The Superior College, Ravi Campus, Shahdara, Lahore

Financial Management

MICROSOFT
Submitted to: Sir Aneeb

Group Members: Roll No.

1) Abdul Rehman 05

2) Ali Raza 19

3) Hamza Pervaiz 02

4) Muhammad Uzair 03

5) Zain Anwar 21
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Contents:

Sr. # Description Pg. #

1 Contents 1

2 Company Overview 2

3 BOD 3

4 Products & Services 4

4.1 Products 5
4.2 Services 8

5 Financial Statements 10
5.1 Income Statement 10
5.2 Balance Sheet 11
5.3 Shareholder’s Equity 12

6 Analysis of Financial Statements (2017 – 2018) 13

7 SWOT Analysis 15

8 Recommendations 18
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2. Company Overview

MICROSOFT
Microsoft Corporation is an American multinational technology company with
headquarters in Redmond, Washington.

It develops, manufactures, licenses, supports, and sells computer software,

consumer electronics, personal computers, and related services.

Microsoft was founded by Bill Gates and Paul Allen on April 4, 1975.

Type: Public

Industry: Computer Software & Hardware.

Employees: 144,106 (2019)

Website: www.microsoft.com

Areas served: Worldwide

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3. BOD (board of directors)

Members of the board of directors as of January 2018 are:

Non-Independent: Independent

Reid Hoffman Bill Gates

Hugh Johnston Satya Nadella

Teri List-Stoll,

Charles Noski,

Helmut Panke,

Sandi Peterson,

Penny Pritzker,

Charles Scharf,

Arne Sorenson,

John W. Stanton,

John W. Thompson

Padmasree Warrior
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4. Products and Services:

Products:
 Windows

 Xbox

 Skype

 Windows Phones

 Microsoft Office

 Visual studio

Services:
 Bing

 Outlook

 ASP.NET

 Azure

 SQL Server

 One Drive
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4.1 Products:
 Windows
Microsoft Windows is a group of several graphical operating system families, all of which are
developed, marketed and sold by Microsoft. Each family caters to a certain sector of the
computing industry. Active Microsoft Windows families include Windows NT and Windows IoT;
these may encompass subfamilies, e.g. Windows Server or Windows Embedded
Compact (Windows CE). Defunct Microsoft Windows families include Windows 9x, Windows
Mobile and Windows Phone.
Microsoft introduced an operating environment named Windows on November 20, 1985, as a
graphical operating system shell for MS-DOS in response to the growing interest in graphical
user interfaces (GUIs).[3] Microsoft Windows came to dominate the world's personal
computer (PC) market with over 90% market share, overtaking Mac OS, which had been
introduced in 1984. Apple came to see Windows as an unfair encroachment on their innovation
in GUI development as implemented on products such as the Lisa and Macintosh (eventually
settled in court in Microsoft's favor in 1993). On PCs, Windows is still the most popular
operating system. However, in 2014, Microsoft admitted losing the majority of the overall
operating system market to Android,[4] because of the massive growth in sales of
Android smartphones. In 2014, the number of Windows devices sold was less than 25% that of
Android devices sold. This comparison however may not be fully relevant, as the two operating
systems traditionally target different platforms. Still, numbers for server use of Windows (that
are comparable to competitors) show one third market share, similar to that for end user use.
As of October 2018, the most recent version of Windows for
PCs, tablets, smartphones and embedded devices is Windows 10. The most recent version
for server computers is Windows Server, version 1903.[5] A specialized version of Windows also
runs on the Xbox One video game console.
 Xbox
Xbox is a video gaming brand created and owned by Microsoft. It represents a series of video
game consoles developed by Microsoft, with three consoles released in the sixth, seventh,
and eighth generations, respectively. The brand also
represents applications (games), streaming services, an online service by the name of Xbox Live,
and the development arm by the name of Xbox Game Studios. The brand was first introduced in
the United States in November 2001, with the launch of the original Xbox console.
The original device was the first video game console offered by an American company after
the Atari Jaguar stopped sales in 1996. It reached over 24 million units sold as of May 2006.
[1]
 Microsoft's second console, the Xbox 360, was released in 2005 and has sold 84 million units
as of June 2014. The Xbox One has been released in 21 markets in total, with a Chinese release
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in September 2014. The head of Xbox is Phil Spencer, who succeeded former head Marc
Whitten in late-March 2014.
 Skype
Skype for Business is an instant messaging (IM) enterprise software used with Skype for
Business Server or with Skype for Business Online (available with Microsoft Office 365).[1]
On 11 November 2014, Microsoft announced that Skype for Business would replace Microsoft
Lync in 2015. The latest version of the communication software combines features of Lync and
of the consumer software Skype.[2] There are two user interfaces – organizations can switch
their users from the default Skype for Business interface to the Skype for Business (Lync)
interface.[3]
In September 2017, Microsoft announced plans that Microsoft Teams would replace Skype for
Business in the future.[4] On May 20, 2018, Microsoft retired Skype for Business on Windows
Phone.[5] On July 30, 2019, Microsoft announced that Skype for Business online will retire on
July 31, 2021
 Windows Phones
Windows Phone (WP) is a family of discontinued[6] mobile operating systems developed
by Microsoft for smartphones as the replacement successor to Windows Mobile[7][8] and Zune.
[9]
 Windows Phone features a new user interface derived from Metro design language. Unlike
Windows Mobile, it is primarily aimed at the consumer market rather than
the enterprise market.[10] It was first launched in October 2010 with Windows Phone 7.
[11]
 Windows Phone 8.1 is the latest public release of the operating system, released to
manufacturing on April 14, 2014.[12][13]
Windows Phone was succeeded by Windows 10 Mobile in 2015; it emphasizes a larger amount
of integration and unification with its PC counterpart—including a new, unified application
ecosystem, along with an expansion of its scope to include small-screened tablets.[14]
On October 8, 2017, Joe Belfiore announced that work on Windows 10 Mobile was drawing to a
close due to lack of market penetration and resultant lack of interest from app developers. [6]
In January 2019, Microsoft announced that support for Windows 10 Mobile would end on
December 10, 2019, and that Windows 10 Mobile users should migrate
to iOS or Android phones.
 Microsoft Office
Microsoft Office, or simply Office, is a family of client software, server software, and services
developed by Microsoft. It was first announced by Bill Gates on August 1, 1988, at COMDEX in
Las Vegas. Initially a marketing term for an office suite (bundled set of
productivity applications), the first version of Office contained Microsoft Word, Microsoft Excel,
and Microsoft PowerPoint. Over the years, Office applications have grown substantially closer
with shared features such as a common spell checker, OLE data integration and Visual Basic for
Applications scripting language. Microsoft also positions Office as a development platform for
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line-of-business software under the Office Business Applications brand. On July 10,

2012, Softpedia reported that Office is used by over a billion people worldwide.[6]
Office is produced in several versions targeted towards different end-users and computing
environments. The original, and most widely used version, is the desktop version, available
for PCs running the Windows and macOS operating systems. Office in a browser, previously
known as Office Online, is a version of the software that runs within a web browser, while
Microsoft also maintains Office apps for Android and iOS.
Since Office 2013, Microsoft has promoted Office 365 as the primary means of obtaining
Microsoft Office: it allows use of the software and other services on a subscription business
model, and users receive free feature updates to the software for the lifetime of the
subscription, including new features and cloud computing integration that are not necessarily
included in the "on-premises" releases of Office sold under conventional license terms. In 2017,
revenue from Office 365 overtook conventional license sales.
The current on-premises, desktop version of Office is Office 2019, released on September 24,
2018
 Visual studio
Microsoft Visual Studio is an integrated development environment (IDE) from Microsoft. It is
used to develop computer programs, as well as websites, web apps, web services and mobile
apps. Visual Studio uses Microsoft software development platforms such as Windows
API, Windows Forms, Windows Presentation Foundation, Windows Store and Microsoft
Silverlight. It can produce both native code and managed code.
Visual Studio includes a code editor supporting IntelliSense (the code completion component)
as well as code refactoring. The integrated debugger works both as a source-level debugger and
a machine-level debugger. Other built-in tools include a code profiler, forms designer for
building GUI applications, web designer, class designer, and database schema designer. It
accepts plug-ins that enhance the functionality at almost every level—including adding support
for source control systems (like Subversion and Git) and adding new toolsets like editors and
visual designers for domain-specific languages or toolsets for other aspects of the software
development lifecycle (like the Team Foundation Server client: Team Explorer).
Visual Studio supports 36 different programming languages and allows the code editor and
debugger to support (to varying degrees) nearly any programming language, provided a
language-specific service exists. Built-in languages include C,[6] C++, C++/CLI, Visual Basic
.NET, C#, F#,[7] JavaScript, TypeScript, XML, XSLT, HTML, and CSS. Support for other languages
such as Python,[8] Ruby, Node.js, and M among others is available via plug-ins. Java (and J#)
were supported in the past.
The most basic edition of Visual Studio, the Community edition, is available free of charge. The
slogan for Visual Studio Community edition is "Free, fully-featured IDE for students, open-
source and individual developers".
The currently supported Visual Studio version is 2019.
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4.2 Services:
 Bing
Bing is a web search engine owned and operated by Microsoft. The service has its origins in
Microsoft's previous search engines: MSN Search, Windows Live Search and later Live Search.
Bing provides a variety of search services, including web, video, image and map search
products. It is developed using ASP.NET.
Bing, Microsoft's replacement for Live Search, was unveiled by Microsoft CEO Steve Ballmer on
May 28, 2009, at the All Things Digital conference in San Diego, California, for release on June 3,
2009.[3] Notable new features at the time included the listing of search suggestions while
queries are entered and a list of related searches (called "Explore pane") based on semantic
technology from Powerset,[4] which Microsoft had acquired in 2008.[5]
As of October 2018, Bing is the third largest search engine globally, with a query volume of
4.58%, behind Google (77%) and Baidu (14.45%). Yahoo! Search, which Bing largely powers, has
2.63%
 Outlook
Microsoft Outlook is a personal information manager from Microsoft, available as a part of
the Microsoft Office suite. Primarily an email application, it also includes a calendar, task
manager, contact manager, note taking, journal, and web browsing.
It can be used as a stand-alone application, or can work with Microsoft Exchange
Server and Microsoft SharePoint Server for multiple users in an organization, such as shared
mailboxes and calendars, Exchange public folders, SharePoint lists, and meeting schedules.
Microsoft has also released mobile applications for most mobile platforms, including iOS and
Android. Developers can also create their own custom software that works with Outlook and
Office components using Microsoft Visual Studio.[6] In addition, Windows Phone devices can
synchronize almost all Outlook data to Outlook Mobile.

 ASP.NET
ASP.NET is an open-source[2] server-side web application framework designed for web
development to produce dynamic web pages developed by Microsoft to allow programmers to
build dynamic web sites, applications and services.
It was first released in January 2002 with version 1.0 of the .NET Framework, and is the
successor to Microsoft's Active Server Pages (ASP) technology. ASP.NET is built on the Common
Language Runtime (CLR), allowing programmers to write ASP.NET code using any
supported .NET language. The ASP.NET SOAP extension framework allows ASP.NET components
to process SOAP messages.
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ASP.NET's successor is ASP.NET Core. It is a re-implementation of ASP.NET as a modular web

framework, together with other frameworks like Entity Framework. The new framework uses
the new open-source .NET Compiler Platform (codename "Roslyn") and is cross
platform. ASP.NET MVC, ASP.NET Web API, and ASP.NET Web Pages (a platform using
only Razor pages) have merged into a unified MVC 6.
 Azure
Microsoft Azure (formerly Windows Azure /ˈæʒər/) is a cloud computing service created
by Microsoft for building, testing, deploying, and managing applications and services through
Microsoft-managed data centers. It provides software as a service (SaaS), platform as a service
(PaaS) and infrastructure as a service (IaaS) and supports many different programming
languages, tools and frameworks, including both Microsoft-specific and third-party software
and systems.
Azure was announced in October 2008, started with codename "Project Red Dog", [1] and
released on February 1, 2010, as "Windows Azure" before being renamed "Microsoft Azure" on
March 25, 2014
 SQL Server
Microsoft SQL Server is a relational database management system developed by Microsoft. As
a database server, it is a software product with the primary function of storing and retrieving
data as requested by other software applications—which may run either on the same computer
or on another computer across a network (including the Internet).
Microsoft markets at least a dozen different editions of Microsoft SQL Server, aimed at different
audiences and for workloads ranging from small single-machine applications to large Internet-
facing applications with many concurrent users.

 One Drive
Microsoft OneDrive (formerly known as Microsoft SkyDrive, Windows Live SkyDrive,
and Windows Live Folders) is a file hosting service and synchronization service operated
by Microsoft as part of its web version of Office. First launched in August 2007, OneDrive allows
users to store files and personal data like Windows settings or BitLocker recovery keys in
the cloud, share files, and sync files across Android, Windows Phone, and iOS mobile devices,
Windows and macOS computers, and the Xbox 360 and Xbox One consoles. Users can
upload Microsoft Office documents directly to OneDrive.
OneDrive offers 5 GB of storage space free of charge, with 50 GB, 1 TB, and 5 TB storage
options available either separately or with Office 365 subscriptions.
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5. Financial Statements

5.1 Income Statement:

Year Ended June 30, 2018 2017
Revenue:

Product 64,497 63,811

Service and other 45,863 32,760
Total revenue 110,360 96,571
Cost of revenue:
Product 15,420 15,175
Service and other 22,933 19,086
Total cost of revenue 38,353 34,261

Gross margin 72,007 62,310

Research and development 14,726 13,037

Sales and marketing 17,469 15,461
General and administrative 4,754 4,481
Impairment and restructuring 0 306

Operating income 35,058 29,025

Other income (expense), net 1,416 876

Income before income taxes 36,474 29,901

Provision for income taxes 19,903 4,412

Net income 16,571 25,489

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5.2 Balance Sheet:

Assets Liability + Equity
2018 2017 2017 2018

Cash and cash 11,946 7,663 Current liabilities:

equivalents
Short-term 121,822 125,318 Accounts payable 8,617 7,390
investments
Short-term debt 0 9,072
Total cash, cash 133,768 132,981 Current portion of long-term 3,998 1,049
equivalents, and short- debt
term investments
Accrued compensation 6,103 5,819
Accounts receivable 26,481 22,431 Short-term income taxes 2,121 718
Inventories 2,662 2,181 Short-term unearned revenue 28,905 24,013
Other 6,751 5,103 Other 8,744 7,684

Total current assets 169,662 162,696 Total current liabilities 58,488 55,745

Property and equipment 29,460 23,734 Long-term debt 72,242 76,073

Operating lease right-of- 6,686 6,555 Long-term income taxes 30,265 13,485
use assets
Equity and other 1,862 6,023 Long-term unearned revenue 3,815 2,643
investments
Goodwill 35,683 35,122 Deferred income taxes 541 5,734
Intangible assets, net 8,053 10,106 Operating lease liabilities 5,568 5,372
Other long-term assets 7,442 6,076 Other long-term liabilities 5,211 3,549

Total liabilities 176,130 162,601

Commitments and
contingencies
Stockholders’ equity:

Common stock and paid-in 71,223 69,315

capital – shares
Retained earnings 13,682 17,769
Accumulated other -2,187 627
comprehensive income (loss)
Total stockholders’ equity 82,718 87,711

Total assets 258,848 250,312 Total Liabilities and Equity 258,848 250,312
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5.3 Shareholders’ Equity:

(In millions)
Year Ended June 30, 2018 2017
Common stock and paid-in capital
Balance, beginning of period 69,315 68,178
Common stock issued 1,002 772
Common stock repurchased -3,033 -2,987
Stock-based compensation expense 3,940 3,266
Other, net -1 86
Balance, end of period 71,223 69,315

Retained earnings
Balance, beginning of period 17,769 13,118
Net income 16,571 25,489

Common stock cash dividends -12,917 -12,040

Common stock repurchased -7,699 -8,798
Cumulative effect of accounting change -42 0
Balance, end of period 13,682 17,769

Accumulated other comprehensive income (loss)

Balance, beginning of period 627 1,794
Other comprehensive loss -2,856 -1,167
Cumulative effect of accounting change 42 0
Balance, end of period

Total stockholders’ equity -2,187 627

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6. Analysis of Financial Statements (2017 – 2018)

Income Statement

Year Ended June 30, 2018 2017

Revenue: 110,360 96,571

Total cost of revenue 38,353 34,261

Gross margin 72,007 62,310

Operating income 35,058 29,025

Other income (expense), net 1,416 876

Income before income taxes 36,474 29,901

Provision for income taxes 19,903 4,412

Net income 16,571 25,489

 Revenue of 2018 is more than the 2017.

 Operating income of 2018 is more than the 2017.
 Taxes Paid in 2018 is more than 2017
 Net Income of 2017 is more than 2018.
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Balance Sheet:

Assets Liability + Equity

 Assets = Liabilities + Equity
 Total Assets of 2018 is more than 2017.
 Total Liabilities of 2018 is more than 2017.
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7. SWOT Analysis of Microsoft:

Strengths in the SWOT analysis of Microsoft

1. Reputed Brand: Microsoft is one of the fortune 100 MNC operating through

regional subsidiaries to minimize cultural differences in more than 100
countries. Microsoft Corporation (Microsoft) is one of the leading providers
of software, and hardware products and services. The company focuses on
developing, manufacturing, licensing, marketing and supporting software
products worldwide.
2. Technologically advanced company: Microsoft is always known as a
catalyst in the tech-world. Prioritizing innovation and optimization through
strong research and development activity. It operates Microsoft Research,
one of the world’s largest computer science research organizations which
work in close collaboration with top universities around the world to advance
the state-of-the-art in computer science sector.
3. Product Portfolio: Microsoft offers a comprehensive range of software,
services, and hardware solutions across different customer classes, which
enable it to enjoy a leading market position. Microsoft generates revenue by
developing, manufacturing, licensing, and supporting software and services
across a wide variety of computing devices. Microsoft also provides
consulting and product and solution support service, and trains and certifies
computer system integrators and developers.
4. Extensive distribution system: Company maintains a strong distribution
and marketing network which leverages operational performance.
Microsoft markets and distributes its products through three major channels
namely OEMs (Original Equipment Manufacturers); distributors and resellers;
and online (through own virtual store & E-commerce sites).
5. World leading OS – One of the major advantages of Microsoft is its
Operating system. Although it is counted in the Product portfolio, and
although people love to point out the glitches in Microsoft OS, it is still one of
the best Computer operating system since the last several decades.
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Weaknesses in the SWOT analysis of Microsoft

1. Legal proceedings: Microsoft is defendant in various unresolved cases

against it. It is entangled in various legal proceedings relating to product
design, manufacture and performance liability and other litigations relating
to contracts, employment issues or intellectual property rights.
2. Not able to control counterfeit of their software business in developing
nations: It is not able to curb the illegal use of their software business
specially operating system in the developing nations like china, India etc.
3. Lagging in innovation – Because of its vast usage, customers of Microsoft
have a common complaint that Microsoft keeps upgrading its products but
there is nothing new from the bottoms up from the brand. In terms of
Operating system capabilities, Apple is farther ahead then Microsoft.
Because of which Apple is slowly coming up as the chosen OS.

Opportunities in the SWOT analysis of Microsoft

1. Shifting to Razor & blade model: Rather than offering expensive software

Microsoft can work on Blade & razor model in order to counter illegal use of
their software specially Operating system, through which they can generate
more revenue.
2. Strategic Alliances: Company can focus on entering into new partnerships
for the development of innovative and technologically advanced products.
Such partnerships provide Microsoft a competitive edge and allow it to
garner high market share. Like in 2014, the company announced nine new
hardware partners for its Windows Phone. The partners provide a direct
access to its tools, widening its scope for consumers and launch new price
points across several key growth markets. The key partners include
Foxconn, Gionee, Lava (Xolo), Lenovo, LG, Longcheer, JSR, Karbonn and ZTE
Corporation.
3. Demand of smartphones: Microsoft can capitalize over the growing
demand of smartphones which is emerging as a major growth opportunity in
both developed & developing nations.
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Threats in the SWOT analysis of Microsoft

1. Competition: The software market is highly competitive, which may impact

the company’s performance. The company faces stiff competition in all its
segments. Its key competitors in Windows Live software and services include
Apple, Google and Yahoo!. Its Internet Explorer product faces stiff
competition from the browsers developed by Google (Chrome), Apple
(Safari), Mozilla, and Opera Software Company. The company’s server and
tools products compete against the related offering of IBM and Oracle.
2. Rapid technological changes: The tech-world is continuously changing.
Companies are ending up killing their own offering much before competition
kills it.
3. Pirated Market: It is the major threat company is facing from its software
front. Every year company loses billions of dollars due to the circulation of
pirated versions across the world. Microsoft loses significant amounts of
revenue owing to the piracy rate of 30% or more in several countries. Also
developing nations like China, India etc. accounts for major market which are
involved in illegal use of Microsoft’s software.
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8. Recommendation

1. Legal Proceeding:

 Hire Professional lawyers

 Strong the other Open Cases

2. Lagging Innovation:

 Number of Updates should be reduced.

 Existing Features must resolve first before adding new features.

 Updates must resolve the Issues in Customer Feedback.

3. Competition:

 Focus on real market

 Don’t utilize time and revenue in products having higher competition.

4. Pirated Market:

 Add security in Products and Services.

 Low rates for Countries having less economy.