Why is Microsoft changing its operating segments?

Microsoft is changing its operating segments to align with its recently completed organizational restructuring. This aims to provide investors with a clearer picture of how the company manages its businesses and to facilitate more insightful financial analysis.

When will these new segments take effect for financial reporting?

The new five-segment reporting structure will be effective starting with the first quarter of fiscal year 2007.

Will I be able to compare past results with future results?

Yes, Microsoft has provided restated historical financial information for fiscal year 2005 and the first three quarters of fiscal year 2006 based on the new operating segment structure to help investors make comparisons.

Will the upcoming FY2006 annual report (10-K) reflect these new segments?

No, the Form 10-K for fiscal year 2006 will still report segment information using the seven operating segments that were in place for that period. However, Microsoft expects to include a final analysis of both FY2005 and FY2006, restated quarterly based on the new five-segment structure, within that filing.

MSFT 8-K: Regulation FD

Summary

Microsoft Corporation (MSFT) filed an 8-K on July 17, 2006, to announce a significant change in its financial reporting structure. Effective the first quarter of fiscal year 2007, the company will report its business results under five new operating segments, which align with its previously announced organizational restructuring. This change aims to provide investors with a clearer understanding of how Microsoft manages its business and to facilitate better analysis of its financial performance across different areas. The company is also providing historical segment data (for FY2005 and the first three quarters of FY2006) restated under the new structure to aid in comparability. Investors should note that while the FY2006 10-K will still report under the old seven-segment structure, the company intends to provide a fully restated analysis for FY2005 and FY2006 under the new five-segment structure in that filing.

Key Highlights

1Microsoft is restructuring its financial reporting to align with its new organizational management structure, effective Q1 FY2007.
2The company will now report under five operating segments: Client, Server and Tools, Online Services Group, Microsoft Business Division, and Microsoft Entertainment and Devices Division.
3These five segments are organized under three main operating divisions: Microsoft Platforms and Services Division, Microsoft Business Division, and Microsoft Entertainment and Devices Division.
4Historical financial data for FY2005 and the first three quarters of FY2006 has been restated under the new five-segment structure to ensure comparability for investors.
5The company will continue to report using its existing seven operating segments in its FY2006 10-K filing.
6A final, detailed analysis of FY2005 and FY2006 data under the new segment structure is expected to be included in the FY2006 10-K.
7The primary driver for this change is to provide investors with enhanced clarity and analytical tools regarding Microsoft's business operations and performance.

MICROSOFT CORP 8-K Report, Regulation FD Disclosure (Jul 17, 2006)

Summary

Key Highlights

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