NOTE 21 — SEGMENT INFORMATION AND GEOGRAPHIC DATA

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 Corporation. LinkedIn is reported as part of our Productivity and Business Processes segment.

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:

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Office Commercial, including Office 365 subscriptions and Office licensed on-premises, comprising Office, Exchange, SharePoint, Skype for Business, and Microsoft Teams, and related Client Access Licenses (“CALs”).

•

Office Consumer, including Office 365 subscriptions and Office licensed on-premises, and Office Consumer Services, including Skype, Outlook.com, and OneDrive.

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

•

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.

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:

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

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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 all devices. This segment primarily comprises:

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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 Internet of Things (“IoT”); and MSN display advertising.

•

Devices, including Microsoft Surface, PC accessories, and other intelligent devices.

•

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)


Year Ended June 30,	2017			2016			2015

Revenue

Productivity and Business Processes	$	30,444		$	26,487		$	26,430
Intelligent Cloud		27,440			25,042			23,715
More Personal Computing		38,773			40,434			43,435
Corporate and Other		(6,707	)		(6,643	)		0


Total	$	89,950		$	85,320		$	93,580

(In millions)


Year Ended June 30,	2017			2016			2015

Operating income (loss)

Productivity and Business Processes	$	11,913		$	12,418		$	13,274
Intelligent Cloud		9,138			9,315			9,803
More Personal Computing		8,288			6,202			5,095
Corporate and Other		(7,013	)		(7,753	)		(10,011	)


Total	$	22,326		$	20,182		$	18,161

Corporate and Other operating loss activity was as follows during the periods presented:

(In millions)


Year Ended June 30,	2017			2016			2015

Net revenue deferral from Windows 10	$	(6,707	)	$	(6,643	)	$	0
Impairment, integration, and restructuring expenses		(306	)		(1,110	)		(10,011	)


Total Corporate and Other	$	(7,013	)	$	(7,753	)	$	(10,011	)

No sales to an individual customer or country other than the United States accounted for more than 10% of fiscal year 2017, 2016, or 2015 revenue. Revenue, classified by the major geographic areas in which our customers are located, was as follows:

(In millions)


Year Ended June 30,	2017		2016		2015

United States ^(a)	$	45,248	$	40,578	$	42,941
Other countries		44,702		44,742		50,639


Total	$	89,950	$	85,320	$	93,580

(a)	Includes billings to OEMs and certain multinational organizations because of the nature of these businesses and the impracticability of determining the geographic source of the revenue.

Revenue from external customers, classified by significant product and service offerings, were as follows:

(In millions)


Year Ended June 30,	2017			2016			2015

Microsoft Office system	$	25,389		$	23,588		$	23,538
Server products and tools		21,758			19,177			18,612
Xbox		9,256			9,395			9,121
Windows PC operating system		8,625	^(a)		8,104	^(a)		14,826
Advertising		6,971			6,098			4,557
Consulting and product support services		5,588			5,641			5,090
Devices		4,557			7,466			11,602
LinkedIn		2,268	^(b)		0			0
Other		5,538			5,851			6,234


Total	$	89,950		$	85,320		$	93,580

(a)	Includes the net revenue deferral from Windows 10.

(b)	Includes advertising revenue.

Our total commercial cloud revenue, which primarily comprises Office 365 commercial, Azure, Dynamics 365, and other cloud properties, was $14.9 billion, $9.5 billion, and $5.8 billion in fiscal years 2017, 2016, and 2015, respectively. These amounts are included in their respective product categories in the table above.

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; 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.

Long-lived assets, excluding financial instruments and tax assets, classified by the location of the controlling statutory company and with countries over 10% of the total shown separately, were as follows:

(In millions)


June 30,	2017		2016		2015

United States	$	39,118	$	22,819	$	19,562
Ireland		12,876		2,078		1,595
Luxembourg		6,845		6,854		6,879
Other countries		10,123		8,210		8,469


Total	$	68,962	$	39,961	$	36,505