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Is Microsoft the next Apple?

October 16, 2013

Microsoft Corp. NASDAQ: MSFT
Disclosure!
Longboard	
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The	
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control.	
  	
  
	
  
Although	
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  the	
  Presenta>on	
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  material	
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necessary	
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  or	
  implied,	
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accuracy	
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  completeness	
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  Presenta>on	
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  other	
  wriNen	
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  (or	
  any	
  inaccuracies	
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  omissions	
  therein).	
  
Thus,	
  shareholders	
  and	
  others	
  should	
  conduct	
  their	
  own	
  independent	
  inves>ga>on	
  and	
  analysis	
  of	
  the	
  Presenta>on	
  and	
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  and	
  
other	
  companies	
  men>oned.	
  	
  
	
  
The	
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  advice	
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  recommenda>on	
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  any	
  securi>es.	
  Except	
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indicated,	
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  date	
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Presenta>on	
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  provide	
  any	
  addi>onal	
  materials.	
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any	
  ac>on	
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  MicrosoB	
  or	
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  other	
  company.	
  	
  
	
  
As	
  used	
  herein,	
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  context	
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directors,	
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  employees.	
  	
  

For Investment Professional Use Only

2	
  
!

“The	
  rumors	
  of	
  my	
  death	
  have	
  
been	
  greatly	
  exaggerated.”	
  	
  

3	
  
Perception vs. Reality!
§  Microso>	
  currently	
  
suffers	
  from	
  a	
  legacy	
  
percepAon	
  problem.	
  
	
  	
  
§  We	
  think	
  Mr.	
  Market’s	
  
outlook	
  for	
  Mr.	
  So>y	
  
does	
  not	
  match	
  reality.	
  	
  	
  

Reality	
  	
  	
  	
  

MFST	
  

The	
  
MicrosoB	
  
Myth	
  
PercepAon	
  

4	
  
The Future of Microsoft!
§  We	
  believe	
  that	
  Microso>	
  stock	
  
will	
  trade	
  over	
  $60	
  within	
  3	
  
years	
  and	
  that	
  over	
  the	
  next	
  5	
  
years	
  Microso>	
  will	
  re-­‐emerge	
  
as	
  the	
  market’s	
  most	
  valuable	
  
company.	
  	
  
	
  
§  The	
  catalyst	
  	
  for	
  this	
  growth	
  
will	
  be	
  driven	
  by	
  a	
  market	
  
dominance	
  in	
  enterprise	
  cloud	
  
compuAng	
  and	
  high	
  value	
  tools	
  
and	
  services	
  and	
  a	
  powerful	
  
differenAaAng	
  plaOorm	
  of	
  
Android	
  +	
  Windows	
  hybrid	
  
devices.	
  	
  	
  

	
  	
  
$60	
  
$55	
  

Microsoft: MSFT

	
  	
  	
  	
  ?	
  	
  ?	
  
	
  	
  

$50	
  
$45	
  
$40	
  
$35	
  
$30	
  
$25	
  
$20	
  
$15	
  

5	
  
Why Microsoft?!
Today…	
  

Tomorrow…	
  

The	
  “One	
  Microso>”	
  turnaround	
  strategy	
  
has	
  successfully	
  reposiAoned	
  the	
  company	
  
for	
  enormous	
  future	
  growth,	
  innovaAon,	
  
operaAng	
  efficiency	
  and	
  accountability	
  
	
  

Microso>	
  grows	
  to	
  dominate	
  the	
  global	
  
enterprise	
  cloud	
  market	
  	
  	
  	
  	
  
	
  

New	
  incoming	
  CEO	
  and	
  acAvist	
  board	
  
members	
  to	
  maximize	
  shareholder	
  value	
  
and	
  drive	
  strategy	
  execuAon	
  
	
  

IntegraAon	
  of	
  dual	
  OS	
  Android	
  +	
  
Windows	
  hybrid	
  devices	
  is	
  a	
  game	
  
change	
  strategy	
  for	
  the	
  devices	
  
business	
  
	
  
Microso>	
  delivers	
  a	
  suite	
  of	
  the	
  most	
  
producAve	
  and	
  differenAated	
  devices	
  in	
  
the	
  world	
  and	
  the	
  enterprise	
  market	
  
adopts	
  them	
  
	
  
6	
  
Current Market Perception!
	
  
§  Microso>	
  
management	
  has	
  
failed	
  at	
  everything	
  
in	
  the	
  last	
  decade	
  
and	
  Google,	
  
Facebook,	
  Apple	
  and	
  
Amazon	
  are	
  the	
  new	
  
technology	
  leaders.	
  

7	
  
Market Perception!
	
  
	
  
§  Culturally	
  irrelevant	
  
brand	
  and	
  legacy	
  
technology	
  company	
  
of	
  the	
  1990s.	
  

8	
  
Market Perception!
	
  
	
  
§  Android	
  and	
  iOS	
  are	
  
the	
  technology	
  OS	
  
standard	
  of	
  the	
  
future	
  and	
  Windows	
  
is	
  a	
  dying	
  plaOorm	
  
that	
  will	
  destroy	
  the	
  
Microso>	
  franchise.	
  

9	
  
Perception vs. Reality!
Percep>on	
  

Reality	
  

Can’t	
  win	
  customers	
  

Dominant	
  and	
  growing	
  enterprise	
  
company	
  with	
  high	
  value	
  products	
  	
  

Dying	
  with	
  PCs	
  

Growing	
  recurring	
  revenue	
  base	
  	
  
	
  

Losing	
  to	
  Google,	
  Amazon	
  

Office	
  365	
  is	
  massive	
  success	
  
	
  

Irrelevant	
  in	
  Cloud	
  	
  

#1	
  posiAoned	
  enterprise	
  cloud	
  business	
  
growing	
  exponenAally	
  	
  	
  
	
  

Devices	
  can’t	
  compete	
  	
  

Game	
  changer	
  opportunity	
  with	
  Android	
  
+	
  Windows	
  hybrid	
  devices	
  	
  
	
  

10	
  
Forget PCs, Enterprise is the Story!
	
  MicrosoB	
  Business	
  Division	
  (MBD)	
  +	
  Server	
  &	
  Tools	
  (S&T)	
  

CAGR	
  

	
  	
  In	
  $Bn	
  
$45	
  
	
  
$40	
  
	
  
$35	
  
	
  
$30	
  
	
  
	
  
$25	
  
	
  
$20	
  
	
  
$15	
  
	
  
$10	
  
	
  
	
  	
  $5	
  
	
  
	
  	
  	
  0	
  

$42.6	
  

+7.4%	
  

Revenue	
  

$23.9	
  
(54%)	
  

EBIT1	
  
(Margin)	
  

$39.2	
  
$32.1	
  

$33.1	
  

$34.2	
  

+8.0%	
  
$16.9	
  
(53%)	
  

$16.5	
  
(50%)	
  

$17.2	
  
(50%)	
  

$20.9	
  
(53%)	
  

	
  	
  	
  	
  	
  	
  	
  2008	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2009	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2010	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2011	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2012	
  
1Excludes	
  Corporate	
  Expense	
  and	
  2012	
  aQuanAve	
  Charge	
  	
  

Source:	
  Company	
  Financial	
  Statements	
  

11	
  
Enterprise is 70% of EBIT and Growing! !
MBD	
  +	
  S&T	
  as	
  Percentage	
  of	
  Total	
  Business	
  
%	
  EBIT	
  

70%	
  
	
  
	
  
	
  
	
  
	
  
65%	
  
	
  
	
  
	
  
	
  
	
  
	
  
60%	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
	
  
55%	
  
	
  
	
  
	
  	
  	
  
50%	
  

%	
  Revenue	
  

	
  	
  	
  	
  	
  	
  	
  2008	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2009	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2010	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2011	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  2012	
  
These	
  Businesses	
  are	
  now	
  70%	
  of	
  EBIT1	
  
1Excludes	
  Corporate	
  Expense	
  and	
  2012	
  aQuanAve	
  Charge	
  	
  

Source:	
  Company	
  Financial	
  Statements	
  

12	
  
Growing Enterprise Businesses!
Product	
  

Revenue	
  

Growth	
  Rate	
  

Market	
  Opportunity	
  

SharePoint	
  

>$2Bn	
  

Growing	
  Double	
  Digits	
  

$9.5	
  Bn	
  Content	
  Management,	
  
Project	
  Management,	
  and	
  
CollaboraAon	
  Market	
  

Lync	
  

$400mm	
  

N/A	
  

$17Bn	
  Unified	
  CommunicaAons	
  
Market	
  

System	
  Center	
  

>$1Bn	
  

Growing	
  >	
  20%	
  

$4Bn	
  Server	
  VirtualizaAon	
  Market	
  
$19.5Bn	
  IT	
  OperaAons	
  Market	
  

Dynamics	
  

>$1Bn	
  

Growing	
  Double	
  Digits	
  

N/A	
  

SQL	
  Server	
  

>$5Bn	
  

14.6%	
  YOY	
  Growth	
  

$28Bn	
  RDBMS	
  Market	
  
	
  

Windows	
  Azure	
  

>$1B?	
  

ExponenAal	
  Growth	
  

MulA-­‐Billion	
  Dollar	
  Opportunity	
  

Visual	
  Studio	
  

>$1Bn	
  

Growing	
  Double	
  Digits?	
  

N/A	
  

ApplicaAon	
  VirtualizaAon	
   >$1Bn	
  
	
  

Growing	
  Double	
  Digits?	
  

N/A	
  

Source:	
  SharePoint	
  revenue	
  from	
  11/12/2012	
  press	
  release;	
  Dynamics	
  revenue	
  from	
  company	
  financial	
  statements;	
  all	
  other	
  
values	
  from	
  MSFT	
  presentaAon	
  at	
  UBS	
  Tech	
  Conference,	
  11/15/2012.	
  Market	
  Size	
  esAmates	
  from	
  Gartner.	
  

13	
  
Building the #1 Enterprise Cloud!
§  Trusted	
  enterprise	
  
brand	
  and	
  partner	
  
	
  
§  Corporate	
  IT	
  managers	
  
prefer	
  Microso>	
  
	
  
§  Incumbent	
  Advantage	
  
	
  
§  Enterprise	
  Agreements	
  
	
  
§  #Winning	
  
	
  

14	
  
Office 365 Facts!
Office	
  is	
  not	
  Windows!	
  
	
  

§  Office	
  does	
  not	
  need	
  Windows	
  
to	
  thrive.	
  
	
  
§  Ubiquitous	
  and	
  familiar	
  around	
  
the	
  world.	
  750¹	
  million	
  users	
  
worldwide.	
  
	
  
§  Office	
  365	
  plaOorm	
  strategy	
  
has	
  successfully	
  protected	
  the	
  
crown	
  jewel.	
  
	
  
§  Improved	
  revenue	
  and	
  margin	
  
opportunity	
  in	
  the	
  cloud.	
  
1Source:	
  Steve	
  Ballmer,	
  Worldwide	
  Partner	
  Conference	
  2011	
  	
  

15	
  
Office 365 Facts!
Win-­‐Win	
  

	
  

Case	
  Study:	
  ValueAct	
  Capital	
  
§  30	
  users	
  
§  4	
  Year	
  upgrade	
  cycle	
  

§ 
§ 
§ 
§ 
§ 

Annual	
  Cost	
  Per	
  User:	
  
$153	
  
Server	
  Hardware	
  
	
  
Windows	
  Server	
  2008R2	
  
	
  
Exchange	
  Server	
  2010	
  
	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Exchange	
  CALs	
  
	
  
	
  
	
  
	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  Office	
  2013	
  

$25	
  
$6	
  
$6	
  
$16	
  

Less	
  reason	
  to	
  consider	
  Google	
  
Cost	
  savings	
  for	
  us	
  
Easier	
  to	
  deploy	
  latest	
  version	
  
Revenue	
  upli>	
  to	
  Microso>	
  (20%)	
  
SAckier	
  relaAonship	
  for	
  future	
  products	
  

$150	
  

With	
  Addi>onal	
  Upside:	
  

	
  $128	
  

$150	
  
$100	
  

	
  	
  	
  	
  	
  	
  	
  	
  	
  Transac>onal	
  

	
  	
  	
  	
  	
  	
  	
  	
  	
  Office	
  365	
  

Office	
  365	
  
Small	
  Business	
  
Premium	
  

§  Combat	
  piracy	
  (42%	
  of	
  all	
  so>ware	
  
was	
  obtained	
  through	
  piracy	
  in	
  
2011	
  according	
  to	
  the	
  BSA1)	
  
§  New	
  use	
  cases	
  (e.g.	
  email	
  for	
  non-­‐
knowledge	
  workers)	
  
12011	
  BSA	
  Global	
  So>ware	
  Piracy	
  Study,	
  May	
  2012	
  	
  

Source:	
  ValueAct	
  Capital	
  PresentaAon	
  

16	
  
Future of Microsoft Device Strategy!
Windows	
  +	
  Android	
  Hybrids	
  
	
  
§  Game	
  Changer	
  
§  One	
  Device,	
  Dual	
  Boot	
  
§  Most	
  producAve	
  
§  Most	
  choice	
  
§  Highest	
  Value	
  
§  Enterprise	
  Demand	
  

17	
  
Summary!
§  Microso>	
  is	
  a	
  dominant	
  
and	
  growing	
  global	
  
enterprise	
  technology	
  
company	
  which	
  has	
  
adjusted	
  its	
  strategy	
  with	
  
modern	
  ideas,	
  innovaAon	
  
&	
  leadership.	
  
	
  
§  The	
  new	
  “One	
  Microso>”	
  is	
  
well	
  on	
  its	
  way	
  to	
  re-­‐
emerging	
  as	
  the	
  largest	
  
market	
  capitalizaAon	
  
company	
  in	
  the	
  years	
  
ahead.	
  
18	
  
About Longboard!
An	
  alterna>ve	
  approach	
  to	
  naviga>ng	
  the	
  
investment	
  ocean	
  
	
  
	
  
Longboard	
  is	
  an	
  asset	
  management	
  firm	
  
specializing	
  in	
  trend	
  following	
  strategies.	
  The	
  
firm’s	
  principals	
  have	
  been	
  invesAng	
  in	
  and	
  
researching	
  trend	
  following	
  strategies	
  since	
  the	
  
late	
  1990s.	
  	
  
	
  
We	
  manage	
  both	
  private	
  investment	
  funds	
  and	
  
mutual	
  funds	
  applying	
  our	
  trend	
  following	
  
investment	
  style.	
  	
  
	
  

	
  
	
  
	
  
“Trends	
  come	
  like	
  a	
  series	
  of	
  ocean	
  
waves,	
  bringing	
  the	
  high	
  Ade	
  when	
  
things	
  are	
  good	
  and,	
  as	
  condiAons	
  
recede,	
  the	
  low	
  Ade	
  appears.	
  These	
  
trends	
  come	
  unexpectedly,	
  
unpredictably,	
  and	
  they	
  have	
  to	
  be	
  
weathered	
  with	
  temperance,	
  poise,	
  and	
  
paAence-­‐	
  good	
  or	
  bad.”	
  
	
  
Jesse	
  Livermore,	
  Reminiscences	
  of	
  a	
  
Stock	
  Operator	
  

19	
  
Contact Us!
To	
  learn	
  more	
  about	
  Longboard,	
  connect	
  with	
  us	
  at:	
  
	
  
	
  info@longboard-­‐am.com	
  
	
  	
  	
  	
  	
  	
  
	
  602.910.6961	
  
	
  
	
  	
  	
  	
  	
  	
  
	
  2355	
  East	
  Camelback	
  Road,	
  Suite	
  750	
  
	
  	
  	
  	
  	
  
	
  Phoenix,	
  Arizona	
  85016	
  
	
  
	
  	
  	
  	
  	
  	
  
	
  www.longboardmutualfunds.com	
  
	
  	
  	
  	
  	
  	
  
	
  www.longboard-­‐am.com	
  
	
  
	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  
	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  	
  

20	
  

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Is Microsoft the next Apple?

  • 1. Is Microsoft the next Apple? October 16, 2013 Microsoft Corp. NASDAQ: MSFT
  • 2. Disclosure! Longboard  Asset  Management,  LLC  (“Longboard”)  is  an  investment  advisor  to  funds  that  are  in  the  business  of  buying  and  selling  securi>es   and  other  financial  instruments.       Longboard  currently  has  a  long  posi>on  in  MicrosoB  Corpora>on  (“MicrosoB”)  common  stock.  We  do  not  own  any  op>ons  on  MicrosoB   common  stock.     Longboard  will  profit  if  MicrosoB  stock  increases  in  value  and  will  lose  money  if  it  decreases  in  value.  Longboard  may  change  its  views   about  or  investment  posi>on  in  MicrosoB  at  any  >me  for  any  reason  or  for  no  reason.         Longboard  may  buy,  sell,  cover  or  otherwise  change  the  form  or  substance  of  its  MicrosoB  investment.  Longboard  disclaims  any  obliga>on   to  no>fy  the  market  of  any  such  changes.       The  informa>on  and  opinions  expressed  in  this  presenta>on  (the  “Presenta>on”)  is  based  on  publicly  available  informa>on  about   MicrosoB.  Longboard  recognizes  that  others  may  disagree  with  Longboard’s  analyses,  conclusions  and  opinions.       The  Presenta>on  includes  forward-­‐looking  statements,  es>mates,  projec>ons  and  opinions.  Such  statements,  es>mates,  projec>ons  and   opinions  may  prove  to  be  substan>ally  inaccurate  and  are  inherently  subject  to  significant  risks  and  uncertain>es  beyond  Longboard’s   control.       Although  Longboard  believes  the  Presenta>on  is  substan>ally  accurate  in  all  material  respects  and  does  not  omit  to  state  material  facts   necessary  to  make  the  statements  therein  not  misleading,  Longboard  makes  no  representa>on  or  warranty,  express  or  implied,  as  to  the   accuracy  or  completeness  of  the  Presenta>on  or  any  other  wriNen  or  oral  communica>on  it  makes  with  respect  to  MicrosoB  and   Longboard  expressly  disclaims  any  liability  rela>ng  to  the  Presenta>on  or  such  communica>ons  (or  any  inaccuracies  or  omissions  therein).   Thus,  shareholders  and  others  should  conduct  their  own  independent  inves>ga>on  and  analysis  of  the  Presenta>on  and  of  MicrosoB  and   other  companies  men>oned.       The  Presenta>on  is  not  investment  advice  or  a  recommenda>on  or  solicita>on  to  buy  or  sell  any  securi>es.  Except  where  otherwise   indicated,  the  Presenta>on  speaks  as  of  the  date  hereof,  and  Longboard  undertakes  no  obliga>on  to  correct,  update  or  revise  the   Presenta>on  or  to  otherwise  provide  any  addi>onal  materials.  Longboard  also  undertakes  no  commitment  to  take  or  refrain  from  taking   any  ac>on  with  respect  to  MicrosoB  or  any  other  company.       As  used  herein,  except  to  the  extent  the  context  otherwise  requires,  Longboard  includes  its  affiliates  and  its  and  their  respec>ve  partners,   directors,  officers  and  employees.     For Investment Professional Use Only 2  
  • 3. ! “The  rumors  of  my  death  have   been  greatly  exaggerated.”     3  
  • 4. Perception vs. Reality! §  Microso>  currently   suffers  from  a  legacy   percepAon  problem.       §  We  think  Mr.  Market’s   outlook  for  Mr.  So>y   does  not  match  reality.       Reality         MFST   The   MicrosoB   Myth   PercepAon   4  
  • 5. The Future of Microsoft! §  We  believe  that  Microso>  stock   will  trade  over  $60  within  3   years  and  that  over  the  next  5   years  Microso>  will  re-­‐emerge   as  the  market’s  most  valuable   company.       §  The  catalyst    for  this  growth   will  be  driven  by  a  market   dominance  in  enterprise  cloud   compuAng  and  high  value  tools   and  services  and  a  powerful   differenAaAng  plaOorm  of   Android  +  Windows  hybrid   devices.           $60   $55   Microsoft: MSFT        ?    ?       $50   $45   $40   $35   $30   $25   $20   $15   5  
  • 6. Why Microsoft?! Today…   Tomorrow…   The  “One  Microso>”  turnaround  strategy   has  successfully  reposiAoned  the  company   for  enormous  future  growth,  innovaAon,   operaAng  efficiency  and  accountability     Microso>  grows  to  dominate  the  global   enterprise  cloud  market             New  incoming  CEO  and  acAvist  board   members  to  maximize  shareholder  value   and  drive  strategy  execuAon     IntegraAon  of  dual  OS  Android  +   Windows  hybrid  devices  is  a  game   change  strategy  for  the  devices   business     Microso>  delivers  a  suite  of  the  most   producAve  and  differenAated  devices  in   the  world  and  the  enterprise  market   adopts  them     6  
  • 7. Current Market Perception!   §  Microso>   management  has   failed  at  everything   in  the  last  decade   and  Google,   Facebook,  Apple  and   Amazon  are  the  new   technology  leaders.   7  
  • 8. Market Perception!     §  Culturally  irrelevant   brand  and  legacy   technology  company   of  the  1990s.   8  
  • 9. Market Perception!     §  Android  and  iOS  are   the  technology  OS   standard  of  the   future  and  Windows   is  a  dying  plaOorm   that  will  destroy  the   Microso>  franchise.   9  
  • 10. Perception vs. Reality! Percep>on   Reality   Can’t  win  customers   Dominant  and  growing  enterprise   company  with  high  value  products     Dying  with  PCs   Growing  recurring  revenue  base       Losing  to  Google,  Amazon   Office  365  is  massive  success     Irrelevant  in  Cloud     #1  posiAoned  enterprise  cloud  business   growing  exponenAally         Devices  can’t  compete     Game  changer  opportunity  with  Android   +  Windows  hybrid  devices       10  
  • 11. Forget PCs, Enterprise is the Story!  MicrosoB  Business  Division  (MBD)  +  Server  &  Tools  (S&T)   CAGR      In  $Bn   $45     $40     $35     $30       $25     $20     $15     $10        $5          0   $42.6   +7.4%   Revenue   $23.9   (54%)   EBIT1   (Margin)   $39.2   $32.1   $33.1   $34.2   +8.0%   $16.9   (53%)   $16.5   (50%)   $17.2   (50%)   $20.9   (53%)                2008                              2009                              2010                              2011                              2012   1Excludes  Corporate  Expense  and  2012  aQuanAve  Charge     Source:  Company  Financial  Statements   11  
  • 12. Enterprise is 70% of EBIT and Growing! ! MBD  +  S&T  as  Percentage  of  Total  Business   %  EBIT   70%             65%               60%                   55%             50%   %  Revenue                2008                                                  2009                                            2010                                          2011                                              2012   These  Businesses  are  now  70%  of  EBIT1   1Excludes  Corporate  Expense  and  2012  aQuanAve  Charge     Source:  Company  Financial  Statements   12  
  • 13. Growing Enterprise Businesses! Product   Revenue   Growth  Rate   Market  Opportunity   SharePoint   >$2Bn   Growing  Double  Digits   $9.5  Bn  Content  Management,   Project  Management,  and   CollaboraAon  Market   Lync   $400mm   N/A   $17Bn  Unified  CommunicaAons   Market   System  Center   >$1Bn   Growing  >  20%   $4Bn  Server  VirtualizaAon  Market   $19.5Bn  IT  OperaAons  Market   Dynamics   >$1Bn   Growing  Double  Digits   N/A   SQL  Server   >$5Bn   14.6%  YOY  Growth   $28Bn  RDBMS  Market     Windows  Azure   >$1B?   ExponenAal  Growth   MulA-­‐Billion  Dollar  Opportunity   Visual  Studio   >$1Bn   Growing  Double  Digits?   N/A   ApplicaAon  VirtualizaAon   >$1Bn     Growing  Double  Digits?   N/A   Source:  SharePoint  revenue  from  11/12/2012  press  release;  Dynamics  revenue  from  company  financial  statements;  all  other   values  from  MSFT  presentaAon  at  UBS  Tech  Conference,  11/15/2012.  Market  Size  esAmates  from  Gartner.   13  
  • 14. Building the #1 Enterprise Cloud! §  Trusted  enterprise   brand  and  partner     §  Corporate  IT  managers   prefer  Microso>     §  Incumbent  Advantage     §  Enterprise  Agreements     §  #Winning     14  
  • 15. Office 365 Facts! Office  is  not  Windows!     §  Office  does  not  need  Windows   to  thrive.     §  Ubiquitous  and  familiar  around   the  world.  750¹  million  users   worldwide.     §  Office  365  plaOorm  strategy   has  successfully  protected  the   crown  jewel.     §  Improved  revenue  and  margin   opportunity  in  the  cloud.   1Source:  Steve  Ballmer,  Worldwide  Partner  Conference  2011     15  
  • 16. Office 365 Facts! Win-­‐Win     Case  Study:  ValueAct  Capital   §  30  users   §  4  Year  upgrade  cycle   §  §  §  §  §  Annual  Cost  Per  User:   $153   Server  Hardware     Windows  Server  2008R2     Exchange  Server  2010                              Exchange  CALs                                                Office  2013   $25   $6   $6   $16   Less  reason  to  consider  Google   Cost  savings  for  us   Easier  to  deploy  latest  version   Revenue  upli>  to  Microso>  (20%)   SAckier  relaAonship  for  future  products   $150   With  Addi>onal  Upside:    $128   $150   $100                    Transac>onal                    Office  365   Office  365   Small  Business   Premium   §  Combat  piracy  (42%  of  all  so>ware   was  obtained  through  piracy  in   2011  according  to  the  BSA1)   §  New  use  cases  (e.g.  email  for  non-­‐ knowledge  workers)   12011  BSA  Global  So>ware  Piracy  Study,  May  2012     Source:  ValueAct  Capital  PresentaAon   16  
  • 17. Future of Microsoft Device Strategy! Windows  +  Android  Hybrids     §  Game  Changer   §  One  Device,  Dual  Boot   §  Most  producAve   §  Most  choice   §  Highest  Value   §  Enterprise  Demand   17  
  • 18. Summary! §  Microso>  is  a  dominant   and  growing  global   enterprise  technology   company  which  has   adjusted  its  strategy  with   modern  ideas,  innovaAon   &  leadership.     §  The  new  “One  Microso>”  is   well  on  its  way  to  re-­‐ emerging  as  the  largest   market  capitalizaAon   company  in  the  years   ahead.   18  
  • 19. About Longboard! An  alterna>ve  approach  to  naviga>ng  the   investment  ocean       Longboard  is  an  asset  management  firm   specializing  in  trend  following  strategies.  The   firm’s  principals  have  been  invesAng  in  and   researching  trend  following  strategies  since  the   late  1990s.       We  manage  both  private  investment  funds  and   mutual  funds  applying  our  trend  following   investment  style.             “Trends  come  like  a  series  of  ocean   waves,  bringing  the  high  Ade  when   things  are  good  and,  as  condiAons   recede,  the  low  Ade  appears.  These   trends  come  unexpectedly,   unpredictably,  and  they  have  to  be   weathered  with  temperance,  poise,  and   paAence-­‐  good  or  bad.”     Jesse  Livermore,  Reminiscences  of  a   Stock  Operator   19  
  • 20. Contact Us! To  learn  more  about  Longboard,  connect  with  us  at:      info@longboard-­‐am.com                602.910.6961                  2355  East  Camelback  Road,  Suite  750              Phoenix,  Arizona  85016                  www.longboardmutualfunds.com                www.longboard-­‐am.com                                                                                       20