Microsoft Outlines Revenue Recognition for the Windows Upgrade Offer

News release:

Microsoft Outlines Revenue Recognition for the Windows Upgrade Offer

June 01, 2012

Company will defer a portion of revenue from sales of Windows 7 to OEMs.

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REDMOND, Wash. — June 1, 2012 — Microsoft Corp. today announced the availability of the Windows Upgrade Offer providing consumers who buy qualifying Windows 7 PCs the option to purchase a downloadable upgrade to Windows 8 Pro for an estimated retail price of $14.99 (U.S.) during the time of the promotion.

Beginning June 2, 2012, consumers who purchase up to five new Windows 7 PCs preinstalled with Windows 7 Home Basic, Home Premium, Professional, or Ultimate will be eligible to purchase an upgrade to Windows 8 Pro upon general availability of Windows 8. Qualifying purchases must be made before January 31, 2013, and offers must be redeemed by February 28, 2013.

For additional details on the Windows Upgrade Offer, please see the company’s announcement at http://www.windowsupgradeoffer.com.

Unlike previous upgrade programs, Microsoft will manage the redemption process, including eligibility verification, payment, software delivery, and support. Delivery of Windows 8 Pro will occur via electronic software distribution.

In association with the Windows Upgrade Offer, Microsoft will defer revenue from eligible sales under the program to the earlier of the fulfillment date or the program’s expiration date. For the fourth quarter of fiscal year 2012, Microsoft will defer an estimated $450 million to $550 million of revenue. The deferral only impacts the timing of revenue recognition and will not impact cash flows from operations.

Microsoft Investor Relations will host a conference call and webcast at 9:00 a.m. PDT today to discuss details of the accounting treatment for the program. The conference call will be hosted by Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, and will be made available on the Microsoft Investor Relations website.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as: 

• execution and competitive risks in transitioning to cloud-based computing;
• challenges to Microsoft’s business model;
• intense competition in all of Microsoft’s markets;
• Microsoft’s continued ability to protect its intellectual property rights;
• claims that Microsoft has infringed the intellectual property rights of others;
• the possibility of unauthorized disclosure of significant portions of Microsoft’s source code;
• actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability;
• improper disclosure of personal data that could result in liability and harm to Microsoft’s reputation;
• outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure;
• government litigation and regulation affecting how Microsoft designs and markets its products;
• Microsoft’s ability to attract and retain talented employees;
• delays in product development and related product release schedules;
• significant business investments that may not gain customer acceptance and produce offsetting increases in revenue;
• unfavorable changes in general economic conditions, disruption of our partner networks or sales channels, or the availability of credit that affect demand for Microsoft’s products and services or the value of our investment portfolio;
• adverse results in legal disputes;
• unanticipated tax liabilities;
• quality or supply problems in Microsoft’s consumer hardware or other vertically integrated hardware and software products;
• impairment of goodwill or amortizable intangible assets causing a charge to earnings;
• exposure to increased economic and regulatory uncertainties from operating a global business;
• geopolitical conditions, natural disaster, cyberattack or other catastrophic events disrupting Microsoft’s business; and
• acquisitions, joint ventures and strategic alliances that adversely affect the business.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at http://www.microsoft.com/investor/.

All information in this release is as of June 1, 2012. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, press only:

Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070,rrt@waggeneredstrom.com

For more information, financial analysts and investors only:

Bill Koefoed, general manager, Investor Relations, (425) 706-4400