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1997-2013: How Microsoft Saw Itself/wsj.com

06 Feb

It’s too early to tell where Microsoft is headed under new CEO Satya Nadella. But if you want to know where it has been over the past 16 years, take a look at its revenue.

Microsoft, whose fiscal year starts on July 1, voluntarily splits its revenue by segments, and it chooses how to define those segments and what to call them. A look at how it did this from 1997 to 2013 is a window into how Microsoft has defined — and redefined — its business over time.

Here’s a visual look at how Microsoft’s revenue segments have changed over the years.

Here’s how the changes played out.

In 1997 and 1998, Microsoft divided its revenue into three segments: Windows, “Productivity Applications and Developer” and “Consumer and Other.”

Toward the end of Bill Gates’ tenure, Microsoft dissolved its Windows division, at least in name. Its core segments became ”Desktop and Enterprise Software and Services.” This has to do in part with the roll out of its Office 2000 software suite, which integrated the Web into its software products.

“You buy Windows, and you put it on your machine — you can’t do a whole lot with it,” said Bob Muglia, senior vice president of Microsoft’s business productivity division told the WSJ at the time. “You buy Office and you can do a lot of things. We see Office as being the place office workers spend much of their time.”

Besides 1999 and 2000, the Windows division has remained a mainstay in the way the company segments its revenue and, by extension, the way it sees itself.

At the beginning of Steve Ballmer’s 14-year stint at Microsoft, the company also majorly changed the way it partitioned its revenue, dividing it into Windows, Server and Tools, Information Worker, MSN, and Home and Entertainment.

In 2005, Information Worker, MSN, and Home and Entertainment would be subsumed by Microsoft Business, Online Services and Entertainment and Devices. Home and Entertainment became Entertainment and Devices, as Microsoft sought to transform the PC into an entertainment hub.

Until last summer, the fundamental makeup of Microsoft has remained very much the same. With its main segments being Online Services ($3.28 billion revenue in the 12 months ended in June 2013), Entertainment and Devices ($10.21 billion), Windows ($18.68 billion), Server and Tools ($20.3 billion), and Microsoft Business ($24.74 billion).

Last summer, Ballmer again changed the way Microsoft reports financials. Now there are only two divisions reported: “Devices and Consumer” and “Commercial.”

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