Microsoft Corporation Case Analysis Essay

intentness EvaluationSoftwargon is an integral part of todays obscure economy, as the push for big(p)er globalization and efficiency drives more of the expending in calling food marts around the reality. In order to maintain a competitive edge in an increasingly competitive global mart, companies ar spending more(prenominal) than and more on hardw be and softw ar infrastructures (YahooFinance, 2006).Microsoft is among 413 companies that expose and distribute finishing bundle w ars and run. These companies argon all part of the operation softw are program application within the applied science sector, which is dominated by peer little software giant Microsoft. More specifically, Microsoft is categorized into the Developmental Tools, Operating Systems, and rectifyment Software sub effort, which entangles companies that design, develop, market, and suffer software for developing, testing, and debugging applications for calculating machine maintenance and for de sktop centering (Ho everywheres.com, 2006).Microsoft, Oracle Corp, CA Inc., and SAP Aktiengesellschaft, with a four-firm concentration ratio of 39% dominate the industry. Most of the opposite 411 firms in the industry specialize in smaller niches, providing narrow down software services such(prenominal) as accounting, business management, etcetera, and pretend winningss under $1 jillion per course of instruction. For this reason, the computer application industry has monopolistic competition (MSN Money, 2006).The top-merchandising software comp some(prenominal) is currently Microsoft, with $41.4 gazillion in realise gross tax in 2005, and is joined in the competitive sports stadium by other top sellers such as Oracle Corp. with $12.9 meg and SAP Aktiengesellschaft with $10.4 cardinal. Other industry leaders in sales accommodate CA Inc., Intuit Inc., Adobe Systems Inc., B.M.C. Software, Compuware Corp., and Novell Inc., each experiencing revenues exceeding $1 cardi nal during 2005. Within the Developmental Tools, Operating Systems, and Utility Software subindustry, top competitors let in Microsoft, International business Machines (IBM), SAP Aktiengesellschaft, and Computer Associates International, who ranked a single jump, fleck, third, and fourth in application software sales (YahooFinance, 2006).The Computer Software industry is outsizedly dominated by Microsoft, which commands 54% of market sales among its top ten competitors, as listed above. The fol measlyer-rankinging chart details the market share of these ten main players in the industry (YahooFinance, 2006)Within the healthful-grounded environment, the software industry has been shaken by several recent regulations that are revitalizing industries within the business market of the United States. Among them are the US Patriot Act, which dictates that companies providing financial services must switch the ability to obtain the occurrence of money laundering the Sarbanes-O xley Act, which mandates that companies tin real-time disclosure of events that cleverness affect their financial performance and deep records of e-mail and instant messages deviate between employees (YahooFinance, 2006). Finally, antitrust laws have been an ongoing terror to the industry. Microsoft has lowestly reached a settlement after an ongoing antitrust investigation, and agreed to allow manufacturers to admit competing software with Windows and uniformly license its direct systems (Antitrust Case Filings, 2006).New technical gains are revitalizing the software industry. The most recent and square development implys a new set of mesh-friendly applications that, as of yet, has no official name. These meshing services can be assembled from standardized expression blocks, meaning that any outcome of applications may be assembled in a variety of government agencys. Beca affair of this, companies are able to develop initiative applications to run on a big range o f software and hardware infrastructures and cater to the specific demands of their respective market segments. The companies that volition maintain market share in the up-and-coming web era are those that are able to develop products that deliver the goods be harmonious on a wide range of hardware platforms. wide consolidations have recently constitute characteristic of the software industry. Largely give inable to acquisitions, IBMs software holdings have grown a great deal. handsome specialists companies face the greatest danger from adult software providers such as Oracle, who recently acquired PeopleSoft and Siebel for $10.3 and $5.9 billion, respectively. If yield slows in their subindustries, these small companies who cater to specific niches be travel along vulnerable to large companies offering extensive conciliatees of enterprise applications that serve a variety of functions such as the industry leaders (YahooFinance, 2006).Following suit after other mature indu stries such as electronics and apparel, a large number of IT and software providers have begun outsourcing much of their manufacturing and R&D functions to countries outside of the United States. Software companies are now able to ingest manufacturers and product developers in countries such as India, Mexico, and China for much less than it would cost in the U.S. (MSN Money, 2006)The tragedy of the September 11 terrorist attacks as well as other post 9/11 attacks prompted another(prenominal) significant trend in the software industry when the United States government cranked tear on hostage. By restructuring their communication systems, they lighted a door to desire software providers who began to provide new, more secure applications to governmental departments and agencies (YahooFinance, 2006)A final trend reflects the popularity of Linux and other capable-source code operating systems. While the Linux operating system is probably the most widely known and widely ut ilise open source code, the idea of open source is gaining momentum and popularity. Companies that provide their products for a nominal subscription fee and generate income based on nurture and support services have adopted the open source idea as a counter-intuitive business model, with which they counter the more traditional selling of products for profit model (Hill and Jones, 2005).Once online collaboration and word processing applications are fully developed and grow in usage and popularity, the seekers predict that the software industry leave see a rise in sales of those kinds of products, and possibly a decline in the sale of PC compatible product that serve the same types of functions. The reason for this is that once these tools are available, consumers will realize that they may access and edit their documents or projects from any computer or PDA with internet access, without having to worry well-nigh being on the specific machine or machines that contain the documen ts they need.Currently, almost all delectationrs of open source software are computer-savvy programming professionals. In the future however, more consumers will use this type of software for business and personal use. This is forecasted by a growing number of applications developed from open source codes such as Linux, as well as increasing popularity of these programs. If this comes to pass, then Linux and other open source applications and operating systems may accumulate market share, frankincense depriving it from Microsoft and Oracle.Strategic EvaluationMicrosoft supports a number of set that translate into goals that the lodge strives to attain. These goals include doing business with honesty and integrity to have passion for customers, partners, and technology to be open and respectful, to take on big challenges and see by means of them constructive self-criticism, self- purifyment, and personal excellence to help foster growth and innovation, and to be accountable to customers, shareholders, partners, and employees for commitments, results, and quality. These goals, however, are immeasurable, intangible, and unspecific. at that place is no timeline for achieving them, and no way to tally whether or not they have been acheived.There are, however, more specific goals that the confederation hopes to attain that are specific, measurable, attainable, realistic, and tangible. Goals for the future include making technology available to one quarter of a billion volume by 2010. another(prenominal) goal is to fuse together Windows development and Web development to en liberal Windows applications (Stu, 2003).By doing this, Microsoft may be able to convince consumes to use the rich application features of Windows. Another goal is to unify the disparate Windows communications and enterprise technologies into a common and simple framework that is competitive with Java go-ahead Edition. Microsoft needs to provide an resource to this model unless it wishs to see Java proceed its lock on the boniface software market. This goal is consistant with Microsofts woo of taking the lead in developing a new computer science standard. (Microsoft, 2006)The mission financial statement of Microsoft Corporation isAt Microsoft, we work to help people and businesses by means ofout the world realize their full capableness. This is our mission. Everything we do reflects this mission and the values that accommodate it potential.- Microsoft, 2006The mission statement is clear in representing Microsoft as sacred in providing the best products to help its customers achieve and realize their full electromotive force. The mission statement is strong, and is very personable by saying At Microsoft, and repeating that this is Microsofts mission statement. The statement repeats itself in the third sentence, saying, everything we do reflects helping everyone in the world understand his or her full potential. Using words to repeat parts of the mission statement makes it bolder to the reader.The statement is broad enough to allow the fraternity to expand into unfamiliar markets or businesses, or both. However, it is narrow enough that it focuses the high gear society on aiding people in reaching their fullest potential. By adhering to this mission statement, employees at Microsoft look to the customers, not the shareholders, as the reason the company live ons. It is clear to express that the company does not exist solely to make a profits or please shareholders. It reflects the lust of the management at Microsoft to make a difference in the world and help those who wish to success do so.Functional Review market abridgmentMicrosoft focuses on the development of software, which includes products such as Office, Project, Visio, FoxPro, and more. The software packages adjutant bird in the creation of business documents, databases, and projects, as well as helps consumers manage their day-to-day lives.Microsoft has seve n different product divisions invitee, Server and Tools, Information prole, Microsoft crinkle Solution, MSN, Mobile and Embedded Devices, and Home and Entertainment (Microsoft, 2006). The Client segment has state for engineering, product delivery, and technical architecture for the Windows product family. It in addition handles Microsofts relationships with personal computer manufacturers, including multinational and regional original equipment manufacturer accounts (SEC, 2006). Server and Tools is responsible for the server system products and all related services. These services include providing advice for requirements postulate for the system to operate properly, custom solution services, and business application provision for the operating systems.Information Worker involves licensing software to several types of users such as small to large corporations, homes, and specialized categories like students. This division releases a study change in software every twai n to three old age. Microsoft Business Solutions deals primarily with developing and marketing offerings to manage financial, customer relationship and hand over chain management functions for small and midsize businesses, large organizations and divisions of global enterprises. MSN is accountable for delivering online services that look to empower users by bringing them to the people and information that military issue most. The Mobile and Embedded Devices section is responsible for the marketing and development of products that volunteer the advantages of the Windows platform to many types of devices. The Home and Entertainment segment is in blame of production, development, and marketing for the Xbox video gaming system (SEC, 2006).Another way Microsoft is go along to broaden their customer base is by establishing itself into the gaming industry. An drill of this is the ripe Xbox 360 Microsoft launched during the 2005 Christmas season. Microsoft has begun to explore new m arkets, like television, with the rising success of the Xbox 360 and the changing demographics. Microsoft realizes that demographics are changing to a younger generation and efforts must be make to accommodate their needs as well. (Wikipedia, 2006)In the gone, Microsofts target market has been men of the ages of eighteen done thirty-four. The company is currently expanding the market it targets by experimenting with two methods of reaching the seventeen and younger age group. The first is through the gaming industry, with the release of the Xbox gaming system. The company is also developing a television institute to reach this age group (Goo, 2006). Another dodge Microsoft is pursuing involves meeting its global clientele where they are in harm of their economic and financial needs (Evers, 2006). These changes in strategy and products reflect Microsofts goal of expanding its target market. While thither is risk involved with these changes, there is also the potential for re turns above a normal profit.Another way Microsoft is continuing to broaden their customer base is by establishing itself into the gaming industry. An example of this is the innovative Xbox 360 Microsoft launched during the 2005 Christmas season. Microsoft has begun to explore new markets, like television, with the rising success of the Xbox 360 and the changing demographics. Microsoft realizes that demographics are changing to a younger generation and efforts must be made to accommodate their needs as well. (Wikipedia, 2006)Microsoft has established a forepart in the international market. The headquarters, including most of the research and development centers, is located in Redmond, Washington. The company has several manufacturing facilities to meet fork over needs on a global scale. These facilities are located in various places such as Dublin, Ireland, Humacao, Puerto Rico, Reno, Nevada and Singapore just to name a some locations. Microsoft currently employees 40,081 in North America and 63,564 world-wide to help them meet growing demand for their products (Microsoft, 2006).Microsoft uses a wide variety of media to influence the demand of their products. Traditional types of advertising are use for global cases including television, print, and Internet (Microsoft.com, 2006). The company uses computer magazines to compare companies or products such as the case of Linux versus Microsoft. Microsofts goal is to reach a certain target market. In addition, Microsoft is implementing a new advertising defend using the Internet in competition with Yahoo and Google. In the campaign, customers will be asked to fill out a survey from there the data will be used to display personal ads of interest to the consumer. If a consumer chooses not to fill out the survey the company will provide them with general ads that are generated from the search. The goal in the long-run is to learn the customers want and needs for future purchases (Oser, 2006).The manufacturing func tion for most of Microsofts products is outsourced. A trafficker supplies the parts needed to assemble the Xbox gaming system. This outsourcing strategy can be a drawback on two counts. Firstly, Microsoft relinquishes some control of the pricing of this product be shell it cannot control the manufacturing costs. Secondly, there is a threat of the manufacturer leaking product association to Microsofts competitors. At the same time however, Microsoft has no legal pledge to the manufacturer, and can manufacture these products internally. Microsoft employs several vendors to supply parts that Microsoft manufactures. These components are purchased at a discount rate, and Microsoft keeps excess take rake in stock in case of shortages (Microsoft, 2006).The company has decided to do an 18 month campaign to advertise the differences between Microsoft and Linux giving the benefits of using our products. Some advantages to Microsofts products include being user-friendly software and appli cations, as well as having a strong news report in that area. Therefore, the cost would be greater to retrained employee how to use Linux software in the business industry for server application use.In dealing with more recent security issues, Microsoft Internet Explorer (IE) has a code-flaw in the browser that makes it vulnerable to hackers. This flaw can allow hackers to taint a system with various code-scripts, which puts the system under attack. To have security issues associated with the companys name can produce a spoiled reputation. Microsofts goals are to have compassion for customers, for partners, and technology. The company wants to train and make technology available to a quarter of the billion people in the world by 2010. In addition, Microsoft tapes passion towards customers by offering specialized advertisements to expose the varied selection of products to the consumer. Another goal is to exhibit openness and respectfulness, which will gain a huge amount of respe ct from the consumer.This is achieved by receiving feedback from our employees, government agencies, and community leaders which will lead to mend Microsofts business. Microsoft is staying on task of taking on large challenges by endeavoring to change their demographics of customers. In addition, the company takes constructive criticism, and uses this as a way to improve criticism in forms of comments and suggestions. Microsoft will accomplish this task through research and development and feedback. Other goals are to give personal excellence, and have duty to customers, shareholders, partners, and employees for commitments, results, and quality. These achievable tasks would help Microsoft stay in the business for course of instructions to come (Microsoft, 2006).Production AnalysisMicrosoft alters its products to me needs of its global customers. The company translates the text and changes the fashion of its applications to make them understandable in that language. This is one reason Microsoft has a reputation for being developing user-friendly applications for its consumers. Other tasks the company is involved with include processing orders, payment options, processing needed information, and supplier management (Microsoft.com, 2006). These tasks are essential to maintaining good relations with Microsofts customers and suppliers. In addition, these tasks make it possible to make necessary changes when there are problems in distribution or manufacturing of Microsofts software.Microsoft outsources all of its manufacturing function except for a few, including the assemblage of the Xbox 360. A vendor supplies the needed parts for this product. This action can be a drawback because it limits Microsoft in its ability to control pricing aspects of this product. There is also the threat that suppliers will share the knowledge of this product with Microsofts competitors. Although this is a threat, Microsoft is under the no legal obligation to continue working with that supplier. Several vendors supply parts for all other products Microsoft assembles. Components for these products are purchased at a discount. Microsoft keeps an inventory of spare parts on hand if needed (Microsoft, 2006).Management AnalysisBill Gates and Paul Allen founded Microsoft in 1975, and in a few social classs, they expanded to Bellevue, Washington from Albuquerque, New Mexico. From there, Microsoft began creating and developing new and revolutionary technology. In 1981, IBM introduced its personal computer with Microsofts 16-bit operating system, MS-DOS 1.0 (Microsoft, 2006). Because of its quality, this operating system became popular. Microsofts stock went public. Over the following twenty familys, Microsoft created more technical and varied operating systems such as Windows 95, 98, and the current Windows XP.This success has lead to intercontinental expansion creating thousands of supposes. Microsoft is the worlds largest software company with over 50,000 employees in various countries as of May 2004 (Microsoft, 2006). Microsoft has become a needed pot of the personal computing market in which many PC retailers have sold their machines pre-equipped with Microsofts software.Because of its large and substantial business, Microsoft was found to be a monopoly among computer software and because of this, Microsoft has experience financial success. In 1998, a guinea pig found that Microsoft was using its monopoly power to defeat its competitors (Reference.com, 2006). Microsoft appealed and showed how changing their companys operations would bring the financial success down increasingly.A mount of directors, who play a major role in decision-making and many basics of the company, run Microsoft. The Chief Executive Officer is Steven Ballmer who joined with Microsoft in 1980 and was the first business manager hired by Bill Gates (Microsoft, 2006). In 1998, Ballmer was ap draw a bead oned President and this gave him full responsibili ty for running the corporation. 2 course of studys later, he became CEO (in 2000) and this gave him full privilege over all the managers and mental faculty of Microsoft.Following Ballmer is James I. Cash, Jr, Dina Dublon, Bill Gates, Raymond V. Gilmartin, Ann McLaughlin Korologos, David F. Margaurdt, Charles H. Noski, Helmut Panke and Jon A. Shirley. A lot of talent and attainment is required to work in any position at Microsoft. They seek out motivated individuals who are experienced in communications and leadership. The single-valued function for finding such trained individuals is to lower training costs of the company.The incorporated Operations is Microsofts backbone, constructing, managing, and running the various services that support the companys 50,000 employees (Microsoft, 2006). This statement shows that Microsoft is dependent on two sections of their management staff the corporate and administrative services. These departments are responsible for management, public relations, providing company-wide administrative support, building new office space, and other tasks.Financial AnalysisMicrosoft Corporation has achieved excellence in since 1975 in the application software industry. They finished the 2005 pecuniary form with a market capitalization of $288.20 billion, doubling the closest competitor, IBM which came in second in market capitalization with $131.00 billion, and an industry mediocre of a low $136.51 gazillion (Hoovers, 2006).Microsoft Corporation has been enjoying a steady growth in revenue over the past three pecuniary years. This has been achieved with the growing popularity of PC use in the world over this time period. Microsofts preliminary estimates showed a growth of worldwide PC shipments from 11% to 13%, and wide server hardware shipments grew approximately 13% to 14% during the 2005 monetary year compared to financial year 2004 (Yahoo Finance). This has caused a growth in revenue of 8% from $36,835 trillion to $39,78 8 jillion from financial year 2004 to 2005 (U.S. SEC).This revenue growth was driven by growth in licensing of Windows Server operating systems and other server application, licensing of Windows Client operating systems through OEMs, and cast upd licensing of Office and other Information Worker products (Yahoo Finance). The 2004 fiscal year ended with an overall growth of $4,648 billion from the front fiscal year 2003, an increment of over 12%. Over the past five years, Microsoft Corporation has generated revenue of over $162 billion. This is an addition of 73% and about $75 billion of this is derived from net silver flow from operations. Shareholders received a return of $69 billion of this revenue in dividends and stock repurchases. With the ledger entry of the Xbox 360, Windows Vista, and newer versions of existing software in 2006 fiscal year, Microsoft expects to have an equal or larger increase of the past five years in the next five years (Microsoft, 2006). wampum income for the fiscal year 2005 was $12,254 which is an increase of $4,086 cardinal from the 2004 fiscal year. This is due to small abates in operating expenses from the previous year with emphasis on research and development, a cliff of over $1.5 billion. Although change magnitude in fiscal year 2005, a large jump in expenses occurred from fiscal year 2003 to 2004. Microsoft increased their keep down operating expenses by $5,159 million to $27,801 million in fiscal year 2004. Although decreasing expenses worked for the fiscal year 2005, decreases in research and development in the future superpower cause the industry to get the edge on Microsoft and revenues decrease (Microsoft, 2006).Operating income has also increased substantially during these two fiscal years with a total increase of 61%. Although it had a 5% decline from fiscal year 2003 to fiscal year 2004, operating income jumped from a marginal $9,034 million in 2004 to an excellent $14,561 million in fiscal year end ing 2005 (U.S. SEC). correspond to Yahoo Finance, the operating income increase for fiscal year 2005 was driven by a decline in stock-based compensation expense increased revenue in Server and Tools, Client, and Information Worker and a reduction in legal costs associated with major litigation.Some key ratios will point out Microsofts position in accordance to the industry. Holding a total debt to equity ratio of 0.00, compared to 0.03 of the industry, Microsoft has showed that they have successfully controlled their pluss without any debt, date back as far as fiscal year 1996. The total debt to total asset ratio also confirms these successes with a low 0.33. This has a great statistic from an investor or shareholders eyes because there is potential for a noble payout. Microsoft has a current ratio of 2.8, compared to the industries average of 2.3.This shows us that Microsoft can pay off any debt that may occur, and can continue operating with property left over. The quick rati o is currently at 2.5 with an industry average of 2.1. Because this number is so close in comparison with the current ratio, this tells us that Microsoft is not dependent on their inventory. These three financial ratios show us that Microsoft Corporation is achieving excellence in comparison to the industry (MSN, 2006). twain the gross profit margin and the net profit margin percentages will show us the financial health of the company. Microsoft Corporations net profit margin is over 7% high(prenominal)(prenominal) that the industries average, at 30.8% compared to 23.5%. This tells us that 31.6% of the companys revenue can be kept as profit. fiscal year 2005 is an increase of 8.6% from fiscal year 2004 and a small decrease of 0.2% from fiscal year 2003. Their gross profit margin is 87.3%, compared to 82.6% of the industries average. Although the industries average of these two ratios is healthy as well, Microsoft still holds better percentages (MSN, 2006).The companys worth ra tios will show some different trends in comparison to the industry from the other ratios presented. Although the earnings per share (EPS) are currently much higher than the industry average and the previous year, it is lower than some of the direct competitors. The EPS in the fiscal year 2005 was 1.13, which is considerably higher than the industries average of 0.15. This is not a bad ratio if you own share in the company, but two of the closest competitors is producing a much higher rate Googles EPS is at 5.021 and IBMs is at 4.875.Although this might turn some investors away, poem have been improving over the past three years. Fiscal year 2003 had an EPS of solo $0.70 but increased to $0.76 in fiscal year 2004. The large increase came in fiscal year 2005 when EPS increased almost $0.40 to $1.13. With the latest innovations Microsoft has developed, these numbers will increase as investors see the future of Microsoft. Microsoft price-to-earnings (P/E) ratio is more attractive than EPS with a ratio of 22.9. Although conservative investors may feel this number is too high, this ratio is much better than the industry average of 27.3 which might influence these investors to invest in Microsoft instead of the direct competitors (MSN, 2006).Management posture ratios like return on assets (ROA) and return on equity (ROE) will show us how well the management at Microsoft Corporation is doing. With an ROA of 19.4%, over 5% higher than the industry average of 13.9%, Microsoft is very profitable in relation to the total assets of the company. This is a substantial increase from 8.8% and 12.6% in fiscal year 2004 and 2003 respectively. The profit per dollar, or ROE of Microsoft, is 29.5%. This is close to 7% higher than the industry average of 22.6% and 18.6% than fiscal year 2004. This shows that Microsoft Corporation is achieving a higher profit from their investors per dollar in comparison to the industries. Although there was a large increase from fiscal year 2 004 to 2005, a decrease of 5.5% occurred between fiscal year 2003 and 2004 (MSN, 2006).The efficiency of the company is struggling in comparison to the industry in one way, inventory derangement. The inventory dollar volume is currently much lower than the industries. With a low 8.1 compared to 28.4 of the industry average, Microsofts inventory turnover might indicate poor sales. Both Microsoft and the industry average of asset turnover are 0.6, indicating that 0.6 of every dollar is revenue. Microsoft is doing a better job than the industry in comparing the accounts receivable turnover, but not a significant amount. The accounts receivable turnover is at 5.7 with an industry average of 5.2. Both Microsoft and the industry are collecting payments from its customers in a timely manner. They are, however, significantly behind S&P 500 which has an accounts receivable turnover ratio of 7.5 (MSN, 2006).A thorough research of silver flows will show the company heading in the right direction. Net operating, investing, and financing cash flows all increased from the fiscal year 2004 to 2005. Fiscal year 2005 showed an increase of 14% to $16.61 billion in cash flow from operations. This is derived from an increase in cash expediency from customers driven by the 8% revenue growth of the company. Cash payments decreased by approximately $1.8 billion from the previous year from binding legal settlements. These factors played the major role in the increase of operating cash flow. Keeping operating cash flows down was payments to the 7% increase in full-time employees added during the fiscal year 2005. This is a great recovery from fiscal year 2004 considering operating cash flow dropped by $1.17 billion from fiscal year 2003. Over two billion of this was from the insolate Microsystems settlement and the European Commission fine.The small offsetting gain is from increases cash receipts from customers. Net financing cash flow showed a large increase from $2.36 b illion in fiscal year 2004 to $41.08 billion in fiscal year 2005. This increase is driven by an additional $34.38 billion of cash dividends paid, and an additional $4.67 billion in cash used for common stock repurchases in fiscal year 2005 from fiscal year 2004. Net financing cash flow did have a substantial decrease from fiscal year 2003 to 2004 of almost $3 billion.However, this decrease is due the company not repurchasing common stock in the fourth quarter of fiscal year 2004 and an increase of $628 million from stock issuances of employee stock option exercises. An increase of $872 million in cash dividends during this fiscal year offset the numbers provided. Net investing cash flow for fiscal year 2005 was $15.03 billion, an increase of $18.37 billion from the previous year. Investment maturities that occurred to fund cash dividends paid increased by $23.59 billion in fiscal year 2005. Offsetting this figure was the decrease of $5.32 billion in cash from sale activity and inves tment purchases. Cash used for investing was $3.34 billion in fiscal year 2004, a decrease of $3.88 billion from fiscal year 2003 (Microsoft, 2006).Model AnalysisThe Boston Consulting aggroup Matrix is a representation of the status of Microsoft in the current market. There are four different categories that fall under the ground substance, Stars, Cash Cows, incredulity Marks and Dogs. The highest category and most self-efficient is the Stars with very high growth and high share. Next in the matrix Cash Cows, which are low in growth and high in shares. The third category in the matrix is the Question Marks which are high in growth and low in shares. Last are the Dogs which are very low in both growth and shares. Microsoft would be placed in the Stars category only because the company is constantly growing and is very self-sustaining.Strategic Alternatives1. Develop a Microsoft version of open source software by exploiting Microsofts distinctive competency for developing softwar e. This will give Microsoft an edge in the open market by allowing it to effectively compete with current alternatives to Microsoft products, such as Linux, Sun Systems, and other open source/free software products. This alternative will give Microsoft the opportunity to increase its revenues by offering support services and training for these products.2. Acquire Red Hat Inc. or another successful Linux provider. By combining the rising popularity of the open source concept with the ongoing success of Microsofts application software, the image of Microsoft will improve and launch the company into the increasingly popular open source market.3. meliorate current product line. Increase research and development spending to improve the dependability and security of current products. Then, implement an advertising campaign through several mediums to stress the superior quality of Microsofts products.