TV, and on-demand programming.



Operational Excellence and Citizenship



As we innovate in technology, we are equally focused on crisp execution. In particular, we are working to deliver an unparalleled customer and partner experience. Across the company, we have created new listening, feedback, and 

response systems to help us get closer to customers and respond quickly and appropriately. Using automated error-reporting technologies, we have fixed a large majority of the computer crashes and hangs reported by customers, and our strengthened field response system has favorably resolved most non-technical issues reported by customers.



Microsoft competes vigorously, and we always will. At the same time, we are committed to maintaining positive relationships within our industry, including with competitors, and to forging strong relationships with governments. We are also committed to helping make technology safer and easier to use. We work to help protect the safety of children online, for example, through our partnership with the International Centre for Missing and Exploited Children. We are deeply engaged in industry efforts to protect peoples’ privacy online, counter the problem of identify theft, and curb the spam epidemic.



The fight against spam is a good example of our commitment to the development of industry standards, which accelerate the advance of technology by helping ensure that different devices and software work well together. Microsoft has collaborated on the Sender ID framework, a technology designed to prevent e-mail forgery, which is used to spread spam and perpetrate online fraud. Submitted for consideration as an Internet standard, the Sender ID framework will be freely available for widespread use.



Everywhere we do business, we aim to help strengthen local economies. One way is through our products, which help our customers be more productive and competitive. Another way is through our business model, which is based on partnering with more than 600,000 other technology firms throughout the world. They create applications, provide computer services, and, in many other ways, build their businesses on our platform, generating local jobs and billions of dollars in tax revenue. A global study of 22,000 technology companies found that Microsoft’s partners earn an average of $8 for every $1 that Microsoft earns.



We are partnering to bring the benefits of technology to communities and classrooms around the world. Last year alone, Microsoft provided more than $440 million in cash and software to more than 5,000 schools and nonprofit organizations. Through our Unlimited Potential and Partners in Learning initiatives, we are working with governments and communities in many countries to promote workforce development and lifelong digital literacy.



We are enormously excited by the tremendous possibilities that lie ahead. As ever, we thank you for your continued support.





MANAGEMENT’S DISCUSSION AND ANALYSIS



RESULTS OF OPERATIONS FOR 2002, 2003, AND 2004 



Management’s Discussion and Analysis (MD&A) contains statements that are forward-looking. These statements are based on current expectations and