Strength 1. Comprehensive Product Portfolio Microsoft offers a comprehensive range of software, services, and hardware solutions across different customer classes, which enable it to enjoy a leading market position. Microsoft generates revenue by developing, manufacturing, licensing, and supporting software and services across a wide variety of computing devices. The company does business worldwide through offices in more than 100 countries. Microsoft carries out the development of systems (servers, personal computers, and intelligent devices), server applications (distributed computing environments), information worker productivity applications, business solution applications, high-performance computing applications, software development tools, video games, and online advertising. Microsoft also provides consulting and product and solution support service, and trains and certifies computer system integrators and developers. It also concentrates on the development of various cloud-based solutions that provide customers software, services and content over the Internet by way of shared computing resources located in centralized data centers. The comprehensive product portfolio of Microsoft enables it to cater to a wide variety of customer requirements across industries and geographies. 2. Strong margins and cash position Microsoft enjoys strong cash flow conversion rates. In FY2012, the company was able to convert 186% of its net income into cash from operations. Comparatively, IBM converted 118% of net income during FY2011 and Apple converted 122% of net income into cash from operations in FY2012. The strong cash conversion that Microsoft enjoys indicates the inherent strength in the company's business model which is dominated by sticky revenues requiring lower cost of acquisitions and pricing power associated with products that command high switching costs. The company’s strong cash flow generation capability supports its growth prospects. Strong cash flows and margins provide resilience to the business operations and reduce vulnerability to market declines. Cash flows enable the company to further finance growth at feasible costs. 3. Strong Intellectual Property Securing patent rights is important for the development of the company’s product portfolio. Strong patent portfolio creates market exclusivity to the proprietary technology, giving the company an edge over its competitors. The company's success depends primarily on its ability to maintain and establish the proprietary nature of its technology through the patent process. The company protects intellectual property investments in a variety of ways. It actively works in the U.S. and internationally to ensure the enforcement of copyright, trademark, trade secret, and other protections that apply to its software and hardware products, services, business plans, and branding. Microsoft maintains a comprehensive U.S. and international portfolio of intellectual property which help i.

1. Strength
1. Comprehensive Product Portfolio
Microsoft offers a comprehensive range of software,
services, and hardware solutions across different customer
classes, which enable it to enjoy a leading market position.
Microsoft generates revenue by developing, manufacturing,
licensing, and supporting software and services across a wide
variety of computing devices. The company does business
worldwide through offices in more than 100 countries.
Microsoft carries out the development of systems (servers,
personal computers, and intelligent devices), server applications
(distributed computing environments), information worker
productivity applications, business solution applications, high-
performance computing applications, software development
tools, video games, and online advertising.
Microsoft also provides consulting and product and
solution support service, and trains and certifies computer
system integrators and developers. It also concentrates on the
development of various cloud-based solutions that provide
customers software, services and content over the Internet by
way of shared computing resources located in centralized data
centers. The comprehensive product portfolio of Microsoft
enables it to cater to a wide variety of customer requirements
across industries and geographies.
2. Strong margins and cash position
Microsoft enjoys strong cash flow conversion rates. In
FY2012, the company was able to convert 186% of its net
income into cash from operations. Comparatively, IBM
converted 118% of net income during FY2011 and Apple
converted 122% of net income into cash from operations in

2. FY2012. The strong cash conversion that Microsoft enjoys
indicates the inherent strength in the company's business model
which is dominated by sticky revenues requiring lower cost of
acquisitions and pricing power associated with products that
command high switching costs. The company’s strong cash flow
generation capability supports its growth prospects. Strong cash
flows and margins provide resilience to the business operations
and reduce vulnerability to market declines. Cash flows enable
the company to further finance growth at feasible costs.
3. Strong Intellectual Property
Securing patent rights is important for the development of
the company’s product portfolio. Strong patent portfolio creates
market exclusivity to the proprietary technology, giving the
company an edge over its competitors. The company's success
depends primarily on its ability to maintain and establish the
proprietary nature of its technology through the patent process.
The company protects intellectual property investments in a
variety of ways. It actively works in the U.S. and
internationally to ensure the enforcement of copyright,
trademark, trade secret, and other protections that apply to its
software and hardware products, services, business plans, and
branding. Microsoft maintains a comprehensive U.S. and
international portfolio of intellectual property which help it in
protecting its technologies. As of December 2012, Microsoft is
one of the leading technology companies with a portfolio of
over 31,000 U.S. and international patents issued and over
38,000 pending. Microsoft is also involved in outbound and
inbound licensing of related patented technologies that are
incorporated into licensees’ or Microsoft’s products. The
company also purchases or license technology that it
incorporate into products or services. A strong patent portfolio
would help the company protect its various products from being
infringed, strengthen its market presence and generate revenue
through milestone licensing fees.

3. References
http://advantage.marketline.com.ezproxy.snhu.edu/Product?pid=
8ABE78BB-0732-4ACA-A41D-
3012EBB1334D&view=SWOTAnalysis
http://callisto.ggsrv.com/imgsrv/FastFetch/UBER1/68489_GDT
C22599FSA
Threats
1. Declines in PC market
The PC market is further set to experience a decline in
2013. According to the industry estimates the worldwide PC
market is expected to decline by 1.3% in 2013 compared to a
decline of 3.7% in 2012. In near term, the PC market will
continue to witness lackluster growth and increased substitution
of tablets will further depress the growth rates. The company's
Windows division's revenue growth is largely correlated to the
growth of the PC market worldwide, as approximately 75% of
total Windows division revenue comes from Windows operating
system software purchased by original equipment
manufacturers. The trend of most of the growth coming from
emerging markets is likely to impact the profitability also
adversely. In emerging markets, average selling prices are low
and piracy is high. These factors will limit growth opportunities
for the Windows PC operating system and Office applications.
2. Rapid Technological Changes
The technology market is subject to rapid changes, and to
compete effectively, the company must continually introduce
new products that achieve market acceptance. The IT enabled
communication equipment industry is characterized by fast
technological changes, evolving industry standards, changing
market conditions and frequent new product and service

4. introductions and enhancements. The introduction of products
using new technologies or the adoption of new industry
standards can make the existing products or products under
development obsolete or unmarketable. In order to remain
competitive and increase its sales, the company needs to adapt
to the rapidly changing business environment.
3. Availability of Pirated Versions of its Products
Microsoft is exposed to a major threat related to the
availability of pirated versions of its software products. Every
year, the company loses billions of dollars due to the circulation
of pirated versions across the world. Microsoft loses significant
amounts of revenue owing to the piracy rate of 30% or more in
several countries. Though the damage is limited in the US, due
to its stringent intellectual property laws, it faces enormous
losses in those countries with comparatively lax copyright laws.
For instance, pirated versions of Windows 7 are already
available across China. This has been a major threat to the
company and will always remain a cause for concern, affecting
its business growth.
4. Highly Competitive Environment
Intense competition across business segments could limit
the company’s business prospects. Microsoft faces stiff
competition in all its operating segments. The major
competitors of Microsoft include Apple, BMC, CA, Inc.,
Hewlett-Packard, IBM, Nintendo and Oracle. In the online
search engine sector, the company faces competition from
Google and Yahoo, which are the major players in the market.
Huge competition across its business segments could make the
company susceptible to market pressures, leading to a loss in

5. market share and decline in revenue.
5. New technologies leading to erosion of competitive
advantages
The windows PC franchise is destined to decline as the
push into cloud computing continues. The cloud computing does
away with the historical dependence on operating systems.
Microsoft itself has tapped into the growing cloud market.
However, the consequences include lower demand for Windows
operating system. This is a significant competitive disadvantage
for the company as it is a new entrant into cloud business.
Furthermore, despite the expectations of Windows Azure
effectively making up the loss of revenues from Windows PC,
the profitability of Windows Azure will be lower. The switching
costs that protected Windows PC so far, have been declining.
From medium term to long term, Windows PC is likely to lose
market share and pricing power. The hosted applications incur
higher costs in terms of management and hardware which is
likely to impact the margins. Therefore as the revenue mix
shifts towards cloud computing, the profitability will tread a
decelerating path. Another threat to Windows PC comes from
the proliferation of several devices like tablets and
smartphones. Microsoft being a late entrant into this market, the
customers are exposed to alternate operating systems from
Apple and Google. In the current market, the customers are
looking for convergence of devices. Amid such intention, the
customers might choose alternate operating systems for the PCs
as well. This is likely to impact Windows PC adversely.
Microsoft has to implement a business model change to
defend market share in an environment where cloud adoption
has been rapid. Business model transition is fraught with many
risks and failure to adapt its products to a subscription model
will materially affect the company's market share.

6. 6. Foreign Currency Exchange Rate Risk
Exchange rate volatility could have an adverse effect on
the company's financial results. The company is geographically
diversified and has operations in many parts of the world. The
company operates in over 100 countries and a significant part of
its revenue comes from international sales. The asset values,
earnings and cash flows are influenced by a range of currencies.
A substantial portion of overseas sales could be affected by
foreign currency exchange rate fluctuations. A significant
portion of revenues generated from overseas business operations
are denominated in currencies such as U.S. Dollar, Chinese
Renminbi, European Euro, U.K. Pound Sterling and Canadian
Dollar. It is exposed to currency risks associated with the
purchases, sales and borrowings from different markets.
Changes in the exchange rates could affect the consolidated
results of operations and thereby impact its overall profitability.
Opportunity
1. Demand for Smartphones
The company could capitalize on the growing demand for
smartphones, which are emerging as a major growth opportunity
for mobile device manufacturers. According to industry
analysts, the global market for smartphones, is predicted to
reach from 487 million units in 2011 to more than 675 million
units (approximately 35%) in 2012, more than 907 million units
(approximately 35%) in 2013 and surpass 1 billion by 2014. The
growth would be driven by factors including lower product cost,
improved handset design and functionalities, the expansion of
global mobile email and browsing services, the emergence of
3G and 4G network technologies, and the standardization and
upgrades of operating systems. Considerable demand is
expected from developing countries, particularly the Asia-
Pacific region, besides North America. Emerging countries

7. including China, India and Brazil are expected to witness
significant usage in smartphones other than the US and the UK.
By 2016, China would be leading the smartphone market with
approximately 20% of market share, followed by the US
(approximately 15%), India (approximately 10%), Brazil
(approximately 5%) and the UK (approximately 4%). The
company could look forward to increase its market presence
across the emerging countries to fuel its revenue growth.
2. Partnerships and Collaborations
The company could benefit from the various strategic
partnerships that it enters. In February 2013, Microsoft
introduced the Microsoft 4Afrika Initiative, a new effort to help
place tens of millions of smart devices in the hands of African
youth by 2016. Also during the month, the company in
collaboration with the government of Kenya’s Ministry of
Information and Communications and Indigo Telecom Ltd.,
launched a pilot project to deliver low-cost wireless broadband
access to locations near Nanyuki and Kalema, Kenya. In
January 2013, Microsoft signed a patent licensing agreement
that gives BMW access to the latest Extended File Allocation
Table (exFAT) to enhance the digital entertainment offerings in
BMW’s line of automobiles. The company entered into a
transformative three-year Joint Enterprise Licensing Agreement
with the U.S. Army, U.S. Air Force and Defense Information
Systems Agency for expanded access to its solutions.
In December 2012, Microsoft announced plans to make
Microsoft Surface available at additional retailers and transition
of several of the stores into permanent Microsoft retail outlets.
In April 2012, the company entered into strategic partnership
with Barnes & Noble, Inc to accelerate the transition to e-
reading. The company also acquired over 800 patents and their
related patent applications from AOL Inc. In February 2012, the
company entered into a strategic application partnership with

8. Good Technology to enable the use of the Good for Enterprise
solution on Windows Phone devices. In January 2012,
Microsoft and TechStars enhanced their relationship through the
new BizSpark Plus program for accelerators and incubators.
Partnerships and collaborations would enable the company to
enhance its product and service offerings and serve its
customers better.
3. Growth of cloud offering catalyzed by positive market trends
The cloud computing is estimated to grow at a fast pace,
catalyzing growth opportunities for the company's cloud
offering. According to the industry estimates, during 2013, the
spending on public cloud platforms is expected to increase by
18.5%. Furthermore, businesses are expected to spend $300
billion annually on cloud services. As the rate of businesses
moving to the cloud continues to accelerate, Microsoft has
several unique advantages that can be leveraged to drive growth
from its cloud offering which primarily includes Windows
Azure and Office 365. The enterprises are moving to the cloud
on their terms and often use hybrid solutions that include the
cloud and their existing datacenter investments. The Windows
Azure platform allows businesses to connect existing
investments and develop new applications reducing the time
from concept to deployment with little upfront cost.
4. Continued opportunities in the server and tools space
The company’s server and tools market continues to
experience a surge in demand. The server market seemed to
have experienced a rebound in fourth quarter of 2012. The
server market is expected to continue growth until 2015 as
several large customers are expected to demand servers to
support the datacenter growth. Worldwide application server
market revenue is expected to grow 17% year-over-year from $7
billion in 2011 to $21.2 billion by 2018. Microsoft’s server and

9. tools division has been witnessing strong revenue growth.
Continued demand in this space will further enhance the
company’s growth prospects.