Rowe Price Group. But the Alphabet company has arguably made more strides in terms of commercializing its technology. Last October, Waymo announced it would begin offering rides to paid customers in its fully driverless vehicles without safety drivers in Phoenix, Arizona. Cruise recently began testing its fully driverless vehicles in San Francisco for the first time.
The company had planned to launch a commercial taxi service in but failed to do so , and it has yet to publicly commit to a new date. Last year, Cruise unveiled the Cruise Origin , a fully driverless prototype vehicle without a steering wheel, pedals, or any controls typically associated with human driving.
Cruise recently unveiled a new set of safety protocols intended to keep people socially distant during trips and the vehicle sanitized between fares. But the software giant is still poised to profit from the technology, especially when it relates to vehicle-to-vehicle communication. Today, connected car networks ingest a deluge of digital information, including advanced driver-assist features like automatic braking, adaptive cruise control, and lane-keep assist.
Soon enough, that information will be the backbone of autonomy. Microsoft has been working quietly behind the scenes to build a connected vehicle platform on top of its Azure cloud system. Renault Nissan became the first to commit to it in January Investing more in a cybersecurity team remains a challenge within many organizations where cybersecurity spending cycles and headcount spending budgets are often two separate exercises, according to Brennan P.
As criminal hacks become more sophisticated, especially ransomware, it's sending the cost of cybersecurity hires even higher. That's led to a recognition from boards of directors that cybersecurity is not just a "tech problem," and it has created new demand for cybersecurity positions, but also makes it even more difficult to compete for a cybersecurity talent pool that is much smaller than other technology fields, and increases the risk of staff defections before technology can even be deployed, he said.
The people aspect is just like the tech investment. It needs to be continuously maintained and lots of programs and security organizations don't think about that. But we are really trying to change that. The labor shortage has to be part of the plan. A gap of hundreds of thousands of workers won't be quickly filled, but cybersecurity experts say there are a variety of solutions that will help in the years ahead, and the large sums being spent by the biggest tech companies including Microsoft and Google can make a difference.
The cybersecurity industry is thinking differently about how it hires. In the past, many firms limited their search to skilled technologists with a specific skill set, but Baybeck said now many organizations are looking to broader developer and engineering communities to attack problems, such as bad code that can lead to vulnerabilities.
You simply can't find them. Climate impact Meaningful, measurable climate solutions in the areas of carbon, water, waste, and ecosystems. Underfunded markets Investing where the capital need for climate solutions is not being met. Climate equity Ensuring developing economies and underserved communities benefit from climate solutions. Investing in climate innovation Below are examples of companies and fund managers in which the Microsoft Climate Innovation Fund has made investment commitments since its launch in Aclima Learn about Aclima.
AutoGrid Learn about AutoGrid. MBD operating income increased, primarily due to revenue growth, offset in part by higher cost of revenue and research and development expenses. Research and development expenses increased, due mainly to an increase in headcount-related expenses. Entertainment and Devices Division "EDD" develops and markets products and services designed to entertain and connect people.
We acquired Skype on October 13, , and its results of operations from that date are reflected in our results discussed below. In June , we announced that we expect our next generation console, Xbox One, to be available for purchase in the second quarter of fiscal year EDD revenue increased, due to higher Windows Phone and Skype revenue, offset in part by lower Xbox platform revenue.
Skype revenue increased, due primarily to including a full year of results in fiscal year We shipped 9. EDD operating income increased, primarily due to revenue growth and lower cost of revenue, offset in part by higher operating expenses.
EDD revenue increased primarily reflecting Skype and Windows Phone revenue, offset in part by lower Xbox platform revenue. We shipped Video game revenue decreased due to strong sales of Halo Reach in the prior year. EDD operating income decreased reflecting higher cost of revenue and operating expenses, offset in part by revenue growth. Certain corporate-level activity is not allocated to our segments, including costs of: broad-based sales and marketing; product support services; human resources; legal; finance; information technology; corporate development and procurement activities; research and development; costs of operating our retail stores; and legal settlements and contingencies.
Corporate-level expenses increased due mainly to full year Puerto Rican excise taxes, higher headcount-related expenses, and changes in foreign currency exchange rates. Cost of revenue includes: manufacturing and distribution costs for products sold, including Xbox and Surface, and programs licensed; operating costs related to product support service centers and product distribution centers; costs incurred to include software on PCs sold by OEMs, to drive traffic to our websites, and to acquire online advertising space "traffic acquisition costs" ; costs incurred to support and maintain internet-based products and services, including datacenter costs and royalties; warranty costs; inventory valuation adjustments; costs associated with the delivery of consulting services; and the amortization of capitalized research and development costs.
Cost of revenue increased reflecting higher headcount-related expenses, payments made to Nokia, and changes in the mix of products and services sold. Research and development expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with product development.
Research and development expenses also include third-party development and programming costs, localization costs incurred to translate software for international markets, and the amortization of purchased software code.
Sales and marketing expenses include payroll, employee benefits, stock-based compensation expense, and other headcount-related expenses associated with sales and marketing personnel and the costs of advertising, promotions, trade shows, seminars, and other programs. General and administrative expenses include payroll, employee benefits, stock-based compensation expense, severance expense, and other headcount-related expenses associated with finance, legal, facilities, certain human resources and other administrative personnel, certain taxes, and legal and other administrative fees.
We test goodwill for impairment annually on May 1 at the reporting unit level using a fair value approach. No impairment of goodwill was identified as of May 1, Our goodwill impairment test as of May 1, , indicated that OSD's carrying value exceeded its estimated fair value. We use derivative instruments to: manage risks related to foreign currencies, equity prices, interest rates, and credit; enhance investment returns; and facilitate portfolio diversification.
Gains and losses from changes in fair values of derivatives that are not designated as hedges are primarily recognized in other income expense. Other than those derivatives entered into for investment purposes, such as commodity contracts, the gains losses are generally economically offset by unrealized gains losses in the underlying available-for-sale securities, which are recorded as a component of other comprehensive income "OCI" until the securities are sold or other-than-temporarily impaired, at which time the amounts are reclassified from accumulated other comprehensive income "AOCI" into other income expense.
Dividends and interest income decreased due to lower yields on our fixed-income investments, offset in part by higher average portfolio investment balances. Net recognized gains on investments decreased primarily due to lower gains on sales of equity and fixed-income securities and a gain recognized on the partial sale of our Facebook holding in the prior year, offset in part by lower other-than-temporary impairments.
Net losses on derivatives decreased due to gains on equity derivatives in the current fiscal year as compared with losses in the prior fiscal year, and lower losses on commodity and foreign exchange derivatives as compared to the prior fiscal year, offset in part by losses on interest-rate derivatives in the current fiscal year as compared to gains in the prior fiscal year.
Interest expense increased due to our increased issuance of debt in the prior year. Net recognized gains on investments increased, primarily due to higher gains on sales of equity and fixed-income securities and a gain recognized on the partial sale of our Facebook holding upon the initial public offering on May 18, , offset in part by higher other-than-temporary impairments.
Net losses on derivatives increased due to losses on commodity and equity derivatives in the current fiscal year as compared with gains in the prior fiscal year, offset in part by fewer losses on foreign exchange contracts in the current fiscal year as compared to the prior fiscal year. Changes in foreign currency remeasurements were primarily due to currency movements net of our hedging activities. Our effective tax rate was lower than the U.
Changes in the mix of income before income taxes between the U. We supply Windows, our primary Windows Division product, to customers through our U. In fiscal years and , our U. The primary driver for the increase in the U. This increase relates primarily to transfer pricing, including transfer pricing developments in certain foreign tax jurisdictions, primarily Denmark.
While we settled a portion of the I. In February , the I. As of June 30, , the primary unresolved issue relates to transfer pricing which could have a significant impact on our financial statements if not resolved favorably. We do not believe it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months because we do not believe the remaining open issues will be resolved within the next 12 months.
We also continue to be subject to examination by the I. We are subject to income tax in many jurisdictions outside the U. Our operations in certain jurisdictions remain subject to examination for tax years to , some of which are currently under audit by local tax authorities. The resolutions of these audits are not expected to be material to our financial statements. Our effective tax rates were lower than the U. In fiscal year , we settled a portion of an I.
The primary driver for the decrease in the U. Our short-term investments are primarily to facilitate liquidity and for capital preservation. They consist predominantly of highly liquid investment-grade fixed-income securities, diversified among industries and individual issuers.
The investments are predominantly U. Our fixed-income investments are exposed to interest rate risk and credit risk. The credit risk and average maturity of our fixed-income portfolio are managed to achieve economic returns that correlate to certain fixed-income indices.
The settlement risk related to these investments is insignificant given that the short-term investments held are primarily highly liquid investment-grade fixed-income securities. While we own certain mortgage-backed and asset-backed fixed-income securities, our portfolio as of June 30, does not contain material direct exposure to subprime mortgages or structured vehicles that derive their value from subprime collateral.
We routinely monitor our financial exposure to both sovereign and non-sovereign borrowers and counterparties. Our gross exposures to our customers and investments in Portugal, Italy, Ireland, Greece, and Spain are individually and collectively not material. We lend certain fixed-income and equity securities to increase investment returns.
The loaned securities continue to be carried as investments on our balance sheet. Cash received is recorded as an asset with a corresponding liability.
Intra-year variances in the amount of securities loaned are mainly due to fluctuations in the demand for the securities. In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to determine the fair value of our financial instruments.
This pricing methodology applies to our Level 1 investments, such as exchange-traded mutual funds, domestic and international equities, and U. If quoted prices in active markets for identical assets or liabilities are not available to determine fair value, then we use quoted prices for similar assets and liabilities or inputs other than the quoted prices that are observable either directly or indirectly.
This pricing methodology applies to our Level 2 investments such as corporate notes and bonds, foreign government bonds, mortgage-backed securities, and U. Level 3 investments are valued using internally developed models with unobservable inputs. Assets and liabilities measured using unobservable inputs are an immaterial portion of our portfolio.
A majority of our investments are priced by pricing vendors and are generally Level 1 or Level 2 investments as these vendors either provide a quoted market price in an active market or use observable inputs for their pricing without applying significant adjustments.
Broker pricing is used mainly when a quoted price is not available, the investment is not priced by our pricing vendors, or when a broker price is more reflective of fair values in the market in which the investment trades. Our broker-priced investments are generally classified as Level 2 investments because the broker prices these investments based on similar assets without applying significant adjustments.
In addition, all of our broker-priced investments have a sufficient level of trading volume to demonstrate that the fair values used are appropriate for these investments.
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