have downloaded more than 218 million copies of Windows XP SP2, which helps protect against software worms and viruses. We are aggressively committed to building out our security technologies to fortify all of our products and services. 

 

We are also deeply involved in working on behalf of the communities where we do business around the world. We focus on partnering to help extend the benefits of technology to more people and communities. Last year alone, Microsoft provided more than $334 million in cash and software to more than 9,000 nonprofit organizations. Through our Partners in Learning program, we have helped bring technology access and skills to 6.6 million students and educators in 99 countries. 

 

We are more enthusiastic than ever about Microsoft’s opportunities to change the world for the better. We can pursue these opportunities because of your continued support. Thank you.





Management discussion



RESULTS OF OPERATIONS FOR FISCAL YEARS 2003, 2004, AND 2005 

 

OVERVIEW 

 

The following Management’s Discussion and Analysis (MD&A) is intended to help the reader understand the results of operations and financial condition of Microsoft Corporation. MD&A is provided as a supplement to, and should be read in conjunction with our financial statements and the accompanying notes to the financial statements (Notes). 

We develop, manufacture, license, and support a wide range of software products for many computing devices. Our software products include operating systems for servers, PCs, and intelligent devices; server applications for distributed computing environments; information worker productivity applications; business solutions applications; and software development tools. We provide consulting and product support services, and we train and certify system integrators and developers. We sell the Xbox video game console and games, PC games, and PC peripherals. Online communication and information services are delivered through our MSN portals and channels around the world. 

Our revenue historically has fluctuated quarterly and has generally been the highest in the second quarter of our fiscal year due to corporate calendar year-end spending trends in our major markets and holiday season spending by consumers. Our Home and Entertainment segment is particularly subject to seasonality as its products are aimed at the consumer market and are in highest demand during the holiday shopping season. Historically, approximately 40% to 50% of Home and Entertainment revenue has been generated in the second fiscal quarter. We believe the seasonality of revenue is likely to continue in the future. 

We intend to sustain the long-term growth of our businesses through technological innovation, engineering excellence, and a commitment to delivering high-quality products and services to customers and partners. Recognizing that one of our primary challenges is to help accelerate worldwide PC adoption and software upgrades, we continue to advance the functionality, security, and value of Windows operating systems, including versions for new devices such as Tablet PCs, Media Center PCs, Portable Media Centers, and mobile devices such as