will include investments in existing and advanced areas of technology, including using cash to acquire technology. Additions to property and equipment will continue, including new facilities and computer systems for R&D, sales and marketing, support, and administrative staff. Commitments for constructing new buildings were $181 million on June 30, 2001. Cash will also be used for strategic opportunities. 

In addition, cash will be used to repurchase common stock to provide shares for employee stock option and purchase plans. Since fiscal 1990, Microsoft has repurchased 854 million common shares while 2.12 billion shares were issued under the Company’s employee stock option and purchase plans. The market value of all outstanding stock options was $66 billion as of June 30, 2001. During December 1996, Microsoft issued 12.5 million shares of 2.75% convertible exchangeable preferred stock. The Company’s convertible preferred stock matured on December 15, 1999. Each preferred share was converted into 1.1273 common shares. 

Management believes existing cash and short-term investments together with funds generated from operations should be sufficient to meet operating requirements. The Company’s cash and short-term investments are available for strategic investments, mergers and acquisitions, and other potential large-scale needs and to fund the share repurchase program. Microsoft has not paid cash dividends on its common stock. 

RECENTLY ISSUED ACCOUNTING STANDARDS 

In June 2001, the Financial Accounting Standards Board issued SFAS 141, Business Combinations, and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting. It also specifies the types of acquired intangible assets that are required to be recognized and reported separately from goodwill. SFAS 142 will require that goodwill and certain intangibles no longer be amortized, but instead tested for impairment at least annually. SFAS 142 is required to be applied starting with fiscal years beginning after December 15, 2001, with early application permitted in certain circumstances. The Company plans to early adopt SFAS 142 in fiscal 2002 and does not expect any impairment of goodwill upon adoption. Goodwill amortization was approximately $300 million in fiscal 2001 and approximately $225 million in fiscal 2000. 

ISSUES AND UNCERTAINTIES 

While Microsoft management is optimistic about the Company’s long-term prospects, the following issues and uncertainties, among others, should be considered in evaluating its growth outlook. 

Rapid Technological Change and Competition 

Rapid change, uncertainty due to new and emerging technologies, and fierce competition characterize the software industry, which means that Microsoft’s market position is always at risk. Microsoft’s ability to maintain its current market share may depend upon the Company’s ability to satisfy customer requirements, enhance existing products, develop and introduce new products and achieve market acceptance of such products. This process grows more challenging as the pace of change continues to