% stake in AT&T for $5 billion. Among Microsoft's divestments, in which parts of the company are sold to another company, only Expedia, Inc. was sold for more than a billion dollars; USA Networks purchased the company on February 5, 2002 for $1.372 billion. Microsoft's first acquisition was Forethought on June 29, 1987. Forethought was founded in 1983 and developed a presentation program that would later be known as Microsoft PowerPoint On December 31, 1997, Microsoft acquired Hotmail for $500 million, its largest acquisition at the time, and integrated Hotmail into its MSN group of services. Hotmail, a free webmail service founded in 1996 by Jack Smith and Sabeer Bhatia, had more than 8.5 million subscribers earlier that month. Microsoft acquired Seattle-based Visio Corporation on January 7, 2000 for $1.375 billion. Visio, a software company, was founded in 1990 as Axon Corporation, and had its initial public offering in November 1995. The company developed the diagramming application software, Visio, which was integrated into Microsoft's product line as Microsoft Visio after its acquisition. On July 12, 2002, Microsoft purchased Navision for $1.33 billion. The company, which developed the technology for the Microsoft Dynamics NAV enterprise resource planning software, was integrated into Microsoft as a new division named Microsoft Business Solutions, later renamed to Microsoft Dynamics. Microsoft purchased aQuantive, an advertising company, on August 13, 2007 for $7.333 billion. Before the acquisition, aQuantive was ranked 14th in terms of revenue among advertising agencies worldwide. aQuantive had three subsidiaries at the time of the acquisition: Avenue A/Razorfish, one of the world's largest digital agencies, Atlas Solutions, and DRIVE Performance Solutions. Microsoft acquired the Norwegian enterprise search company Fast Search & Transfer on April 25, 2008 for $1.191 billion to boost its search technology.

DIVISIONS Windows & Windows Live Division ("Windows Division") develops and markets PC operating systems, related software and online

services, and PC hardware products. This collection of software, hardware, and services is designed to simplify everyday tasks through efficient Web browsing and seamless operations across the user's hardware and software. Windows Division revenue growth is largely correlated to the growth of the PC market worldwide, as approximately 75% of total Windows Division revenue comes from Windows operating system software purchased by original equipment manufacturers ("OEMs"), which they pre-install on equipment they sell. In addition to PC market changes, Windows revenue is impacted by: hardware market changes driven by shifts between developed markets and emerging markets, consumer PCs and business PCs, and among varying forms of computing devices; the attachment of Windows to PCs shipped and changes in inventory levels within the OEM channel; and pricing changes and promotions, pricing variation associated with OEM channel shifts from local and regional system builders to large, multinational OEMs, and different pricing of Windows versions licensed. Principal Products and Services: Windows 7 and prior versions of the Windows operating system; Windows Live suite of applications and web services; and Microsoft PC hardware products. Server and Tools

Server and Tools develops and markets server software, software developer tools, services, and solutions that are designed to make information technology professionals and 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, storage, management and operations, service-oriented architecture platform, security and identity software. Server and Tools also builds standalone and software development lifecycle tools for software architects, developers, testers, and project managers. Server offerings can be run on-site, in a partnerhosted environment, or in a Microsoft-hosted environment.

Principal Products and Services: Windows Server operating systems; Windows Azure; Microsoft SQL Server; SQL Azure; Windows Intune; Windows Embedded; Visual Studio; Silverlight; System Center products; Microsoft Consulting Services; and Premier product support services

Online Services Division Online Services Division ("OSD") develops and markets information and content designed to help people simplify tasks and make more informed decisions online, and that help advertisers connect with audiences. OSD offerings include Bing, MSN, adCenter, and advertiser tools. Bing and MSN generate revenue through the sale of search and display advertising. Search and display advertising generally accounts for nearly all of OSD's annual revenue.

Microsoft Business Division Microsoft Business Division ("MBD") offerings consist of the Microsoft Office system (comprising mainly Office, SharePoint, Exchange and Lync) and Microsoft Dynamics business solutions. Microsoft Office system products are designed to increase personal, team, and organization productivity through a range of programs, services, and software solutions, which may be delivered either on premise or as a cloud-based service. Growth of revenue from the Microsoft Office system offerings, which generate over 90% of MBD revenue,

depends on our ability to add value to the core Office product set and to continue to expand our product offerings in other areas such as content management, enterprise search, collaboration, unified communications, and business intelligence. Microsoft Dynamics products provide business solutions for financial management, customer relationship management ("CRM"), supply chain management, and analytics applications for small and mid-size businesses, large organizations, and divisions of global enterprises. Approximately 80% of MBD revenue is generated from sales to businesses, which includes Microsoft Office system revenue generated through volume licensing agreements and Microsoft Dynamics revenue. Revenue from this category generally depends upon the number of information workers in a licensed enterprise and is therefore relatively independent of the number of PCs sold in a given year. Approximately 20% of MBD revenue is derived from sales to consumers, which includes revenue from retail packaged product sales and OEM revenue. This revenue generally is affected by the level of PC shipments and by product launches. Principal Products and Services: Microsoft Office; Microsoft Exchange; Microsoft SharePoint; Microsoft Lync; Microsoft Dynamics ERP and Dynamics CRM; and Microsoft Office Web Apps, which are the online companions to Microsoft Word, Excel, PowerPoint, and OneNote. In June 2011, MBD launched Office 365, which is an online services offering of Microsoft Office, Exchange, SharePoint, and Lync

Entertainment and Devices Division Entertainment and Devices Division ("EDD") develops and markets products and services designed to entertain and connect people. The Xbox 360 entertainment platform, including Kinect, is designed to provide a unique variety of entertainment choices for individuals and families through the use of our devices, peripherals, content, and online services. Mediaroom is designed to provide live,

recorded, and on-demand television programming regardless of your location or device. Windows Phone is designed to bring users closer to the people, applications, and content they need, while providing unique capabilities such as Microsoft Office and Xbox LIVE functionality. Nokia strategic alliance On April 21, 2011, Microsoft and Nokia entered into definitive agreements to form a strategic alliance to jointly create new mobile products and services and to extend established products and services to new markets