microsoft china revenue

During fiscal year 2020, we recorded an impairment charge of $161 million to operating lease right-of-use assets due to the closing of our Microsoft Store physical locations. Customer mix between consumer, small and medium businesses, and large enterprises. We evaluated management’s significant accounting policies related to these customer agreements for reasonableness. We evaluated the reasonableness of management’s estimate of stand-alone selling prices for products and services that are not sold separately. Okta, Proofpoint, and Symantec provide security solutions across email security, information protection, identity, and governance. Revenue is the top line item on an income statement from which all costs and expenses are subtracted to arrive at net income. 21 in the 2020 Fortune 500 rankings of the largest United States corporations by total revenue; it was the world's largest software maker by revenue as of 2016. Surface revenue increased $457 million or 8%, driven by increased demand from remote work and learn scenarios. Gross margin percentage increased slightly, due to sales mix shift to higher gross margin businesses in Windows and Gaming. Skype for Business and Skype also compete with a variety of instant messaging, voice, and video communication providers, ranging from start-ups to established enterprises. More Personal Computing revenue increased, driven by Surface, Gaming, and Windows. Certain options and forwards not designated as hedging instruments are also used to manage the variability in foreign exchange rates on certain balance sheet amounts and to manage other foreign currency exposures. We determine the allowance based on known troubled accounts, historical experience, and other currently available evidence. At the data layer, Azure is the only cloud with limitless data and analytics capabilities. Former Microsoft CEO Steve Ballmer is unhappy about software piracy in China, accusing businesses in the country of ripping off his former firm. Our principal audit procedures related to the Company’s revenue recognition for these customer agreements included the following: Income Taxes — Uncertain Tax Positions — Refer to Note 12 to the financial statements. As one of the two largest providers of cloud computing at scale, we believe we work from a position of strength. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Time: 8:00 a.m. Pacific Time With significant input from employees and leaders who are members of the Black and African American community, our senior leadership team and board of directors has developed a set of actions to help improve the lived experience at Microsoft and drive change in the communities in which we live and work. With GitHub, more than 50 million developers across 3 million organizations, including the majority of the Fortune 50, are able to collaborate and build software together. Gross margin increased $10.9 billion or 15%, driven by growth across each of our segments. In the past, option and forward contracts were used to hedge a portion of forecasted international revenue and were designated as cash flow hedging instruments. The allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. Padmasree Warrior 2 Inventories are stated at average cost, subject to the lower of cost or net realizable value. Unearned revenue comprises mainly unearned revenue related to volume licensing programs, which may include Software Assurance (“SA”) and cloud services. Azure Cognitive Services makes it easier to build applications that see, hear, speak, search, understand, and accelerate decision-making. Microsoft said Azure will continue to drive revenue growth. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development. This global approach helps us remain competitive in local markets and enables us to continue to attract top talent from across the world. Costs incurred internally in researching and developing a computer software product are charged to expense until technological feasibility has been established for the product. We think about the future of work through three vectors. Localizing a product may require modifying the user interface, altering dialog boxes, and translating text. Project xCloud is Microsoft’s game streaming technology that is complementary to our console hardware and will give fans the ultimate choice to play the games they want, with the people they want, on the devices they want. And, we are pushing the bounds of how AI can generalize learning beyond narrow domains, collaborating with OpenAI on a supercomputing platform to train and run AI models of unprecedented scale. Certain of our employees are subject to collective bargaining agreements. These metrics provide strategic product insights which allow us to assess the performance across our commercial and consumer businesses. RSUs generally vest ratably over a service period of four years. Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, VMware, and open source offerings. This includes the server platform, database, business intelligence, storage, management and operations, virtualization, service-oriented architecture platform, security, and identity software. Archives of these events are also available. Its professional social network LinkedIn and search engine Bing have both been criticized for censoring content considered sensitive by the Chinese government. MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying Notes to Financial Statements. The increase in our effective tax rate for fiscal year 2020 compared to fiscal year 2019 was primarily due to a $2.6 billion net income tax benefit in the fourth quarter of fiscal year 2019 related to intangible property transfers. As Microsoft CEO Satya Nadella announced at the Microsoft Tech Summit 2017 in November, Microsoft Azure operated by 21Vianet will triple its capacity in China in the first half of 2018. In these instances, we may use information such as the size of the customer and geographic region in determining the SSP. Still, Walmart managed to reclaim the title of the world's largest company by revenue—for the eighth consecutive year. Business, and Chief Marketing Officer, Amy E. Hood We also sell commercial and consumer products and services directly to customers, such as cloud services, search, and gaming, through our digital marketplaces and online stores. Certain of our counterparty agreements for derivative instruments contain provisions that require our issued and outstanding long-term unsecured debt to maintain an investment grade credit rating and require us to maintain minimum liquidity of $1.0 billion. Xbox Live and our cloud gaming services face competition from various online gaming ecosystems and game streaming services, including those operated by Amazon, Apple, Facebook, Google, and Tencent. Productivity and Business Processes revenue increased, driven by Office and LinkedIn. Our collective opportunity is to channel this intelligent cloud and intelligent edge era into tech intensity for every organization on the planet. This pricing methodology applies to our Level 1 investments, such as U.S. government securities, common and preferred stock, and mutual funds. The remaining transition tax of $15.2 billion is payable over the next six years with a final payment in fiscal year 2026. We’re committed to working across the public and private sectors to foster partnerships and solutions that will have lasting impact and redefine what “achieve more” means for the world. While these programs may differ in various parts of the world, generally they include those discussed below. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. They enable people, organizations, and entire industries to not only thrive but reimagine the world. You can see shares up just around 1%. Refer to Note 16 – Stockholders’ Equity of the Notes to Financial Statements for further discussion. Gross margin increased $4.8 billion or 22%, driven by growth in server products and cloud services revenue and cloud services scale and efficiencies. In August 2017, the Financial Accounting Standards Board (“FASB”) issued new guidance related to accounting for hedging activities. We selected a sample of customer agreements and performed the following procedures: Obtained and read contract source documents for each selection, including master agreements, and other documents that were part of the agreement. Server products and cloud services revenue increased $8.8 billion or 27%, driven by Azure. Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the period. Credit losses relating to available-for-sale debt securities will also be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. Highlights from fiscal year 2020 compared with fiscal year 2019 included: Our industry is dynamic and highly competitive, with frequent changes in both technologies and business models. We evaluate our reporting units on an annual basis and, if necessary, reassign goodwill using a relative fair value allocation approach. Organizations of all sizes have digitized business-critical functions, redefining what they can expect from their business applications. On October 25, 2018, we acquired GitHub, Inc. (“GitHub”), a software development platform, in a $7.5 billion stock transaction (inclusive of total cash payments of $1.3 billion in respect of vested GitHub equity awards and an indemnity escrow). These manufacturers, many of which are also current or potential partners and customers, include Apple and our Windows OEMs. Strengthening of the U.S. dollar relative to certain foreign currencies reduced reported revenue and expenses from our international operations in fiscal year 2020. We measure the fair value of PSUs using a Monte Carlo valuation model. Information on our business strategies, financial results, and metrics for investors. It is easy to fall prey to pessimism, or the sense that we individually or as a company can’t make a difference. The S&P 500 and Dow Jones Industrial Average set records as . We strive to make computing more personal by putting users at the core of the experience, enabling them to interact with technology in more intuitive, engaging, and dynamic ways. Agence France-Presse. Windows faces competition from various software products and from alternative platforms and devices, mainly from Apple and Google. We distribute our retail packaged products primarily through independent non-exclusive distributors, authorized replicators, resellers, and retail outlets. New Microsoft Edge—with enterprise-class security—protects individuals’ privacy online and makes it easier to find information at work. Our segments provide management with a comprehensive financial view of our key businesses. Additionally, we have agreed to cover damages resulting from breaches of certain security and privacy commitments in our cloud business. We have the opportunity to redefine what customers and partners can expect and are working to deliver new solutions that reflect the best of Microsoft. The proceeds of these issuances were or will be used for general corporate purposes, which may include, among other things, funding for working capital, capital expenditures, repurchases of capital stock, acquisitions, and repayment of existing debt. Project xCloud will provide players with more choice over how and where they play. We continue to open new opportunities for gamers to engage both on- and off-console with both the launch of Project xCloud, our game streaming service, and continued investment in gaming hardware. Microsoft is a technology company whose mission is to empower every person and every organization on the planet to achieve more. Net realizable value is the estimated selling price less estimated costs of completion, disposal, and transportation. Equity investments without readily determinable fair values are written down to fair value if a qualitative assessment indicates that the investment is impaired and the fair value of the investment is less than carrying value. Found inside – Page 27It established a representative office in 1992 and then set up a wholly owned subsidiary, Microsoft (China), in 1995. ... The problem was how to translate that market share into revenue, since everybody seemingly used pirated versions. On September 18, 2019, our Board of Directors approved a share repurchase program authorizing up to $40.0 billion in share repurchases. Build the Intelligent Cloud and Intelligent Edge Platform. Catch up on the financial results and analysis. Our fixed-income investments are exposed to interest rate risk and credit risk. Operating income increased $3.3 billion or 25%, including an unfavorable foreign currency impact of 2%. We are broadening our approach to how we think about gaming end-to-end, from the way games are created and distributed to how they are played and viewed across PC, console, and mobile. Nearly 52% of Microsoft's total revenue in FY Q2 2020 came from the United States. Dynamics products and cloud services revenue increased 14%, driven by Dynamics 365 growth of 42%. The recast of these prior period amounts had no impact on our consolidated balance sheets, consolidated income statements, or net cash from or used in operating, financing, or investing on our consolidated cash flows statements. Revenue Recognition — Refer to Note 1 to the financial statements. Gains and losses representing hedge components excluded from the assessment of effectiveness are recognized in earnings. In addition, certain costs incurred at a corporate level that are identifiable and that benefit our segments are allocated to them. Fiscal year 2019 net income included a $2.6 billion net income tax benefit related to intangible property transfers and a $157 million net charge related to the enactment of the TCJA, which together resulted in an increase to net income and diluted EPS of $2.4 billion and $0.31, respectively. Windows Commercial products and cloud services revenue increased 14%, driven by an increased mix of multi-year agreements that carry higher in-quarter revenue recognition. President and Chief Executive In fiscal year 2020, our foreign regional operating centers in Ireland and Puerto Rico, which are taxed at rates lower than the U.S. rate, generated 86% of our foreign income before tax. Amid this rapid change, we delivered strong results: Our commercial cloud surpassed $50 billion in revenue for the first time—up 36 percent year-over-year. These obligations did not have a material impact in our consolidated financial statements during the periods presented. Assets are not allocated to segments for internal reporting presentations. Many of our shareholders are increasingly focused on the importance of the effective engagement and action on ESG topics. Non-GAAP net income and diluted EPS are non-GAAP financial measures which exclude the net tax impact of transfer of intangible properties in fiscal year 2019 and the net tax impact of the TCJA in fiscal years 2019 and 2018. Lease expense for lease payments is recognized on a straight-line basis over the lease term. We provide details on our CSR Reports Hub covering everything from law enforcement access to data, to environmental data, details on our political activities, workforce demographics, and human rights. GitHub is reported as part of our Intelligent Cloud segment. Changes in operating assets and liabilities: Repayments of short-term debt, maturities of 90 days or less, net, Acquisition of companies, net of cash acquired, and purchases of intangible and other assets, Effect of foreign exchange rates on cash and cash equivalents, Cash and cash equivalents, beginning of period, Accounts receivable, net of allowance for doubtful accounts, Net income available for common shareholders (A), Weighted average outstanding shares of common stock (B), Common stock and common stock equivalents (C), Realized gains from sales of available-for-sale securities, Realized losses from sales of available-for-sale securities, Other-than-temporary impairments of investments, Net unrealized gains on investments still held, Gross amounts of derivatives offset in the balance sheet, Amount reclassified from accumulated other comprehensive income, Foreign-derived intangible income deduction, State income taxes, net of federal benefit, Excess tax benefits relating to stock-based compensation, Deferred income tax assets, net of valuation allowance, Book/tax basis differences in investments and debt, Long-term deferred income tax liabilities, Increases for tax positions related to the current year, Increases for tax positions related to prior years, Decreases for tax positions related to prior years, Decreases due to lapsed statutes of limitations. How the Critical Audit Matter Was Addressed in the Audit. Gross margin percentage increased slightly, due to gross margin percentage improvement in Azure, offset in part by an increased mix of cloud offerings. We test goodwill for impairment annually on May 1 at the reporting unit level, primarily using a discounted cash flow methodology with a peer-based, risk-adjusted weighted average cost of capital. Windows OEM non-Pro revenue declined 7%, below the consumer PC market, driven by continued pressure in the entry level category. We’ve acted as digital first responders to the world’s first responders, supporting those on the front lines, from healthcare, to education, to public sector, to critical manufacturing, grocery, and retail. As of June 30, 2020 and 2019, accumulated goodwill impairment was $11.3 billion. Our competitors are developing new software and devices, while also deploying competing cloud-based services for consumers and businesses. The competitive position of Linux has also benefited from the large number of compatible applications now produced by many commercial and non-commercial software developers. LinkedIn revenue increased $1.5 billion or 28%, driven by growth across each line of business. Under the Executive Incentive Plan, the Compensation Committee approves stock awards to executive officers and certain senior executives. We are also working to expand broadband access to 40 million unserved and underserved people in rural areas globally, and to 3 million people in unserved and rural communities in the US by July 2022. $ + tax Without trust, none of our progress is possible. Executive Vice President, Chief Windows, including Windows OEM licensing (“Windows OEM”) and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows IoT; and MSN advertising. We believe that our audits provide a reasonable basis for our opinion. Interest expense decreased primarily driven by a decrease in outstanding long-term debt due to debt maturities, offset in part by higher finance lease expense. Under the Open agreements, organizations purchase perpetual licenses and SA is optional. Its revenue has been increasing by an average of about 13% annually over the past five years. Cloud services, which allow customers to use hosted software over the contract period without taking possession of the software, are provided on either a subscription or consumption basis. The senior executive did not disclose the specific revenue growth target for its cloud computing business in China. The US tech titan said it made a profit of $20.5 billion in the recently ended quarter on revenue that climbed to $45.3 billion in a 22 percent increase from the same quarter last year. Azure's growth rate is the best direct measure of competition with rivals such as AWS and Google Cloud as Microsoft does not break out revenue from the cloud-computing unit. As of June 30, 2020, we employed approximately 163,000 people on a full-time basis, 96,000 in the U.S. and 67,000 internationally. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2020, based on the criteria established in Internal Control – Integrated Framework (2013) issued by COSO. We record financing receivables when we offer certain of our customers the option to acquire our software products and services offerings through a financing program in a limited number of countries. Cost of revenue increased $3.2 billion or 7%, driven by growth in commercial cloud. Our customers see this urgent need and are looking to us—in partnership with them—to take action. Over the next decade, technology spending as a percentage of gross domestic product is projected to double. In middleware, we compete against Java vendors. Enterprise Services, including Premier Support Services and Microsoft Consulting Services. We generate revenue by offering a wide range of cloud-based and other services to people and businesses; licensing and supporting an array of software products; designing, manufacturing, and selling devices; and delivering relevant online advertising to a global audience. Found inside – Page 43Exhibit 9 Microsoft and Lotus Financials (in $ millions) 1985 1986 1987 1988 1989 1990 1991 1992 1993 Microsoft" Net revenue $140 $198 $346 $591 $804 $1,183 $1,843 $2,759 $3,753 Cost of revenue 30 41 74 148 204 253 363 466 633 Research ... Office Consumer products and cloud services revenue increased $286 million or 7%, driven by Microsoft 365 Consumer, due to recurring subscription revenue and transactional strength in Japan. As of June 30, 2020, the primary unresolved issues for the IRS audits relate to transfer pricing, which could have a material impact in our consolidated financial statements when the matters are resolved. We protect our intellectual property investments in a variety of ways. The federal and state net operating loss carryforwards will expire in various years from fiscal 2021 through 2040, if not utilized. The past six months have served as the largest at-scale experiment we’ve ever seen for remote work. The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices. Other news and announcements that we may post from time to time that investors might find useful or interesting. Announcements of investor conferences, speeches, and events at which our executives talk about our product, service, and competitive strategies. We disclose metrics to enable investors to evaluate progress against our ambitions, provide transparency into performance trends, and reflect the continued evolution of our products and services. We also compete with other providers of entertainment services such as Netflix and Hulu. Financial Instruments – Targeted Improvements to Accounting for Hedging Activities. In June 2016, the FASB issued a new standard to replace the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. This year, we went further to give developers new tools to power remote development, productivity, and collaboration, wherever they are. Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Shares of our common stock may be purchased by employees at three-month intervals at 90% of the fair market value on the last trading day of each three-month period. The Company designs and maintains accounting and internal control systems to provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing consolidated financial statements and maintaining accountability for assets. Office Consumer revenue is mainly affected by the percentage of customers that buy Office with their new devices and the continued shift from Office licensed on-premises to Microsoft 365 Consumer subscriptions. The second broad category of OEMs are system builders consisting of lower-volume PC manufacturers, which source Microsoft software for pre-installation and local redistribution primarily through the Microsoft distributor channel rather than through a direct agreement or relationship with Microsoft. Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of June 30, 2020. Windows OEM revenue increased 4%. We have paid transition tax of $3.2 billion, which included $1.2 billion for fiscal year 2020. This starts with our own culture at Microsoft, extends to how we engage our suppliers and partners to create change, and includes strengthening our communities. Gross margin percentage increased slightly, due to gross margin percentage improvement in Azure, offset in part by an increased mix of cloud offerings. Judgment is required in determining when technological feasibility of a product is established. Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors, or when a broker price is more reflective of fair values in the market in which the investment trades. Morgan Stanley has high conviction these stocks will gain on earnings. Operating expenses increased $2.5 billion or 19%, driven by investments in Azure. A hearing is expected to occur in the second quarter of fiscal year 2021. The Independent Software Vendor Royalty program enables partners to integrate Microsoft products into other applications and then license the unified business solution to their end users. Since buying LinkedIn in a $26 billion deal back 2016, Microsoft's focus has been growing the business social platform. We recently added several new products and accessories into the Surface family, including Surface Book 3 and Surface Go 2. Gaming is the most expansive category in the entertainment industry. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. We also license standalone and software development lifecycle tools for software architects, developers, testers, and project managers. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand the results of operations and financial condition of Microsoft Corporation. Found inside – Page 142At Microsoft's headquarters, Hu exclaimed, “Because you, Mr. Bill Gates, are a friend of China, I'm a friend of Microsoft. ... Revenue from a state-owned enterprise accrued to the national or provincial government and to the ministry to ... But helplessness is corrosive to hope, and hope plus work is what is required. Over 57 million business and 120,000 schools have LinkedIn accounts. President and Chief Executive Shares of common stock outstanding were as follows: The following table summarizes the changes in accumulated other comprehensive income (loss) by component: We grant stock-based compensation to employees and directors. Microsoft’s Board of Directors provides insight, feedback, and oversight across a broad range of environmental and social matters. Cost of revenue includes: manufacturing and distribution costs for products sold and programs licensed; operating costs related to product support service centers and product distribution centers; costs incurred to include software on PCs sold by original equipment manufacturers (“OEM”), to drive traffic to our websites, and to acquire online advertising space; costs incurred to support and maintain online products and services, including datacenter costs and royalties; warranty costs; inventory valuation adjustments; costs associated with the delivery of consulting services; and the amortization of capitalized software development costs. Teri L. List-Stoll 1,3 For us, “achieve more” has four important attributes: First, we must ensure that the economic growth we drive is inclusive. The company beat Wall Street expectations for its fist quarter ended Sept. 30, with pandemic-induced demand for the software giant's cloud-based . Boeing took a dive on . Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Our commercial business primarily consists of Server products and cloud services, Office Commercial, Windows Commercial, the commercial portion of LinkedIn, Enterprise Services, and Dynamics. The United States has the most LinkedIn members, followed by India and China. Our innovation helps every developer be an AI developer, with approachable new tools from Azure Machine Learning Studio for creating simple machine learning models, to the powerful Azure Machine Learning Workbench for the most advanced AI modeling and data science.

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