2001



Letter To Shareholders, customers, partners and employees 

Twenty years ago, the MS-DOS®-based IBM PC had a tiny processor, a minuscule amount of memory, an even smaller amount of storage, and sold for $1,595 – equivalent to more than $3,000 in today’s dollars. Even so, it was a remarkable advance in technology. Today, a PC that is thousands of times more powerful sells for less than $800. But it’s not just the power and the price that have changed so dramatically over the last two decades. What’s most remarkable is how software advances have made the PC an increasingly indispensable and versatile tool in the workplace, at home and at school. 

Other electronic advances of this century, like the radio, the TV and the fax machine – while breakthroughs to be sure – have but one use. Software makes the PC, by comparison, a multi-talented workhorse. Software powers the operations of the world’s largest businesses. It enables people to shop for cars, books, music or just about anything else from the convenience of their home. Software facilitates instantaneous communication between people living in Sydney and São Paulo. And it helps junior high school students in New York do research for their classes. 

Even more amazing are the opportunities ahead. As software grows increasingly dynamic, flexible and responsive, the PC is becoming the hub of an expanding universe of software-connected devices that will enable businesses and people to realize their potential. 

2001 

Fiscal 2001 was a year of solid customer enthusiasm for Microsoft products and services – all the more significant considering the challenging economic climate and turbulence in the technology industry. Revenues increased by $2.34 billion to $25.3 billion, and operating income increased by $710 million to $11.72 billion. 

The Windows family of products turned in a strong performance, led by brisk sales of Windows 2000 Professional. Microsoft SQL ServerTM 2000 and Exchange 2000 Server drove record revenues for Microsoft’s rapidly growing enterprise server business. Our productivity and business-services offerings expanded significantly with the launch of Office XP – the newest version of Microsoft’s business productivity suite – and the acquisition of Great Plains Software, Inc., a leading supplier of mid-market business applications. Microsoft’s consumer software and services business, led by MSN momentum, grew at an impressive 20 percent rate, despite a rugged environment in the online space. 

2002 

Building on Microsoft .NET – the company’s platform for next-generation software and services – fiscal 2002 promises to be a year of continued growth for Microsoft in five key areas: 

Expanding on the power and flexibility of the personal computer and taking the PC experience to the next level of opportunity for customers and the IT industry; 

Meeting the needs of business customers – from the enterprise to medium and small businesses – with a new generation of mission-critical servers and business applications; 

Taking advantage of key market opportunities in the consumer space with emerging businesses such as MSN, devices and games; 

Partnering with developers