Microsoft Corporation 10-K Summary: Fiscal Year Ended June 30, 1997
Business Context and Reporting Period
This Form 10-K covers the fiscal year ended June 30, 1997. Microsoft Corporation develops, manufactures, licenses, and supports a broad range of software products, including operating systems (Windows 95, Windows NT), server applications (BackOffice), productivity suites (Office 97), and Internet technologies (Internet Explorer, MSN). The company operates through three main groups: Product, Sales and Support, and Operations. As of June 30, 1997, the company employed 22,232 full-time employees globally.
Key Financial Metrics
Revenue and Profit: The filing text does not provide specific total revenue or net income figures for the fiscal year, as the "Selected Financial Data" and "Financial Statements" are incorporated by reference to the 1997 Annual Report to Shareholders (Exhibits 13.2 and 13.4).
Research and Development (R&D): Microsoft spent $1.93 billion on product research and development during fiscal 1997. This represented 16.9% of revenue for the year (excluding joint venture funding).
Market Capitalization: As of September 12, 1997, the aggregate market value of common stock held by non-affiliates was approximately $106.2 billion. There were 1,212,567,717 shares of common stock outstanding as of that date.
Debt and Liquidity: The filing text does not provide specific values for total debt, cash flow, or liquidity ratios, as these are contained in the incorporated financial statements.
Material Changes and Strategic Developments
- Acquisitions: In August 1997, Microsoft acquired WebTV Networks, Inc., an online service enabling Internet access via television set-top terminals. The company also owns Softimage, a provider of 3D visualization software.
- Product Launches: The company released Microsoft Office 97, featuring enhanced Internet integration, and continued the rollout of Windows 95 and Windows NT Server.
- Joint Ventures: Microsoft holds 50% stakes in DreamWorks Interactive L.L.C. (interactive entertainment) and MSNBC Cable/Interactive News L.L.C. (news services).
- Manufacturing: The company sold its domestic manufacturing and distribution operation in July 1996. Remaining manufacturing facilities are located in Puerto Rico and Ireland.
- Real Estate: Microsoft is constructing new office buildings at its Redmond, Washington campus (565,000 sq ft) and near Redding, England (225,000 sq ft).
Outlook, Risks, and Management Commentary
Competition: The company faces intense competition in all business segments. Key competitors include IBM, Apple, Sun Microsystems, Netscape, Oracle, and Novell. The filing highlights the threat of "thin client" strategies and the rapid pace of technological change, particularly regarding the Internet and server-based computing.
Risks: Significant risks include software piracy, foreign exchange rate fluctuations, and the ability to attract and retain qualified employees in a competitive market. The company notes that its competitive position may be adversely affected by joint initiatives among competitors to shift software to centrally managed servers.
Guidance: The filing does not contain specific forward-looking financial guidance or earnings projections. Management emphasizes a commitment to high R&D expenditures to maintain technical control and rapid product innovation.
Investor Verification Checklist
- Verify total revenue, net income, and earnings per share figures in the 1997 Annual Report to Shareholders (referenced in Exhibits 13.2 and 13.4).
- Review the detailed balance sheet to assess debt levels, cash reserves, and working capital.
- Examine the "Commitments and Contingencies" section (Exhibit 13.4) for details on legal proceedings and potential liabilities.
- Confirm the financial impact of the WebTV Networks acquisition and the integration of Softimage.
- Assess the growth trajectory of the Internet and server-based product lines versus traditional PC operating system sales.