Microsoft changes revenue reporting model

Microsoft announced this week that it would be changing the way it reports revenues, beginning with its 2001 fiscal year. Until now, Microsoft had broken down its revenue into the following four market segments: Windows Platforms, Productivity Applications and Developer, Consumer, and Other. But the company wishes to emphasize its consumer and Internet products so the new segments, which will be featured in its next quarterly earnings report on October 18, are Desktop Software; Enterprise Software and Services; Consumer Software, Services, and Devices; Consumer Commerce Investments; and Other.

"Microsoft's business continually evolves, and our financial reporting needs to evolve accordingly," said John Connors, Microsoft's Chief Financial Officer. "We recently unveiled Microsoft .NET, our vision for the next-generation of Internet-based products and services. With .NET, we are focused on growing our core business franchises, such as Microsoft Windows, Microsoft Office, Enterprise Servers, and MSN, while at the same time investing in business opportunities that will fuel the company's future growth. The new segments reflect the company's recent re-organization around these priorities and will help investors evaluate our progress in these areas."

The Desktop Software segment will include all of desktop versions of Windows as well as Microsoft Office. Enterprise Software and Services includes the Windows 2000 Server family, Microsoft's Server products such as SQL Server and Exchange, developer tools, the company's consulting services, and its Product Support Services (PSS) division. The Consumer Software, Services and Devices segment focuses on the MSN online service, WebTV, learning and productivity software, embedded software, mobile and wireless products, and games. Consumer Commerce Investments includes Expedia, the HomeAdvisor online real estate service, and the CarPoint online automotive service. And as you might expect, "Other" simply includes everything else, such as Microsoft Press, and the company's keyboards and mouse products.

For fiscal 2000, Microsoft reported almost $23 billion in total revenue. Of this total, $16.3 billion came from desktop software; $4 billion from Enterprise software and services; $1.6 billion from consumer software, services, and devices; and the remainder was split between consumer commerce investments ($182 million) and Other ($753 million). Clearly, Microsoft's biggest earner is desktop software, which accounts for about 73% of its revenues

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