UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`
`FORM 10-K
`
`☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`
`For the Fiscal Year Ended June 30, 2019
`
`OR
`
`☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
`1934
`
`For the Transition Period From
`
` to
`
`Commission File Number 001-37845
`
`MICROSOFT CORPORATION
`
`WASHINGTON
`(STATE OF INCORPORATION)
`
`91-1144442
`(I.R.S. ID)
`
`ONE MICROSOFT WAY, REDMOND, WASHINGTON 98052-6399
`(425) 882-8080
`www.microsoft.com/investor
`
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of each class
`
`Trading Symbol
`
`Name of exchange on which registered
`
`COMMON STOCK, $0.00000625 par value per share
`2.125% Notes due 2021
`3.125% Notes due 2028
`2.625% Notes due 2033
`
`Securities registered pursuant to Section 12(g) of the Act:
`
`NONE
`
`MSFT
`MSFT
`MSFT
`MSFT
`
`NASDAQ
`New York Stock Exchange
`New York Stock Exchange
`New York Stock Exchange
`
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
`
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
`Act. Yes ☐ No ☒
`
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
`Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) , and (2) has
`been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
`
`Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
`405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
`submit such files). Yes ☒ No ☐
`
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
`company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”
`and “emerging growth company” in Rule 12b-2 of the Exchange Act.
`
`Large accelerated filer ☒
`Non-accelerated filer ☐
`
`Accelerated filer ☐
`Smaller reporting company ☐
`Emerging growth company ☐
`
`If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
`with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
`
`Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
`
`As of December 31, 2018, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $769.6
`billion based on the closing sale price as reported on the NASDAQ National Market System. As of July 29, 2019, there were 7,635,409,400
`shares of common stock outstanding.
`
`DOCUMENTS INCORPORATED BY REFERENCE
`
`Portions of the definitive Proxy Statement to be delivered to shareholders in connection with the Annual Meeting of Shareholders to be held on
`December 4, 2019 are incorporated by reference into Part III.
`
`Exhibit 2017
`
`

`

`MICROSOFT CORPORATION
`FORM 10-K
`For the Fiscal Year Ended June 30, 2019
`INDEX
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`Page
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`PART I
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`PART II
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` Item 1.
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` Item 1A.
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` Item 1B.
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` Item 2.
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` Item 3.
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` Item 4.
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`Item 5.
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` Item 6.
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` Item 7.
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` Item 7A.
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` Item 8.
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` Item 9.
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` Item 9A.
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` Item 9B.
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`PART III
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` Item 10.
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` Item 11.
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`Item 12.
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` Item 13.
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` Item 14.
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`PART IV
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` Item 15.
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` Item 16.
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` Business
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` Executive Officers of the Registrant
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` Risk Factors
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` Unresolved Staff Comments
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` Properties
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` Legal Proceedings
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` Mine Safety Disclosures
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`3
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` 14
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` 16
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` 27
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` 27
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` 27
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` 27
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`Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer
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`Purchases of Equity Securities
` 28
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` Selected Financial Data
` 29
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` Management’s Discussion and Analysis of Financial Condition and Results of Operations 30
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` Quantitative and Qualitative Disclosures about Market Risk
` 48
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` Financial Statements and Supplementary Data
` 49
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` Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 94
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` Controls and Procedures
` 94
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` Report of Management on Internal Control over Financial Reporting
` 94
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` Report of Independent Registered Public Accounting Firm
` 95
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` Other Information
` 96
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` Directors, Executive Officers and Corporate Governance
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` Executive Compensation
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` 96
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` 96
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`Security Ownership of Certain Beneficial Owners and Management and Related
`Stockholder Matters
` 96
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` 96
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` 96
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` Certain Relationships and Related Transactions, and Director Independence
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` Principal Accounting Fees and Services
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` Exhibits, Financial Statement Schedules
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` Form 10-K Summary
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` Signatures
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`2
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` 97
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` 103
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` 104
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`

`

`
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`PART I
`Item 1
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`Note About Forward-Looking Statements
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`This report includes estimates, projections, statements relating to our business plans, objectives, and expected
`operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform
`Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.
`Forward-looking statements may appear throughout this report, including the following sections: “Business” (Part I,
`Item 1 of this Form 10-K), “Risk Factors” (Part I, Item 1A of this Form 10-K), and “Management’s Discussion and
`Analysis of Financial Condition and Results of Operations” (Part II, Item 7 of this Form 10-K). These forward-looking
`statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,”
`“strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and
`similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject
`to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that
`could cause actual results and events to differ materially in “Risk Factors,” “Management’s Discussion and Analysis of
`Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk” (Part
`II, Item 7A of this Form 10-K). Readers are cautioned not to place undue reliance on forward-looking statements, which
`speak only as of the date they are made. We undertake no obligation to update or revise publicly any forward-looking
`statements, whether because of new information, future events, or otherwise.
`
`PART I
`
`ITEM 1. BUSINESS
`
`GENERAL
`
`Embracing Our Future
`
`Microsoft is a technology company whose mission is to empower every person and every organization on the planet
`to achieve more. We strive to create local opportunity, growth, and impact in every country around the world. Our
`platforms and tools help drive small business productivity, large business competitiveness, and public-sector efficiency.
`They also support new startups, improve educational and health outcomes, and empower human ingenuity.
`
`We continue to transform our business to lead in the new era of the intelligent cloud and intelligent edge. We bring
`technology and products together into experiences and solutions that unlock value for our customers. In this next phase
`of innovation, computing is more powerful and ubiquitous from the cloud to the edge. Artificial intelligence (“AI”)
`capabilities are rapidly advancing, fueled by data and knowledge of the world. Physical and virtual worlds are coming
`together with the Internet of Things (“IoT”) and mixed reality to create richer experiences that understand the context
`surrounding people, the things they use, the places they go, and their activities and relationships. A person’s
`experience with technology spans a multitude of devices and has become increasingly more natural and multi-sensory
`with voice, ink, and gaze interactions.
`
`What We Offer
`
`Founded in 1975, we develop and support software, services, devices, and solutions that deliver new value for
`customers and help people and businesses realize their full potential.
`
`We offer an array of services, including cloud-based solutions that provide customers with software, services,
`platforms, and content, and we provide solution support and consulting services. We also deliver relevant online
`advertising to a global audience.
`
`Our products include operating systems; cross-device productivity applications; server applications; business solution
`applications; desktop and server management tools; software development tools; and video games. We also design,
`manufacture, and sell devices, including PCs, tablets, gaming and entertainment consoles, other intelligent devices,
`and related accessories.
`
`3
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`

`

`
`The Ambitions That Drive Us
`
`PART I
`Item 1
`
`To achieve our vision, our research and development efforts focus on three interconnected ambitions:
`
`• Reinvent productivity and business processes.
`
`• Build the intelligent cloud and intelligent edge platform.
`
`• Create more personal computing.
`
`Reinvent Productivity and Business Processes
`
`We are in a unique position to empower people and organizations to succeed in a rapidly evolving workplace.
`Computing experiences are evolving, no longer bound to one device at a time. Instead, experiences are expanding to
`many devices as people move from home to work to on the go. These modern needs, habits, and expectations of our
`customers are motivating us to bring Microsoft Office 365, Windows platform, devices, including Microsoft Surface,
`and third-party applications into a more cohesive Microsoft 365 experience.
`
`Our growth depends on securely delivering continuous innovation and advancing our leading productivity and
`collaboration tools and services, including Office, Microsoft Dynamics, and LinkedIn. Microsoft 365 brings together
`Office 365, Windows 10, and Enterprise Mobility + Security to help organizations empower their employees with AI-
`backed tools that unlock creativity, increase teamwork, and fuel innovation, all the while enabling compliance
`coverage and data protection. Microsoft Teams is core to our vision for the modern workplace as the digital hub that
`creates a single canvas for teamwork, conversations, meetings, and content. Microsoft Relationship Sales solution
`brings together LinkedIn Sales Navigator and Dynamics to transform business to business sales through social
`selling. Dynamics 365 for Talent with LinkedIn Recruiter and Learning gives human resource professionals a
`complete solution to compete for talent. Microsoft Power Platform empowers employees to build custom applications,
`automate workflow, and analyze data no matter their technical expertise.
`
`These scenarios represent a move to unlock creativity and inspire teamwork, while simplifying security and
`management. Organizations of all sizes can now digitize business-critical functions, redefining what customers can
`expect from their business applications. This creates an opportunity for us to reach new customers and increase usage
`and engagement with existing customers.
`
`Build the Intelligent Cloud and Intelligent Edge Platform
`
`Companies are looking to use digital technology to fundamentally reimagine how they empower their employees,
`engage customers, optimize their operations, and change the very core of their products and services. Partnering with
`organizations on their digital transformation is one of our largest opportunities and we are uniquely positioned to
`become the strategic digital transformation platform and partner of choice.
`
`Our strategy requires continued investment in datacenters and other hybrid and edge infrastructure to support our
`services. Microsoft Azure is a trusted cloud with comprehensive compliance coverage and AI-based security built in.
`
`Our cloud business benefits from three economies of scale: datacenters that deploy computational resources at
`significantly lower cost per unit than smaller ones; datacenters that coordinate and aggregate diverse customer,
`geographic, and application demand patterns, improving the utilization of computing, storage, and network resources;
`and multi-tenancy locations that lower application maintenance labor costs.
`
`As one of the two largest providers of cloud computing at scale, we believe we work from a position of strength. Being
`a global-scale cloud, Azure uniquely offers hybrid consistency, developer productivity, AI capabilities, and trusted
`security and compliance. We see more emerging use cases and needs for compute and security at the edge and are
`accelerating our innovation across the spectrum of intelligent edge devices, from IoT sensors to gateway devices and
`edge hardware to build, manage, and secure edge workloads. With Azure Stack, organizations can extend Azure into
`their own datacenters to create a consistent stack across the public cloud and the intelligent edge. Our hybrid
`infrastructure consistency spans identity, data, compute, management, and security, helping to support the real-world
`needs and evolving regulatory requirements of commercial customers and enterprises. We are accelerating our
`development of mixed reality solutions, with new Azure services and devices such as HoloLens 2. The opportunity to
`merge the physical and digital worlds, when combined with the power of Azure cloud services, unlocks the potential
`for entirely new workloads which we believe will shape the next era of computing.
`
`4
`
`

`

`PART I
`Item 1
`
`
`The ability to convert data into AI drives our competitive advantage. Azure SQL Database makes it possible for
`customers to take Microsoft SQL Server from their on-premises datacenter to a fully managed instance in the cloud to
`utilize built-in AI. We are accelerating adoption of AI innovations from research to products. 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.
`
`On October 25, 2018, we completed our acquisition of GitHub, Inc. (“GitHub”), a service that millions of developers
`around the world rely on to write code together. The acquisition is expected to empower developers to achieve more
`at every stage of the development lifecycle, accelerate enterprise use of GitHub, and bring Microsoft’s developer tools
`and services to new audiences.
`
`Create More Personal Computing
`
`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. In support of this, we are bringing Office, Windows,
`and devices together for an enhanced and more cohesive customer experience.
`
`Windows 10 continues to gain traction in the enterprise as the most secure and productive operating system. It
`empowers people with AI-first interfaces ranging from voice-activated commands through Cortana, inking, immersive
`3D content storytelling, and mixed reality experiences. Windows also plays a critical role in fueling our cloud business
`and Microsoft 365 strategy, and it powers the growing range of devices on the “intelligent edge.” Our ambition for
`Windows 10 monetization opportunities includes gaming, services, subscriptions, and search advertising.
`
`We are committed to designing and marketing first-party devices to help drive innovation, create new device categories,
`and stimulate demand in the Windows ecosystem. We recently expanded our Surface family of devices with the
`Surface Hub 2S, which brings together Microsoft Teams, Windows, and Surface hardware to power teamwork for
`organizations.
`
`We are mobilizing to pursue our expansive opportunity in the gaming industry, 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.
`We have a strong position with our Xbox One console, our large and growing highly engaged community of gamers on
`Xbox Live, and with Windows 10, the most popular operating system for PC gamers. We will continue to connect our
`gaming assets across PC, console, and mobile, and work to grow and engage the Xbox Live member network more
`deeply and frequently with services like Mixer and Xbox Game Pass. Our approach is to enable gamers to play the
`games they want, with the people they want, on the devices they want.
`
`Our Future Opportunity
`
`Customers are looking to us to accelerate their own digital transformations and to unlock new opportunity in this era of
`intelligent cloud and intelligent edge. We continue to develop complete, intelligent solutions for our customers that
`empower users to be creative and work together while safeguarding businesses and simplifying IT management. Our
`goal is to lead the industry in several distinct areas of technology over the long-term, which we expect will translate to
`sustained growth. We are investing significant resources in:
`
`• Transforming the workplace to deliver new modern, modular business applications to improve how people
`communicate, collaborate, learn, work, play, and interact with one another.
`
`• Building and running cloud-based services in ways that unleash new experiences and opportunities for
`businesses and individuals.
`
`• Applying AI to drive insights and act on our customer’s behalf by understanding and interpreting their needs
`using natural methods of communication.
`
`• Using Windows to fuel our cloud business and Microsoft 365 strategy, and to develop new categories of
`devices – both our own and third-party – on the intelligent edge.
`
`•
`
`Inventing new gaming experiences that bring people together around their shared love for games on any
`devices and pushing the boundaries of innovation with console and PC gaming by creating the next wave
`of entertainment.
`
`5
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`

`

`
`Our future growth depends on our ability to transcend current product category definitions, business models, and sales
`motions. 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.
`
`PART I
`Item 1
`
`OPERATING SEGMENTS
`
`We operate our business and report our financial performance using three segments: Productivity and Business
`Processes, Intelligent Cloud, and More Personal Computing. Our segments provide management with a
`comprehensive financial view of our key businesses. The segments enable the alignment of strategies and objectives
`across the development, sales, marketing, and services organizations, and they provide a framework for timely and
`rational allocation of resources within businesses.
`
`Additional information on our operating segments and geographic and product information is contained in Note 20 –
`Segment Information and Geographic Data of the Notes to Financial Statements (Part II, Item 8 of this Form 10-K).
`
`Our reportable segments are described below.
`
`Productivity and Business Processes
`
`Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity,
`communication, and information services, spanning a variety of devices and platforms. This segment primarily
`comprises:
`
`• Office Commercial, including Office 365 subscriptions and Office licensed on-premises, comprising Office,
`Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business,
`and related Client Access Licenses (“CALs”).
`
`• Office Consumer, including Office 365 subscriptions and Office licensed on-premises, and Office Consumer
`Services, including Skype, Outlook.com, and OneDrive.
`
`•
`
`LinkedIn, including Talent Solutions, Marketing Solutions, and Premium Subscriptions.
`
`• Dynamics business solutions, including Dynamics 365, a set of cloud-based applications across ERP and
`CRM, Dynamics ERP on-premises, and Dynamics CRM on-premises.
`
`Office Commercial
`
`Office Commercial is designed to increase personal, team, and organizational productivity through a range of products
`and services. Growth depends on our ability to reach new users in new markets such as first-line workers, small and
`medium businesses, and growth markets, as well as add value to our core product and service offerings to span
`productivity categories such as communication, collaboration, analytics, security, and compliance. Office Commercial
`revenue is mainly affected by a combination of continued installed base growth and average revenue per user
`expansion, as well as the continued shift from Office licensed on-premises to Office 365. CALs provide certain Office
`Commercial products and services with access rights to our server products and CAL revenue is reported with the
`associated Office products and services.
`
`Office Consumer
`
`Office Consumer is designed to increase personal productivity through a range of products and services. Growth
`depends on our ability to reach new users, add value to our core product set, and continue to expand our product and
`service offerings into new markets. 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 Office 365. Office
`Consumer Services revenue is mainly affected by the demand for communication and storage through Skype,
`Outlook.com, and OneDrive, which is largely driven by subscriptions, advertising, and the sale of minutes.
`
`LinkedIn
`
`LinkedIn connects the world's professionals to make them more productive and successful, and is the world's largest
`professional network on the Internet. LinkedIn offers services that can be used by customers to transform the way they
`hire, market, sell, and learn. In addition to LinkedIn’s free services, LinkedIn offers three categories of monetized
`solutions: Talent Solutions, Marketing Solutions, and Premium Subscriptions, which includes Sales Solutions. Talent
`Solutions is comprised of two elements: Hiring, and Learning and Development. Hiring provides services to recruiters
`
`6
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`

`

`PART I
`Item 1
`
`
`that enable them to attract, recruit, and hire talent. Learning and Development provides subscriptions to enterprises
`and individuals to access online learning content. Marketing Solutions enables companies to advertise to LinkedIn’s
`member base. Premium Subscriptions enables professionals to manage their professional identity, grow their network,
`and connect with talent through additional services like premium search. Premium Subscriptions also includes Sales
`Solutions, which helps sales professionals find, qualify, and create sales opportunities and accelerate social selling
`capabilities. Growth will depend on our ability to increase the number of LinkedIn members and our ability to continue
`offering services that provide value for our members and increase their engagement. LinkedIn revenue is mainly
`affected by demand from enterprises and professional organizations for subscriptions to Talent Solutions and Premium
`Subscriptions offerings, as well as member engagement and the quality of the sponsored content delivered to those
`members to drive Marketing Solutions.
`
`On November 16, 2018, LinkedIn acquired Glint, an employee engagement platform, to expand its Talent Solutions
`offerings.
`
`Dynamics
`
`Dynamics provides cloud-based and on-premises business solutions for financial management, enterprise resource
`planning (“ERP”), customer relationship management (“CRM”), supply chain management, and analytics applications
`for small and medium businesses, large organizations, and divisions of global enterprises. Dynamics revenue is driven
`by the number of users licensed, expansion of average revenue per user, and the continued shift to Dynamics 365, a
`unified set of cloud-based intelligent business applications.
`
`Competition
`
`Competitors to Office include software and global application vendors, such as Apple, Cisco Systems, Facebook,
`Google, IBM, Okta, Proofpoint, Slack, Symantec, Zoom, and numerous web-based and mobile application competitors
`as well as local application developers. Apple distributes versions of its pre-installed application software, such as
`email and calendar products, through its PCs, tablets, and phones. Cisco Systems is using its position in enterprise
`communications equipment to grow its unified communications business. Google provides a hosted messaging and
`productivity suite. Slack provides teamwork and collaboration software. Zoom offers videoconferencing and cloud
`phone solutions. 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. Okta, Proofpoint, and Symantec provide
`security solutions across email security, information protection, identity, and governance. Web-based offerings
`competing with individual applications have also positioned themselves as alternatives to our products and services.
`We compete by providing powerful, flexible, secure, integrated industry-specific, and easy-to-use productivity and
`collaboration tools and services that create comprehensive solutions and work well with technologies our customers
`already have both on-premises or in the cloud.
`
`LinkedIn faces competition from online recruiting companies, talent management companies, and larger companies
`that are focusing on talent management and human resource services; job boards; traditional recruiting firms; and
`companies that provide learning and development products and services. Marketing Solutions competes with online
`and offline outlets that generate revenue from advertisers and marketers.
`
`Dynamics competes with vendors such as Infor, NetSuite, Oracle, Salesforce.com, SAP, and The Sage Group to
`provide cloud-based and on-premise business solutions for small, medium, and large organizations.
`
`Intelligent Cloud
`
`Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can
`power modern business. This segment primarily comprises:
`
`• Server products and cloud services, including SQL Server, Windows Server, Visual Studio, System Center,
`and related CALs, GitHub, and Azure.
`
`• Enterprise Services, including Premier Support Services and Microsoft Consulting Services.
`
`Server Products and Cloud Services
`
`Our server products are designed to make IT professionals, developers, and their systems more productive and
`efficient. Server software is integrated server infrastructure and middleware designed to support software applications
`built on the Windows Server operating system. This includes the server platform, database, business intelligence,
`
`7
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`

`

`PART I
`Item 1
`
`
`storage, management and operations, virtualization, service-oriented architecture platform, security, and identity
`software. We also license standalone and software development lifecycle tools for software architects, developers,
`testers, and project managers. GitHub provides a collaboration platform and code hosting service for developers.
`Server products revenue is mainly affected by purchases through volume licensing programs, licenses sold to original
`equipment manufacturers (“OEM”), and retail packaged products. CALs provide access rights to certain server
`products, including SQL Server and Windows Server, and revenue is reported along with the associated server product.
`
`Azure is a comprehensive set of cloud services that offer developers, IT professionals, and enterprises freedom to
`build, deploy, and manage applications on any platform or device. Customers can use Azure through our global network
`of datacenters for computing, networking, storage, mobile and web application services, AI, IoT, cognitive services,
`and machine learning. Azure enables customers to devote more resources to development and use of applications
`that benefit their organizations, rather than managing on-premises hardware and software. Azure revenue is mainly
`affected by infrastructure-as-a-service and platform-as-a-service consumption-based services, and per user-based
`services such as Enterprise Mobility + Security.
`
`Enterprise Services
`
`Enterprise Services, including Premier Support Services and Microsoft Consulting Services, assist customers in
`developing, deploying, and managing Microsoft server and desktop solutions and provide training and certification to
`developers and IT professionals on various Microsoft products.
`
`Competition
`
`Our server products face competition from a wide variety of server operating systems and applications offered by
`companies with a range of market approaches. Vertically integrated computer manufacturers such as Hewlett-Packard,
`IBM, and Oracle offer their own versions of the Unix operating system preinstalled on server hardware. Nearly all
`computer manufacturers offer server hardware for the Linux operating system and many contribute to Linux operating
`system development. 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. A number of companies,
`such as Red Hat, supply versions of Linux.
`
`We compete to provide enterprise-wide computing solutions and point solutions with numerous commercial software
`vendors that offer solutions and middleware technology platforms, software applications for connectivity (both Internet
`and intranet), security, hosting, database, and e-business servers. IBM and Oracle lead a group of companies focused
`on the Java Platform Enterprise Edition that competes with our enterprise-wide computing solutions. Commercial
`competitors for our server applications for PC-based distributed client-server environments include CA Technologies,
`IBM, and Oracle. Our web application platform software competes with open source software such as Apache, Linux,
`MySQL, and PHP. In middleware, we compete against Java vendors.
`
`Our database, business intelligence, and data warehousing solutions offerings compete with products from IBM,
`Oracle, SAP, and other companies. Our system management solutions compete with server management and server
`virtualization platform providers, such as BMC, CA Technologies, Hewlett-Packard, IBM, and VMware. Our products
`for software developers compete against offerings from Adobe, IBM, Oracle, and other companies, and also against
`open-source projects, including Eclipse (sponsored by CA Technologies, IBM, Oracle, and SAP), PHP, and Ruby on
`Rails.
`
`We believe our server products provide customers with advantages in performance, total costs of ownership, and
`productivity by delivering superior applications, development tools, compatibility with a broad base of hardware and
`software applications, security, and manageability.
`
`Azure faces diverse competition from companies such as Amazon, Google, IBM, Oracle, Salesforce.com, VMware,
`and open source offerings. Our Enterprise Mobility + Security offerings also compete with products from a range of
`competitors including identity vendors, security solution vendors, and numerous other security point solution vendors.
`Azure’s competitive advantage includes enabling a hybrid cloud, allowing deployment of existing datacenters with our
`public cloud into a single, cohesive infrastructure, and the ability to run at a scale that meets the needs of businesses
`of all sizes and complexities. We believe our cloud’s global scale, coupled with our broad portfolio of identity and
`security solutions, allows us to effectively solve complex cybersecurity challenges for our customers and differentiates
`us from the competition.
`
`8
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`Our Enterprise Services business competes with a wide range of companies that provide strategy and business
`planning, application development, and in