Microsoft Corp – ‘424B3’ on 3/30/01

On:  Friday, 3/30/01, at 5:36pm ET   ·   Accession #:  1032210-1-500159   ·   File #:  333-38694

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Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Final Prospectus                                       9     43K 

Document Table of Contents

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                                                Filed Pursuant to Rule 424(B)(3)
                                                   Registration Number 333-38694
PROSPECTUS                                                                      

[LOGO OF MICROSOFT CORPORATION] 

3,000,000 Shares

Common Stock

----------- 

This prospectus is part of a registration statement that covers 3,000,000   
shares of common stock of Microsoft. These shares may be offered and sold from  
time to time by certain institutional holders of our common shares (the         
"selling shareholders"). We will not receive any of the proceeds from the sale  
of the common shares except to the extent Microsoft receives a cash refund of   
the make whole amount as provided for in the put warrants held by the selling   
shareholders (see Selling Shareholders and Plan of Distribution on page 7 of    
the prospectus). We will bear the costs relating to the registration of the     
common shares, which we estimate to be $65,708.00.                              

The common shares are traded on the Nasdaq Stock Market under the symbol    
MSFT. The average of the high and low prices of the common shares as reported   
on the Nasdaq Stock Market on March 28, 2001 was $56.66 per common share.       

Neither the Securities and Exchange Commission nor any state securities     
commission has approved or disapproved these securities, or determined if this  
prospectus is truthful or complete. Any representation to the contrary is a     
criminal offense.                                                               

----------- 

The date of this prospectus is March 30, 2001 

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TABLE OF CONTENTS 

                                                                [Download Table]
                                                                                
The Company.................................................................   3

Risk Factors................................................................   4

Use of Proceeds.............................................................   7

Selling Shareholders and Plan of Distribution...............................   7

Legal Matters...............................................................   8

Experts.....................................................................   8

Where You Can Find More Information.........................................   9

You should rely only on the information contained or incorporated by      
reference in this prospectus and in any accompanying prospectus supplement. No  
one has been authorized to provide you with different information.              

The shares of common stock are not being offered in any jurisdiction where
the offer is not permitted.                                                     

You should not assume that the information in this prospectus or any      
prospectus supplement is accurate as of any date other than the date on the     
front of the documents.                                                         

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THE COMPANY 

 Microsoft Corporation was founded as a partnership in 1975 and incorporated
in 1981. Microsoft develops, manufactures, licenses, sells, and supports a wide 
range of software products, including:                                          

.  operating system software (for example, Microsoft Windows 98, Windows    
  2000, and Windows CE) designed for personal computers, servers, handheld
personal computers and other information devices;                     

.  server applications software (for example, Microsoft Exchange Server and 
Microsoft SQL Server) designed for client/server environments;        

.  business and consumer applications software (for example, Microsoft      
Word; Microsoft Excel and Microsoft Outlook);                         

.  software development tools; and                                          

.  Internet and intranet software and technologies.                         

Microsoft's efforts also include:                                         

.  development of entertainment and information software programs;          

.  development of the MSN(TM) network of Internet products and services;    

.  alliances with companies involved with the creation and delivery of      
digital information;                                                  

.  sales of personal computer devices such as the Microsoft Mouse and the   
Microsoft Natural Keyboard;                                           

.  publication of software-related books; and                               

.  research and development of advanced technologies for future software    
products.                                                             

Microsoft's business strategy is to develop a broad line of software      
products for business and personal use, and to distribute these products        
through diverse channels, including distributors, resellers, system             
integrators, retail stores, and preinstalled on new computer hardware.          

Microsoft is organized as a Washington corporation with its principal     
executive offices located at One Microsoft Way, Redmond, Washington 98052-6399. 
Our telephone number is (425) 882-8080 and our electronic mail address is       
msft@microsoft.com.                                                             

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RISK FACTORS  

An investment in our common stock involves a high degree of risk. You     
should consider the following factors carefully before deciding to purchase     
shares of our common stock. Additional risks not presently known to us or that  
we currently deem immaterial may also impair our business operations.           

Our current position in the market for computer software is continuously        
threatened because this market is intensely competitive and technology is       
constantly changing.                                                            

Microsoft is the leading producer of software for personal computers, PCs,
in the world. Nonetheless, rapid change, uncertainty due to new and emerging    
technologies, and fierce competition characterize the PC software industry,     
which means that our market position is always at risk. Our ability to          
maintain our current market share may depend upon our ability to satisfy        
customer requirements, enhance existing products, develop and introduce new     
products and achieve market acceptance of such products. This process is        
challenging since the pace of change continues to accelerate, including "open   
source" software, new computing devices, new microprocessor architectures, the  
Internet, and Web-based computing models. If we do not successfully identify    
new product opportunities and develop and bring new products to market in a     
timely and cost-efficient manner, our business growth will suffer and demand    
for our products will decrease.                                                 

Further, the PC software industry is inherently complex. New products and 
product enhancements can require long development and testing periods.          
Significant delays in new product releases or significant problems in creating  
new products could damage our business.                                         

The competition in the PC software industry is intense and may have       
multiple effects. For example, competing companies and systems may gain market  
share, which could have the effect of directly or indirectly reducing our       
existing market share. In addition, competitors, working with new technology,   
may arrive at a technology that creates a new market altogether and renders     
our product offerings obsolete. We expect that the overall number of            
competitors providing niche products that compete with ours will increase due   
to the market's attractive growth.                                              

While we work closely with computer manufacturers and developers, other   
companies promote their platforms and technologies against our products and     
existing industry standards. These operating systems, platforms, and products   
may gain popularity with customers, computer manufacturers, and developers,     
reducing our future revenues. For example, we are engaged in intense            
competition with companies that develop and support operating systems such as   
the open source Linux operating system and Unix operating systems for many      
business installations. These competitors include Caldera Systems, Inc., Red    
Hat, Inc., IBM and Sun Microsystems, Inc. This increased level of competition   
may result in price reductions, lower-than-expected gross margins or our        
inability to maintain our market share, any of which may result in a loss of    
revenue and cause our business to suffer.                                       

Because of increasing competition in the PC industry, we may experience         
reduced product sales and lower revenue growth.                                 

The nature of the PC market is changing in ways that may reduce our       
software sales and our revenue growth. We earn a portion of our revenue by      
licensing our software to PC manufacturers, who install Microsoft applications  
during production and sell PCs to consumers that are fully operational at the   
time of purchaser. Recently, manufacturers have sought to reach more consumers  
by developing and producing lower cost PCs--PCs that come without pre-          
installed software or contain software with reduced functionality to keep       
prices down.                                                                    

 In addition to the influx of low-cost PCs, a market for hand-held computing
and communication devices, like hand-held computers and wireless communication  
devices that have the ability to communicate with the Internet, has developed.  

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While these devices are not as powerful or versatile as PCs, they threaten
to erode sales growth in the market for PCs with pre-installed software. This   
may affect our revenue growth because manufacturers may choose not to install   
Microsoft software in these low-cost PCs or consumers may purchase alternative  
devices that do not utilize Microsoft software. These lower-priced devices      
require us to provide lower-priced software with a subset of the original       
functionality. As a result, we will experience slower revenue growth from the   
sale of software produced for these devices than from the sale of software for  
traditional PCs.                                                                

In addition, in response to present and future anticipated competitive    
pressures in our industry, we are providing alternative distribution of our     
products at a cost lower than if the customer were to purchase the individual   
products in a shrink wrapped box at a traditional retail, mail order or online  
store. For instance, we offer suites of software products like the Microsoft    
Office suite, which is a collection of standalone products such as Excel,       
Word, Outlook and PowerPoint. By packaging the products as a suite, we offer    
the customers the opportunity to purchase a license to use a collection of      
products for less cost than purchasing each of the individually-licensed        
products in standard boxes from a retail, mail order or online store.           
Additionally, we are offering products through alternative distribution         
channels than the standard individually shrink wrapped boxes sold through       
traditional retail vendors. These channels include:                             

.  Licensing agreements--customers may purchase multiple-user licenses for  
a suite of products for a lower cost than paying for each license     
separately                                                            

.  Subscriptions--customers may enter into an annual gold license, which    
  entitles them to automatic upgrades and replacement products for a lower
cost than acquiring upgrades and replacement products on an individual
basis                                                                 

.  Downloads over the Internet--customers are able to download service      
releases and upgrades as well as other products directly from the     
Internet                                                              

As a result of responding to competitive pressures in the marketplace by  
offering products through alternative distribution methods, we may experience   
slower revenue growth.                                                          

Prices of our products could decrease, which would reduce our net income.       

The competitive factors described above may require us to lower product   
prices to meet competition. Since our cost of revenue is already very low,      
price reductions would reduce our net income.                                   

Developing software is expensive, and the investment in product development     
often involves a long payback cycle.                                            

Our continued success depends in part on our continued ability to create  
more versatile software products faster than our competitors. We plan to        
continue significant investments in software research and development. We also  
expend significant resources on researching and developing new technologies     
such as voice recognition and ClearType software, a software that provides      
improved font sharpness and text display on color LCD screens allowing for      
better on-screen reading comparable to reading on paper. We are also making     
significant investments in strategic relationships with third parties where we  
have the opportunity to establish leadership in new businesses. We anticipate   
these investments in research and development will increase over historical     
spending levels without corresponding growth in revenues in the near future.    
We cannot assure that significant revenue from these product opportunities      
will be achieved for a number of years, if at all.                              

Our profit margins internationally may be threatened by factors in other        
countries that are outside of our control and force down the price of our       
software relative to our costs.                                                 

We develop and sell our products throughout the world. The prices of our  
products in countries outside of the United States are generally higher than    
our prices in the United States because of the costs incurred in localizing     
software for non-U.S. markets and the costs of producing and selling our        
products in these countries                                                     

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are also higher. Pressures to globalize our pricing structure might require     
that we reduce the sales price of our software in other countries, even though  
the costs of the software continue to be higher than in the United States.      
This would reduce our margins and result in overall declines in our revenue     
growth.                                                                         

 Negative changes in the following factors, among others, could also have an
impact on our business and results of operations outside of the United States:  

.  software "piracy" trade protection laws, policies and measures and other 
regulatory requirements affecting trade and investment;               

.  unexpected changes in regulatory requirements for software;              

.  social, political, labor or economic conditions in a specific country or 
region;                                                               

.  difficulties in staffing and managing foreign operations; and            

.  potential adverse foreign tax consequences.                              

Our intellectual property rights may be difficult to protect.                   

We diligently defend our intellectual property rights, but unlicensed     
copying of software represents a loss of revenue. While this adversely affects  
U.S. revenue, revenue loss is even more significant outside of the U.S.,        
particularly in countries where laws are less protective of intellectual        
property rights. Throughout the world, we actively educate consumers on the     
benefits of licensing genuine products and educate lawmakers on the advantages  
of a business climate where intellectual property rights are protected.         
However, continued efforts may not affect revenue positively.                   

We cannot predict the outcome or impact of antitrust claims by the U.S. and     
several states.                                                                 

 We are a defendant in a lawsuit filed by the Antitrust Division of the U.S.
Department of Justice and a group of several state attorneys general alleging   
violations of the Sherman Act and various state antitrust laws. After the       
trial, the District Court entered the Findings of Fact and Conclusions of Law   
stating that we had violated the Sherman Act and various state antitrust laws.  
A judgment was entered on June 7, 2000 that if not stayed or modified, would    
require the breakup of Microsoft into two companies and would impose severe     
product design and business conduct restrictions. On June 13, 2000, we filed    
an appeal of the judgment. On June 20, 2000, the District Court entered an      
order staying the judgment of June 7, 2000 in its entirety until the appeal     
therefrom is heard and decided, unless the stay is earlier vacated by an        
appellate court. The Court of Appeals heard oral argument on our appeal on      
February 26-27, 2001 but the Court has not issued any opinion. Although we      
believe we will obtain ultimate relief from the judgment, we can not predict    
with certainty when or the extent to which such relief will be obtained. The    
failure to obtain sufficient relief through the appeal could have a material    
adverse effect on the value of Microsoft's common stock and/or the stock of     
the two resulting companies if the divestiture is finally approved. For more    
information concerning this litigation, particularly the current status of the  
litigation which is changing very rapidly, you are encouraged to review our     
other SEC filings, which are incorporated below under "Where You Can Find More  
Information" and copies of orders, motions, briefs and other court filings      
that are available at the following websites:                                   
www.microsoft.com/presspass/trial/default.asp,                                  
www.usdoj.gov/atr/cases/ms index.htm, and www.dcd,uscourts.gov/microsoft-       
all.html.                                                                       

We may not be able to maintain our present revenue growth rate or operating     
margins.                                                                        

Our revenue growth rate in 2001 may not approach the level attained in    
prior years. Operating expenses are expected to increase from historical        
levels. Because of the fixed nature of a significant portion of such expenses,  
coupled with the possibility of slower revenue growth, operating margins may    
decrease from historical levels.                                                

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USE OF PROCEEDS 

All net proceeds from the sale of the common shares covered by this       
prospectus will go to the selling shareholders who offer and sell their         
shares. We will not receive any proceeds from the sale of the common shares by  
the selling shareholders.                                                       

SELLING SHAREHOLDERS AND PLAN OF DISTRIBUTION 

All of the common shares registered for sale under this prospectus will be
owned prior to the offer and sale of such shares by holders of put warrants     
that have been issued by us to the "selling shareholders".                      

All of the shares offered by the selling shareholders were acquired in the
settlement of put warrants that we issue from time to time. Generally, under    
the terms of the agreements relating to the put warrants, if the selling        
shareholder exercises the warrant and we elect to net-share settle the          
warrant, we will issue shares of common stock of Microsoft to the selling       
shareholder having a value equal to the product of the number of shares         
subject to the warrant times the difference between the exercise price of the   
warrant and the closing value of the Microsoft common shares on the expiration  
date of the warrant (the "settlement value"). If the Microsoft common shares    
received by the institutional investor are sold within 10 business days and     
the net proceeds are less than the settlement value, we are obligated to pay    
the difference in either cash or additional common shares which may also be     
sold pursuant to this registration statement; conversely, if the net proceeds   
are more than the settlement value, we will receive the difference in a cash    
refund (the "make-whole" amount). In addition, we may negotiate an early        
settlement of the put warrants and issue Microsoft common shares to the         
warrant holders having a value equal to the value of the put warrants at such   
early settlement date. The shares held by the selling shareholders do not       
exceed one percent (1%) of Microsoft's outstanding capitalization. In the past  
three years, Microsoft may have had commercial or investment banking            
relationships with the selling shareholders; however we do not consider these   
relationships to be material.                                                   

We are registering the common shares covered by this prospectus for the   
selling shareholders. As used in this prospectus, "selling shareholders"        
includes the pledgees, donees, transferees or others who may later hold the     
selling shareholders' interests. We will pay the costs and fees of registering  
the common shares, but the selling shareholders will pay any brokerage          
commissions, discounts or other expenses relating to the sale of the common     
shares.                                                                         

 The selling shareholders may sell the common shares in the over-the-counter
market or otherwise, at market prices prevailing at the time of sale, at        
prices related to the prevailing market prices, or at negotiated prices. In     
addition, the selling shareholders may sell some or all of their common shares  
through:                                                                        

.  a block trade in which a broker-dealer or other person may resell a      
 portion of the block, as principal or agent, in order to facilitate the
transaction;                                                          

.  purchases by a broker-dealer or other person, as principal, and resale   
by the broker-dealer for its account; or                              

.  ordinary brokerage transactions and transactions in which a broker       
solicits purchasers.                                                  

When selling the common shares, the selling shareholders may enter into   
hedging transactions. For example, the selling shareholders may:                

.  enter into transactions involving short sales of the common shares by    
broker-dealers;                                                       

.  sell common shares short themselves and deliver the shares registered    
hereby to settle such short sales or to close out stock loans incurred
in connection with their short positions;                             

.  enter into option or other types of transactions that require the        
  selling shareholder to deliver common shares to a broker-dealer or other
person, who will then resell or transfer the common shares under this 
prospectus; or                                                        

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.  loan or pledge the common shares to a broker-dealer or other person, who 
  may sell the loaned shares or, in the event of default, sell the pledged
shares.                                                               

The selling shareholders may negotiate and pay broker-dealers or other    
persons commissions, discounts or concessions for their services. Broker-       
dealers or other persons engaged by the selling shareholders may allow other    
broker-dealers or other persons to participate in resales. However, the         
selling shareholders and any broker-dealers or such other persons involved in   
the sale or resale of the common shares may qualify as "underwriters" within    
the meaning of the Section 2(a)(11) of the Securities Act of 1933 (the "1933    
Act"). In addition, the broker-dealers' or their affiliates' commissions,       
discounts or concession may qualify as underwriters' compensation under the     
1933 Act. If the selling shareholders qualify as "underwriters," they will be   
subject to the prospectus delivery requirements of Section 5(b)(2) of the 1933  
Act.                                                                            

In addition to selling their common shares under this prospectus, the     
selling shareholders may:                                                       

.  agree to indemnify any broker-dealer or agent against certain            
liabilities related to the selling of the common shares, including    
liabilities arising under the 1933 Act;                               

.  transfer their common shares in other ways not involving market makers   
or established trading markets, including directly by gift,           
distribution, or other transfer; or                                   

.  sell their common shares under Rule 144 of the 1933 Act rather than      
  under this prospectus, if the transaction meets the requirements of Rule
144.                                                                  

We have agreed to indemnify the selling shareholders against liabilities  
arising in connection with this offering, including liabilities under the 1933  
Act, or to contribute to payments that the selling shareholders may be          
required to make in that respect.                                               

Additional information related to the selling shareholders and the plan of
distribution may be provided in one or more supplemental prospectuses.          

LEGAL MATTERS 

For purposes of this offering, Preston Gates & Ellis LLP, Seattle,        
Washington, is giving its opinion on the validity of the common shares. As of   
the date of this prospectus, attorneys in Preston Gates & Ellis LLP who have    
worked on substantive matters for Microsoft own fewer than 1,000,000 common     
shares.                                                                         

EXPERTS 

The consolidated financial statements of Microsoft for each of the three  
years in the period ended June 30, 1999, incorporated by reference in this      
Prospectus from Microsoft's Annual Report on Form 10-K, have been audited by    
Deloitte & Touche LLP, independent public accountants, as stated in their       
report which is incorporated herein by reference, and have been so              
incorporated in reliance upon such report given upon the authority of said      
firm as experts in accounting and auditing.                                     

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WHERE YOU CAN FIND MORE INFORMATION 

.  Government Filings. We file annual, quarterly and special reports and    
other information with the Securities and Exchange Commission (the    
"SEC"). You may read and copy any document that we file at the SEC's  
public reference rooms in Washington, D.C., New York, New York, and   
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further  
information on the public reference rooms. Our SEC filings are also   
available to you free of charge at the SEC's web site at www.sec.gov. 
 Most of our SEC filings are also available to you free of charge at our
web site at www.microsoft.com/MSFT.                                   

.  Stock Market. The common shares are traded as "National Market           
Securities" on the Nasdaq National Market. Material filed by Microsoft
can be inspected at the offices of the National Association of        
Securities Dealers, Inc., Reports Section, 1735 K Street, N.W.,       
Washington, D.C. 20006.                                               

.  Information Incorporated by Reference. The SEC allows us to "incorporate 
  by reference" the information we file with them, which means that we can
disclose important information to you by referring you to those       
  documents. The information incorporated by reference is considered to be
  part of this prospectus, and information that we file later with the SEC
will automatically update and supersede previously filed information, 
including information contained in this document.                     

We incorporate by reference the documents listed below and any future     
filings we will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of   
the Securities Exchange Act of 1934 until this offering has been completed:     

1.  Microsoft's Current Report on Form 8-K dated June 16, 2000.             

2.  Microsoft's Annual Report on Form 10-K, which includes various pages    
from its Annual Report to Shareholders, for the year ended June 30, 
2000.                                                               

3.  Microsoft's Quarterly Report on Form 10-Q for the quarters ended        
September 30, 2000 and December 31, 2000.                           

4.  Microsoft's Current Report on Form 8-K dated July 19, 1999.             

5.  Microsoft's Proxy Statement dated September 28, 2000.                   

6.  The description of the common stock of Microsoft, which is contained in 
the registration statement of Microsoft filed on Form S-3, dated    
December 13, 1996.                                                  

You may request free copies of these filings by writing or telephoning us 
at the following address:                                                       

Investor Relations Department                 
Microsoft Corporation                         
One Microsoft Way                             
Redmond, Washington 98052-6399                
(425) 882-8080                                
email: msft@microsoft.com                     

You may also review and/or download free copies of items 2, 3 and 5 at our
website at www.microsoft.com/MSFT. Information contained on this and any other  
website referenced in this prospectus is not part of this prospectus.           

9 

Dates Referenced Herein   and   Documents Incorporated by Reference

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This ‘424B3’ Filing		Date		First		Last			Other Filings
Filed on:		3/30/01		1
		3/28/01		1
		12/31/00		9					10-Q
		9/30/00		9					10-Q
		9/28/00		9					10-K,  DEF 14A
		6/30/00		9					10-K
		6/20/00		6
		6/16/00		9					8-K
		6/13/00		6
		6/7/00		6					8-K
		7/19/99		9					8-K
		6/30/99		8					10-K
		12/13/96		9					S-3/A
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