1. PRESENTED BY: Samantha Brown

2. AREAS OF DISSCUSION: Current Performance Present Strategy Performance Targets Financial / Strategic Performance This presentation will discuss the present state of business affairs of Microsoft Corporation in comparison with its it closest competitors as well as provide a set of considerations and recommendation in each targeted area that will aid the company in it quest to remain relevant. (Cartoon Courtesy of DenverPost.com)

3. Strengths Brand Loyalty Brand Reputation Software Acquisition of Skype Weaknesses Slow to innovation Mature PC Market Product Security Flaws Poor Investments Opportunities Expansion into Gaming Cloud Based Services Expansion into Mobile Devices Growth via Acquisitions Threats Consumer needs & Preferences Changes Lawsuits (anti trust / developer) Competition in Software Sale in Substitute Products SWOT (Microsoft, 2013)

4. Past Strategy The past strategy was based on a old past vision “A personal computer in every home” Company had only one real competitor (IBM). IBM supplied the PC and MS provided the OS Cashed in on low barging power of customers, customer had no choice in OS (pre-installed) Little to no threat for substitutions Eventually deemed as a Monopoly *All of these are no longer a factor.* Present Strategy Single Strategy: “One Microsoft” the product lines will be viewed as a whole not as individual divisions. The single core strategy will ensure that there is shared goal throughout the company. Executing Innovation: Executing innovation ahead of the competition is the main factor Expansion: Open a new device and service chapter. Moving to develop continuous product cycles which bring consistent user interfaces to PC, tablets, phones and gaming systems. Mobility: Creating a family of devices that will empower the consumer at home, at work, and on the go with the digital activities that are most valued.

5. Microsoft is a well known company specifically for its software and virtual services such as Bing and Skype CompanyMicrosoft Corporation Industries Served Computer Software, Electronics Geographical area Worldwide HeadquartersUnited States Current CEOSteve Ballmer Revenue$77.8 billion Profit$17.98 billion Employees99,000 Main Competitors Apple, Google, Samsung, IBM Profitable yet stagnant in the last 10yrs Window OS provides 75% of profits MS is not a hardware company, but rely on the PC for its sales Less than 25% profits comes from servers and tools The PC, their main target, is on a steady decline. Focuses are now on smart phones and tablets – not MS specialty Consistently losing relevancy Competitors: Apple, Google, Oracle Corp, IBM, Sap AG, CA Tech,

6. Recommendation: Differentiation Strategy Change in long-term industry growth rate Emerging of new internet capabilities and application Technological change and manufacturing process innovation Product and marketing innovation Highlighting skills and expertise of company personnel

7. Licensing$5.2 – 5.4 BillPC business will be stable Hardware35 – 45% $3.8 – 4.1 Bill Xbox One – Xbox Products Devices and other CS$1.7 – 1.8 Bill Commercial9 – 11%Low cost added value products Commercial Licensing$10.7 – 10.9 Bill Software Commercial Other$1.7 – 1.9 BillCloud services Operating Expenses6 – 8% $8.5 – 8.6 Bill Quarterly Capital Expenditures$6.5 Bill Tax Rate18 – 20%Dependent on geographical mix of earnings

8. There can be a horizon in the future of Microsoft if the performance goals or met and or exceed. Actions must be taken to ensure a successful outlook : The formulation of Gesture Recognition Technology Expand the company’s Cloud Services Provide Unification for Devices Partnering with other companies such as Toyota There can be a horizon in the future of Microsoft if the performance goals or met and or exceed. Actions must be taken to ensure a successful outlook : The formulation of Gesture Recognition Technology Expand the company’s Cloud Services Provide Unification for Devices Partnering with other companies such as Toyota

9. Microsoft financials in the last decade has been varied Great Recession – greatly affect MS share price (from $35 - $25 per share) The total revenue from 2002 to 2013 has doubled over ($28.4 to $77.85 B) Microsoft OS and the introduction of the Xbox gaming system supported their revenue over these years

10. Best performances are generally prior to December. MS EPS is stable compared to its closest competitors MS achieved good results while continuing to increase their dividends from year to year (Microsoft EPS, 2013)

11. ROE Trends Sept. 30, 201329.89% June 30, 201330.08% March 31, 201323.23% Dec. 31, 201222.70% Sept. 30, 201223.99% June 30, 201226.90% March 31, 201238.56% Dec. 31, 201141.53% Sept. 30, 201144.24% June 30, 201145.91% The past economic crisis had a great affect the on the ROE Stocks were at an historic low to include MS Recent MS strategic acquisitions were not recorded or calculated The increase in dividends with the acquisitions strengthened the organization; it is not reflected in the given numbers The past economic crisis had a great affect the on the ROE Stocks were at an historic low to include MS Recent MS strategic acquisitions were not recorded or calculated The increase in dividends with the acquisitions strengthened the organization; it is not reflected in the given numbers (Y Chart, 2013)

12. Stock prices have be constantly flat, but high 2013 MS had a 42% gain Compared to peers, MS’s stock has acted anomalously High prices are due to stock market is generally high Shareholders are applauding MS for strategic risks Stock prices look to continue prices based on shareholders demand Year: 2013 - $33.00 2012 - $29.50 2011 – $25.00 2010 – $21.50 2009 - $22.00 2008 - $23.50 (MSFT Monthly Historical Prices, 2013)

13. MS could continue to increase their dividend and share repurchase plan to: Continue to return cash to MS shareholders Appeal to shareholders that are seeking long-term steady growth and benefit from quarterly dividends Solidify shareholder’s loyalty and encourage future holdings (Amin, 2013)

14. Cost-efficient Acquisition Operations: Demonstrate growth potential over short-term profitability This recommendation is an alternative to the first and could possibly be considered a contradiction. However, given the size and girth of their competitive landscape, MS may be at a competitive disadvantage (long-term) if they continue to play it safe. (Ong, 2013)

15. Scored consistently, the highest credit rating given: “AAA” (2008-2013) The capital structure of the company allows it to maintain this rating Was the first company to achieve this rating in a decade Recommendation: The company should maintain their actions in reference to the credit rating. MS maintains its equity and keeps debts low which in turn, produces a spectacular credit rating. (Morning Star, 2013)

16. MS is being labeled as “old” (synonymous with Bill Gates) MS maintains a steady image, but the consumer sometimes seems uninterested in the company Recommendations Company’s Face: Introduce a fresh new face Company Logo: Consider sponsoring a logo contest that incorporates the iconic color blocks, but more appealing to the new technological generation Customer Support: Reevaluate customer support services to ensure a satisfactory experience Corporate Responsibility: Incorporate programs that demonstrate MS dedication the public and the environment (CNNMoney, 2013)

17. Microsoft is and has always been a strong company. It has in some cases lagged behind, but is taking steps to improve its situation. With the appropriate plans and strategic moves, the company may be able to regain it shine in the industry and the world.

18. Amin, S. (2013 September 17 ). Microsoft Continues $40 Billion Share Repurchase Program; Increases Quarterly Dividend 22%. In Microsoft News. Retrieved from http://microsoft-news.com/microsoft-continues 40-billion-share-repurchase-program-increases-quarterly-dividend- CNNMoney. (2012). World’s Most Admired Companies. Retrieved from: http://money.cnn.com/magazines/fortune/most-admired/2012/snapshots/3063.html Microsoft. (2013). Annual Report. Retrieved from http://www.microsoft.com/investor/reports/ar13/index.html Microsoft. (2013). Our Commitment to Citizenship. Retrieved from: http://www.microsoft.com/about/corporatecitizenship/en-us/reporting/ Morningstar. (2013). Microsoft Corporation MSFT. Retrieved from: http://quicktake.morningstar.com/StockNet/bonds.aspx?Symbol=MSFT&country=USA Ong, J. (2013 January 30 ). Google, Facebook led private tech M&A activity in 2012 as companies spent $46.8b on over 2,200 deals. In TNW News. Retrieved from http://thenextweb.com/insider/2013/01/30/google-and- facebook-led-private-ma-activity-in 2012-as-companies-spent-46-8b-on-over Y Charts. (2013 November 20). Microsoft Historical Return on Equity. Retrieved from: http://ycharts.com/companies/MSFT/return_on_equity