Microsoft BOD Presentation

Arash Azarmi Chief Executive Officer Kacy Navarrette President, Entertainment & Devices Division Payam Bahreyni Chief Financial Officer Sagar Babu Vallurupalli Chief Marketing Officer Roshan Peter Chief Research and Strategy Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Agenda
Recent happenings Analyze trends Assess issue Competitor Analysis Recommend a solution and process

Arash, Chief Executive Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Purpose
To request concurrence to conduct a feasibility study to verify the correlation between number of applications in Windows Marketplace and an increase in sales of Windows 8 operated tablets and phones.

Arash, Chief Executive Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Recent Happenings
Microsoft Revamp
Change in Logo New product line
Windows 8 OS October 26 Nokia Lumia 820 & 920 November Microsoft Surface December

Arash, Chief Executive Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Microsoft Divisions
Entertainment & Devices Windows & Windows Live

Microsoft Business

Server & Tools

Online Services
Arash, Chief Executive Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Microsoft Divisions
Entertainment & Devices Windows & Windows Live

Microsoft Business

Server & Tools

Online Services
Arash, Chief Executive Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Microsoft Divisions
Revenue by Division FY 2012
Entertainment & Devices Revenue: $ 8.9 Bn.

14% 26%

Windows & Windows Live Division

Server & Tools Online Services Division

34%
27% 4%
Total Revenue: $ 69.7 Bn.

Microsoft Business Division Entertainment & Devices Division

Payam, Chief Financial Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive

$3,500

Microsoft Divisions
Change in Revenue By Division
$4,000
2010 2011

Revenue Change (Million Dollars)

Landscape Out of the Gate Recommendations

$3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 $(500) $(1,000) Windows & Windows Live Server & Tools Online Services Microsoft Business
2010 2011 2012 2010 2012 2011 2010 2012

2011

2011 2012

2012

2010

Entertainment & Devices

Payam, Chief Financial Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Why the Loss?

Loss of PC user A decline in sales of PC has been documented as sales of tablet and mobile devices increases.
Decreasing Sale of PCs PC Sales
Millions 20 15 10 5 0

Arrival of Millennial consumer Q2 10 Q2 11 Q2 12 This new generation is focused about being connected. Consumers buy tablets and smartphones due to the features

Kacy, President of Entertainment & Devices Division

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Competitive Landscape
Smartphone and Tablet OS Market Share (Q4 2012)

6%

7%

21%
Apple iOS

5%

MS Windows Phone
Google Android Blackberry Others

61%

Sagar, Chief Marketing Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive

Thousands

Competitive Landscape
Number of Apps in Various App Stores
700 600 500
2012 2012

Landscape Out of the Gate Recommendations

400
300 200 100 0

2011

2011
2012 2011

Sagar, Chief Marketing Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations
Thousands

Competitive Landscape
Growth of Number of Available Apps
700 600 500

400
300

Apple Google

200
100 0 Aug-10

Microsoft

Nov-10

Feb-11

Jun-11

Sep-11

Dec-11

Apr-12

Jul-12

Sagar, Chief Marketing Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations
Number of Months
30 25 40 35

Quick Out of the Gate

Time to reach 100K apps

20
15 10 5 0

iOS

Windows Phone

Android Nokia Store Blackberry

Sagar, Chief Marketing Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Recommendations
2016 Windows 8 operated tablet and smartphones market share projection: 19.2% Ways to gain more market share by 2016? Question: Can we increase our sales by increasing number of apps on our marketplace?

Roshan, Chief Research and Strategy Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Recommendations
A feasibility study to determine correlation between increase number of apps and sales of tablets and smartphones Budget: $ 480,000 Time Frame: 3 Months

Roshan, Chief Research and Strategy Officer

Purpose Recent Happenings Microsoft Divisions Decline of PC Competitive Landscape Out of the Gate Recommendations

Recommendation Phases
Phase 1 Phase 2

Yes

Research more on ways of accelerating the increase of the number of apps

Feasibility Study
Corr > 0

OR

No

Investigate other factors that potentially increase the sales of Windows phones and tablets
Roshan, Chief Research and Strategy Officer

Questions?
Purpose

Recent happenings
Microsoft Divisions Microsoft Revenue by Division

4 Year Revenue by Division

Entertainment & Devices Windows Marketplace Why Windows Marketplace? Recommendations

FSA
Q4 (Jun '12) Net profit margin Operating margin EBITD margin Return on average assets Return on average equity -1.65% -2.72% 1.06% 2012 Calendar 23.03% 29.92% 33.67% 14.77%

-2.92%

27.51%