1. Rotterdam, March 31, 2004 Group 8 - Section B Oscar Bernaldez / Pablo Franzini / Masa Kijima Alessandro Piloni / Nikolaos Platis / Iris Tang

2. Microsoft Corporation is one of the most successful companies in the world. This is our analysis of its present situation, its success factors, the threats that challenge it and our recommendations for the future

3. PRODUCTS CAN BE GROUPED IN THREE CATEGORIES  PC Experience : Desktop Software  Server and Business : Server Software  Consumer & Devices

4. THE MAIN PRODUCTS AND SERVICES OF EACH CATEGORY ARE THE FOLLOWING, ERP and CRM Windows Server Developer tools ConsultingTraining Xbox PC and Online games TV Platform MSN Network MSN Access PC Windows O/S Pocket PC Smart Phones MapPoint Windows Device O/S Office System

5. WINDOWS FOR PC, OFFICE AND SERVERS O/S ARE THE MAIN REVENUE SOURCES Windows for Server Windows for Server22% MS Office 29% ERP & CRM 6% Windows for PC 32% 32% Home & Entertainment 9% MSN2% Mobile and Embedded Devices Revenue Breakdown 2003

6. MICROSOFT IS DEFINITELY THE MARKET LEADER OF ITS MAIN PRODUCTS Market Shares 69 % Desktop O/S Source: IDC, 2004 93 % 58 % 58 % Servers O/S 0 10 20 30 40 50 60 70 80 90 100 20022003 WindowsLinuxUnixothers 58 % 60 %

7. MICROSOFT SUCCESS IS BASED ON VALUE, COST AND SPEED  Recognize a specific need  Find the existing product that meets the need and shape it with in-house developers  Bundle it with other products  Market the product or Service  Open standards to ISVs  Upgrade the technology periodically

8. MOST HIGHLIGHTED EXAMPLES ARE: DOS, GUI, OFFICE AND EXPLORER   DOS: purchased for $50k, developed and sold to IBM   GUI (Windows): copied Apple Macintosh and made it compatible   Office: Completed a package of software   Explorer: Bundle it with Windows  two companies  Business Solutions: Entered to the ERP-CRM market acquiring two companies

9. MICROSOFT HAS A VERY SUCCESSFUL MARKETING STRATEGY The Marketing Mix  P rice  Build Bundles: Windows, Office  Price differentiation: OEMs, Retail  P roduct: Understand the need, find the product, open standards, upgrade  P lace: Marketed mainly by OEMs, also Retail  P romotion: Not massive campaigns, PR

10. MICROSOFT IS FACING SIGNIFICANT CHALLENGES TO ITS DOMINANT POSITION   Brand Recognition   Flexibility despite of size   Customer driven (needs)   $49bn cash   …   Favorable market position   Any device needs software   …   Narrow view of the software industry. i.e.: internet   Dependency on hardware manufacturers   Customer driven (technology weakness)   Executing on multiple fronts   …   Security   Linux and non commercial software   Continued legal risk   … S W O T

11. MICROSOFT IS GOING TO THE FAST GROWING CONSUMER AND DEVICES BUSINESS Industry Analysis 1. 1. Low bargain power of suppliers: Many Employees and ISVs 2. 2. High bargain power of buyers: Hardware Vendor have many options 3. 3. High barriers to entry: Requires Large investments 4. 4. High threat of substitutes: Plenty of substitutes (Cell phone/PDA …) 5. 5. Influence of complements: For example video games and digital music 6. 6. High industry competition: based on technology, price and compatibility, big players

12. MICROSOFT HAS TO DEAL WITH THE RAPID GROWTH OF LINUX Summary   Technological superior product   Free   More complex to manage   Switching costs from Windows are low   Amazon.com and Google run on Linux Source: Cnet News 2004

13. BUNDLING IS THE MAIN REASON OF LEGAL DEMANDS IN THE UNITED STATES AND EUROPE Windows O/S Explorer Outlook Media Player European Commission Microsoft vs. Monti: Media Player Disclose software information Fine: Euro 497.2m Precedent for the future of the monopoly

14. HIGHLIGTH OF MICROSOFT STRATEGY THROUGH TIME Contingent Strategy ConstantStrategy Drive key Competitors out of business Follower of new technologies, pragmatist approach Form and exploit Key Alliances DOS Era Copy & Adapt Low Costs Force MS Standards Create High Barriers of entry Windows Era Acquisitions Spree Expansion Across Sections Monopolistic Tactics Internet & Mobile Era

15. OUR RECOMMENDATIONS FOR THE FUTURE   Reduce Dependency on Desktop OS   Expand to Mobile Telecommunications sector   Balance R&D investments and Acquisition technology   Create Alliances with key players in other industries   Keep Lobbying to face legal threats

16. Rotterdam, March 31, 2004 Provide Incentives for ISVs to develop on Microsoft OS