Business Performance and Environment of Microsoft Corporation - Report Example

MICROSOFT Order No.222072 April 2008 M ICROSOFT The Microsoft Corporation is one of the largest and most successful manufacturers of software in the world. Microsoft with its aggressive management strategies, constant focus on developing new products and new technologies is an industry leader and will continue to be one. Microsoft’s corporate culture is as renowned as its products. This paper will present an overview of Microsofts historical background, its products, its organizational structure, and its financial figures. It will also analyze the competition Microsoft faces; its impact on environment and lastly it will present a brief overview of its future plans. Historical Background In 1975 Bill Gates and Paul Allen, two friends joined to develop a programming language, BASIC for M.I.T.S.’s Altair 8800, in Albuquerque, New Mexico. Microsoft was born here. This was the first personal computer. Microsoft then started to license BASIC to other companies, like Apple Computer and Commodore.1 In 1977, Microsoft released Microsoft FORTRAN, its next language program.2 In 1980, Microsoft bought an operating system, QDOS, renamed it and licensed it to I.B.M. Microsoft quickly took off from here and began to grow. Microsoft’s business software soon went ahead of its competitors products like Lotus 1-2-3 and WordPerfect. From the mid-1990s, Microsoft started to look beyond software. It teamed up with NBC to start MSNBC and launched its MSN Internet portal. By 1998, Microsoft’s Internet Explorer browse had overtaken Netscape. In 2001 Microsoft entered the videogame business. Its product Xbox 360 gaming console is a leading product in the market surpassing similar products of its competitors, Sony and Nintendo. In 2006, Microsoft introduced its Zune digital media player which was as successful as Apple’s iPod. In 2006, Bill Gates announced that Ray Ozzie would take over his role as the Chief Software Architect after a two-year transition period. However he would continue to be the Chairman, head the Board of Directors and act as an adviser on key projects. In January 2007, Microsoft launched its much awaited, Vista operating system.3 Microsoft Office 2007 was released around the same time. In February 2008, Microsoft made an unsolicited bid to purchase Yahoo, its Internet services competitor. However this offer was rejected.4 Product Line Microsoft develops, manufactures, supports and licenses, a wide range of software products for a wide range of computing devices. This includes operating systems for personal computers, servers and intelligent devices; server applications and software development tools. Microsofts online products include the MSN network of Internet products and services. It also licenses consumer software programs and sells hardware devices. Broadly speaking Microsofts business is the development of a wide range of software products for information technology sector, knowledge industry, and the consumer sector and marketing these through multiple channels. Initially Microsofts business was divided into seven segments: 1. Microsoft’s Client segment produces Windows XP, Windows 2000, and other Windows operating systems. 2. The Server and Tools segment consists of server software licenses and client access licenses for Windows Server, SQL Server, Exchange Server, and other servers 3. Microsoft’s Information Worker segment consists of the Microsoft Office System of programs, servers, services, and solutions 4. The Microsoft Business Solutions segment includes the businesses of Great Plains, Microsoft Central, and Navision 5. MSN segment includes Subscriptions and MSN Network services. 6. Microsoft’s Mobile and Embedded Devices segment consisting of Windows Embedded device operating systems, Windows Mobile software, Windows Automotive and MapPoint 7. The Home and Entertainment segment consists of the Microsoft Xbox video game system, the Home Products Division, PC games and TV platform products.5 However in 2005, Microsoft rationalized its original seven business groups into three core divisions, the Microsoft Platform Products and Services Division, the Microsoft Business Division and the Microsoft Entertainment and Devices Division.6 Organisation The company consists of a Board of Directors of ten people, who are mostly outsiders. The Board has five committees to oversee specific matters. These being the Audit Committee, that is responsible for auditing and reporting; the Compensation Committee, which handles compensation matters; the Finance Committee, which takes care of financial matters like mergers and acquisitions; the Governance and Nominating Committee, which is in charge of various corporate matters like nomination of the board; and the Antitrust Compliance Committee. Then there is the Executive Team, consisting of sixteen company officers from all over the world, which makes sure employees understand Microsofts culture. The Executive Team include the Chairman and Chief Software Architect, the CEO, the General Counsel and Secretary, the CFO, senior and group vice presidents from the business units, the CEO of the Europe, the Middle East and Africa regions; and the heads of Worldwide Sales, Marketing and Services; Human Resources; and Corporate Marketing. In addition to the Executive Team there is also the Corporate Staff Council, which takes care of all major staff functions including approving corporate policies. In addition to this there are the Presidents and Vice Presidents of the various product divisions.7 Financial figures FINANCIAL HIGHLIGHTS8 (In millions, except per share data) Fiscal Year Ended June 30 2007   2006   2005   2004   2003 Revenue $51,122 $44,282 $39,788 $36,835 $32,187 Operating income 18,524   16,472   14,561   9,034   9,545 Net income 14,065   12,599   12,254   8,168   7,531 Diluted earnings per share $   1.42   $   1.20   $   1.12   $   0.75   $   0.69 Cash dividends declared per share $   0.40   $   0.35   $   3.40   $   0.16   $   0.08   Cash and short-term investments 23,411   34,161   37,751   60,592   49,048 Total assets 63,171   69,597   70,815   94,368   81,732 Long-term obligations 8,320   7,051   5,823   4,574   2,846 Stockholders’ equity 31,097   40,104   48,115   74,825   64,912 Competitors The computer industry, software industry is particular is very competitive. Microsoft is well ahead of its competitors because of its numerous strengths. In fact, during a recession when many companies incurred huge losses, Microsoft registered profits up to 35%.9 Its competitors are mainly in the Development Tools, Operating Systems, and Utilities Software industry. Microsofts main competitors are Google, IBM, Oracle,10 Hewlett-Packard Company, Sun Microsystems, Apple and Corel. Google Inc. is threatening to take the position of Microsoft as an industry leader. It has been dominating Web search for sometime now and has introduced services like online spreadsheets and word processing programs that are competition for Excel and Word. Google Maps is a competitor for Windows. IBMs spreadsheet, Corels word processor and Sun Microsystems’ Star Office with aggressive pricing strategies are a threat. Also IBM and Apple by preinstalling their application software in some of their PCs are competing directly with Microsoft’s desktop application software. Many web-based application-hosting services are providing an alternative to Microsoft Office. The Linux open source operating system is being increasingly accepted. Microsoft Windows is also facing competition from platforms based on Internet browsing software and Java technology of Sun Microsystems and AOL-Time Warner. Environmental Impact Today most companies are following initiatives for environmental sustainability. Microsoft has made environmental sustainability an essential part of its business. It has always endeavored to conserve natural resources and protect the environment by creating innovative products. Microsoft also stipulates that all suppliers and vendor must follow environmental laws and practices. Vendors as far as possible must use recycled materials in Microsoft products and packaging. Microsoft has in place an extensive recycling and conservation system to reduce waste and conserves resources at its facilities. Microsoft recycles old computers, monitors, servers, etc. and keeps them out of landfills. Microsoft encourages employees to use alternate modes of transport, subsidizes transport costs and offers incentives for carpools. Microsoft also has a fleet of 41 hybrid vehicles that are used in their shuttle service and it is estimated that about 20,000 gallons of gasoline are saved annually. Microsoft through its technology enables customers and businesses to promote sustainability in their workplaces or homes. Till now Windows Vista is by far the most energy-efficient Microsoft operating system. Large organizations can make a big difference when it comes to impact on environment. They use hundreds of PCs and a significant amount of energy can be saved if they introduce a system where a PC will go to sleep if it is inactive for more than fifteen minutes. “Sleep” mode in Windows Vista enables one to do just that. Microsoft is also a leader in development of innovative products such as Microsoft® Office Live Meeting, Microsoft Office SharePoint®, and Microsoft Office Groove® 2007, which enable virtual meetings, thereby reducing the need for travel or the physical transfer of documents. Microsoft Dynamics™ is developing an environmental dashboard that can manage a companys environmental data, evaluate their carbon footprint, and help them evaluate the sustainability of their business. Microsoft is looking at ways to improve the packaging of its products by going in for environmentally friendly material like packaging made from recycled plastic bottles, and in the process decreasing the quantity of disposable packaging.11 Future Plans Microsoft is proposing to launch major products like Windows Server 2008 and Hyper-V, to add to the momentum of Windows Vista and Office 2007. Microsoft CEO Steve Ballmer (2008) during his annual “Strategic Update” for Wall Street analysts in New York in February 2008 said that Microsoft wants to buy Yahoo to help the growth of its online advertising business and even if this does not happen, it will continue to invest heavily in its own online-advertising assets. Ballmer added that are smaller “nascent” markets where Microsoft will continue to invest like healthcare, Zune and the Surface multi-touch tabletop.12 Analysts believe that packaged software is on its way out and is being replaced by subscription-based services and Web applications. Microsoft relies on Windows and Office software for most of its profits., Hence Microsoft is trying to get a firm foothold in the growing markets for entertainment and Web services, which until now have been the stronghold of rival companies Google and Apple.13 Microsofts outlook for the future has been summed up by Kevin Turner (2008), chief operating officer at Microsoft "We are in the midst of another strong year with great momentum heading into calendar year 2008.....We continue to see healthy demand from both businesses and consumers in the United States and our growth in emerging markets is especially strong. Looking across Brazil, Russia, India and China, our field revenue reached a combined growth rate over 65% this quarter. As we look ahead, our Windows Server 2008 launch, with our virtualization solution, will further our quest to bring exceptional value to our customers.” 14 References 1. Ballmer Steve (2008), Quote Retrieved from http://investing.businessweek.com/research/stocks/financials/financials.asp?symbol=MSFT.O 2. Turner Kevin (2008), Quote Retrieved from http://www.microsoft.com/msft/earnings/FY08/earn_rel_q2_08.mspx 3. http://www.portfolio.com/resources/company-profiles/Microsoft-Corporation-1252/ 4. http://encarta.msn.com/encyclopedia_761567883_1____3/microsoft_corporation.html3 5. http://topics.nytimes.com/top/news/business/companies/microsoft_corporation/index.htm 6. Michttp://www.cbronline.com/companyprofile.asp?guid=8ABE78BB-0732-4ACA-A41D-3012EBB1334D&CType=Backgroundrosoft Corporation 7. http://en.wikipedia.org/wiki/Microsoft 8. http://www.microsoft.com/msft/reports/default.mspx 9. http://wps.ablongman.com/wps/media/objects/803/822612/APASill.pdf 10. http://www.hoovers.com/microsoft/--ID__14120,target__business_intelligence--/free-co-samples-index.xhtml 11. http://download.microsoft.com/download/C/6/9/C69D0366-C3EB-4376-B42B-7820EFE844BB/Microsoft_on_the_Topic_Environmental_Stewardship.doc Read More