corporate-level results are not allocated to our segments. Those results include expenses related to corporate operations associated with broad-based sales and marketing, product support services, human resources, legal, finance, information technology, corporate development and procurement activities, research and development and other costs, and legal settlements and contingencies. 

 

Fiscal year 2007 compared to fiscal year 2006 

 

Corporate-level expenses increased primarily driven by increased headcount-related costs offset by decreased costs for legal settlements and legal contingencies. Headcount-related costs increased 25%, driven by a 19% increase in headcount and an increase in salaries and benefits for existing headcount. We incurred $511 million in legal charges during the twelve months ended June 30, 2007, primarily related to antitrust and unfair competition consumer class actions, intellectual property claims, and an extension payment to Sun Microsystems, Inc. under our Limited Patent Covenant and Standstill Agreement. We incurred $1.32 billion in legal charges during fiscal year 2006 which included settlement expense of $361 million related to our settlement with RealNetworks, Inc. as well as other intellectual property and antitrust matters, a € 281 million ($351 million) fine imposed by the European Commission in July 2006 related to its 2004 decision in its competition law investigation of Microsoft, and an extension payment to Sun Microsystems, Inc. 

 

Fiscal year 2006 compared to fiscal year 2005 

 

Corporate-level expenses decreased primarily reflecting decreased costs for legal settlements and legal contingencies partially offset by increased headcount-related costs. We incurred $1.32 billion in legal charges during fiscal year 2006 as compared to $2.31 billion in legal charges incurred during fiscal year 2005 primarily



related to settlements with Novell, Inc., Gateway, IBM, and other antitrust and competition law matters. Headcount-related costs increased 5%, driven by a 23% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation. 

 

Outlook 

 

Our outlook for fiscal year 2008 is as follows: 

 

Client    We expect revenue to grow reflecting improvement in the commercial and retail portion of the business due to increased acceptance of Windows Vista. We expect PC shipments to grow 9% to 11% for fiscal year 2008. We believe that PC unit growth rates will be higher in the consumer segment than in the business segment and higher in emerging markets than in mature markets. 

 

Server and Tools    We expect continued momentum from recent product launches and to benefit from the upcoming launches of the new versions of SQL Server, Windows Server, and Visual Studio in the second half of fiscal year 2008. 

 

Online Services Business    We expect increased growth in online advertising revenue as the portals, channels, and communications services continue to expand globally and the overall Internet advertising industry continues to expand. In May 2007, we agreed to acquire aQuantive, Inc., a digital marketing company,