SEGMENT INFORMATION

9 Months Ended

Mar. 31, 2017

SEGMENT INFORMATION

NOTE 18 — SEGMENT INFORMATION

In its operation of the business, management, including our chief operating decision maker, who is also our Chief Executive Officer, reviews certain financial information, including segmented internal profit and loss statements prepared on a basis not consistent with U.S. GAAP. During the periods presented, we reported our financial performance based on the following segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

In December 2016, we completed our acquisition of LinkedIn. LinkedIn is reported as part of our Productivity and Business Processes segment. LinkedIn offers services that can be used by customers to transform the way they hire, market, sell, and learn on a global basis through Talent Solutions, Marketing Solutions, and Premium Subscriptions.

• Talent Solutions is comprised of Hiring and Learning and Development. Hiring provides services to recruiters that enable them to attract, recruit, and hire talent. Learning and Development provides subscriptions to enterprises and individuals to online learning content.

• Marketing Solutions enable enterprises and individuals to advertise to LinkedIn’s member base through relevant content. Advertising (consisting of content-based, graphic display, text link, and programmatic) is shown primarily on LinkedIn.com and its mobile applications.

• Premium Subscriptions (inclusive of Sales Solutions) enable professionals to manage their professional identity, grow their network, and connect with talent.

Our reportable segments are described below.

Productivity and Business Processes

Our Productivity and Business Processes segment consists of products and services in our portfolio of productivity, communication, and information services, spanning a variety of devices and platforms. This segment primarily comprises:

• Office Commercial, including volume licensing and subscriptions to Office 365 commercial for products and services such as Office, Exchange, SharePoint, and Skype for Business, and related Client Access Licenses (“CALs”).

• Office Consumer, including Office sold through retail or through an Office 365 consumer subscription, and Office Consumer Services, including Skype, Outlook.com, and OneDrive.

• MicrosoftDynamics (“Dynamics”) business solutions, including Dynamics ERP on-premises, Dynamics CRM on-premises, and Dynamics 365, a set of cloud-based applications across ERP and CRM.

• LinkedIn, including Talent Solutions, Marketing Solutions, and Premium Subscriptions.

Intelligent Cloud

Our Intelligent Cloud segment consists of our public, private, and hybrid server products and cloud services that can power modern business. This segment primarily comprises:

• Server products and cloud services, including Microsoft SQL Server, Windows Server, Visual Studio, System Center, and related CALs, as well as Azure.

• Enterprise Services, including Premier Support Services and Microsoft Consulting Services.

More Personal Computing

Our More Personal Computing segment consists of products and services geared towards harmonizing the interests of end users, developers, and IT professionals across screens of all sizes. This segment primarily comprises:

• Windows, including Windows original equipment manufacturer licensing and other non-volume licensing of the Windows operating system; Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows Embedded; MSN display advertising; and Windows Phone licensing.

• Devices, including Microsoft Surface, phones, and PC accessories.

• Gaming, including Xbox hardware and Xbox software and services, comprising Xbox Live transactions, subscriptions, and advertising (“Xbox Live”), video games, and third-party video game royalties.

• Search advertising.

Corporate and Other includes adjustments to conform our internal accounting policies to U.S. GAAP, and impairment, integration, and restructuring expenses. Significant internal accounting policies that differ from U.S. GAAP relate to Windows 10 revenue recognition.

Revenue and costs are generally directly attributed to our segments. However, due to the integrated structure of our business, certain revenue recognized and costs incurred by one segment may benefit other segments. Revenue on certain contracts is allocated among the segments based on the relative value of the underlying products and services, which can include allocation based on actual prices charged, prices when sold separately, or estimated costs plus a profit margin. Cost of revenue is allocated in certain cases based on a relative revenue methodology. Operating expenses that are allocated primarily include those relating to marketing of products and services from which multiple segments benefit, and are generally allocated based on relative gross margin.

In addition, certain costs incurred at a corporate level that are identifiable and that benefit our segments are allocated to them. These allocated costs include costs of: legal, including settlements, and fines; information technology; human resources; finance; excise taxes; field selling; shared facilities services; and customer service and support. Each allocation is measured differently based on the specific facts and circumstances of the costs being allocated. Certain corporate-level activity is not allocated to our segments, including impairment, integration, and restructuring expenses.

Segment revenue and operating income (loss) were as follows during the periods presented:

(In millions)	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
Revenue
Productivity and Business Processes	$	7,958		$	6,521		$	21,998		$	19,517
Intelligent Cloud		6,763			6,096			20,006			18,331
More Personal Computing		8,836			9,539			29,953			31,474
Corporate and Other(a)		(1,467	)		(1,625	)		(5,324	)		(4,616	)
Total	$	22,090		$	20,531		$	66,633		$	64,706

(In millions)	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
Operating income (loss)
Productivity and Business Processes	$	2,783		$	2,981		$	9,159		$	9,429
Intelligent Cloud		2,181			2,176			6,637			7,135
More Personal Computing		2,097			1,751			6,524			5,154
Corporate and Other (a)		(1,467	)		(1,625	)		(5,324	)		(4,616	)
Total	$	5,594		$	5,283		$	16,996		$	17,102

(a) Consists of the net revenue deferral from Windows 10.

Assets are not allocated to segments for internal reporting presentations. A portion of amortization and depreciation is included with various other costs in an overhead allocation to each segment, and it is impracticable for us to separately identify the amount of amortization and depreciation by segment that is included in the measure of segment profit or loss.