Today's presentation may contain forward-looking statements, which are predictions, projections, or other statements about future events based on current expectations and assumptions. Actual results may differ materially from these forward-looking statements because of a variety of risks and uncertainties about our business, which are discussed today or described in our filings with the Securities and Exchange Commission, including our Form 10-K and 10-Q. We do not undertake any duty to update any forward-looking statement. Please welcome John Thompson, Chairman of the Board of Microsoft Corporation.
Good morning. Welcome to the annual meeting of shareholders. I'm John Thompson, Chairman of the Board of Microsoft. For those of you who are here with us at the Meydenbauer Center here in Bellevue, Washington, and for those of you listening online, we welcome you to our annual shareholder meeting. We're streaming live today on our investor relations website. We strive to make the meeting as inclusive as possible and are excited to offer our shareholders the opportunity to participate and vote via the virtual shareholder meeting. Thank you for being here in Bellevue and for your continued investment in Microsoft. Many of you have traveled long distances to attend, and we appreciate your commitment as shareholders and to participate in these meetings.
Our board values the continued feedback from you. We appreciate the importance and thoughtfully expressed diverse opinions that you provide as we work to create real value for you, our shareholders. I'd like to share with you the structure for today's meeting. Today, I will be joined by Satya Nadella, our Chief Executive Officer, Amy Hood, Executive Vice President and Chief Financial Officer, and Brad Smith, Executive Vice President, General Counsel, and our Corporate Secretary. Brad will address the business portion of the meeting, followed by Amy, who will review Microsoft's financial results. Satya Nadella will share the vision for Microsoft, followed by a few demonstrations that highlight the power and the relevance of our technology and products. Then we will have about 45 minutes of Q&A to discuss a whole range of things. First, let me attend to a few formalities.
Broadridge Financial has been appointed the Inspector of Elections for this meeting. The inspectors are located in the reception table in the lobby. Most of you have already voted by proxy. Your proxy votes have been tallied already. If you're a shareholder of record or a beneficial shareholder holding a legal proxy from your bank or broker, you want to vote your shares now or change your vote, ballots are available from the inspectors that are at the reception table in the lobby. Filling out a ballot and giving it to the inspectors will revoke any earlier proxy you gave. If you are a beneficial shareholder with a voting instruction form, you also may submit those forms and use the computers at the reception table to cast a new vote.
The polls are now open and will close in a few moments following the presentation of the business matters here. Before we turn to the business of the meeting, I'd like to recognize a few members of our Senior Leadership Team who are here with us today. Kevin Turner, our Executive Vice President and Chief Operating Officer, and our new head of Human Resources, Executive Vice President Kathleen Hogan. Kathleen is taking over for Lisa Brummel, who is retiring after 25 years of great service to Microsoft. A special thanks to Lisa and a special welcome to Kathleen. I also want to thank Steve Ballmer, who is here with us and has helped tremendously in making the transition to our new CEO very, very smooth.
As many of you know, in August, Steve announced his departure from the board to focus on his new endeavors, which include teaching and the L.A. Clippers. We all look forward to your success with the Clippers and your continued engagement as our largest individual shareholder. This past year has been one of tremendous change for Microsoft. As Bill Gates said at our last year's annual meeting, Microsoft is in a highly competitive and dynamic industry, and many opportunities and challenges are ahead of us. We are in the midst of the most strategic transformation we've ever had, and that has included both executive and board leadership changes, a reinvigoration of our strategic focus, and a major realignment of our cost structure and our workforce. Over the past year, we've taken many important steps, which I'd like to summarize very briefly.
First, the board undertook a search for the next CEO of Microsoft. We committed that the search process would be conducted thoroughly, with diligence, and within a six-month timeframe. After rigorous reviews of external and internal candidates, we accomplished our goal within six months and selected Satya Nadella as the third CEO of Microsoft. Over the past 10 months, Satya has pushed the company forward with its transformation, making Microsoft a productivity and platforms company for the mobile-first, cloud-first world. His vision is compelling, and under his leadership, Microsoft has reenergized industry partnerships, delivered new products and services, and focused on an innovation roadmap around iconic products like Windows 10, Azure, and Office 365. At the same time, the company initiated an internal realignment to streamline the business, deliver synergies, and complete the integration of Nokia.
This fundamental restructuring continues with investments in innovation, both for strong operating controls and strong expense control as well. Our Board of Directors has also seen a wave of change. We transitioned to an independent Chairman structure, and Bill Gates has taken on the role of Technology Advisor, helping to shape the technology and product direction of the company. I'd like to introduce the Board of Directors who are here in attendance with us today. First, I'd like to welcome the four new independent directors to their first shareholder meeting. These four individuals add diverse experiences, skills, and expertise to the board and offer new perspectives in this time of company transformation. Mason Morfit is a member of the Audit Committee. John Stanton is a member of our Compensation Committee.
Teri List-Stoll is a member of our audit committee, and Charles Scharf is a member of the governance and nominating committee. I'd also like to introduce other directors who have served on this board for many years. Here with us today are Chuck Noski, chair of our audit committee and a member of the governance and nominating committee. Dr. Helmut Panke, chair of the regulatory and public policy committee and a member of the audit committee, and Dr. Maria Klawe, member of the compensation committee and a member of the regulatory and public policy committee. Welcome to all of you. Finally, I'd like to take this opportunity to thank the members of the board who are departing for their many years of service.
A special thank you to Dina Dublon for her service as a member of both the audit committee and the compensation committee, and an equally special thank you to David Marquardt for all the years of service that he provided to Microsoft on all of our boards, including most recently serving on the governance and nominating committee board. Let me also introduce Steve Sinwell, Jason Rissanen, and Chris Weber, representing Deloitte, our independent auditors. Now I'd like to call the 2014 Annual Shareholders Meeting to order. I'll be serving as the chair of the meeting, and Brad Smith will be serving as our secretary. As chair of the meeting, I've adopted an agenda that will govern the order of business and the rules of conduct for this meeting. Copies of the agenda and the rules are available at the reception table outside the meeting room.
The rules of conduct also govern the Q&A session. Brad, please report to the notice of the meeting, the proxies received, and present the matters to be voted on.
Well, thanks, John, and good morning, everyone. The notice of the meeting and Internet availability of the proxy materials were mailed by Broadridge Corporation, as you heard John refer to. Broadridge sent those out beginning on October 20, 2014. They went to all shareholders of record as of September 30, 2014. As a result, the meeting is being held pursuant to proper notice. What I'll do this morning is now walk us through the relatively short formal aspect of the meeting, and then as you heard John say, you'll hear more from Satya, from Amy, and we'll have a lengthy Q&A. Proxies representing more than 84% of the approximately 8.3 billion shares of the company's stock that are eligible to vote have in fact been received. A quorum is present, and the meeting is duly constituted, and it will proceed. We have four proposals for shareholders to consider.
They were all described in the proxy statement. The first item is the election of directors. The following 10 people have been properly nominated by the board. William H. Gates III, Dr. Maria Klawe, Teri List-Stoll, Mason Morfit, Satya Nadella, Charles H. Noski, Dr. Helmut Panke, Charles Scharf, John Stanton, and John W. Thompson. The board recommends a vote for each of the directors on the ballot. The second item is an advisory vote to approve the compensation of the company's named executive officers, as disclosed in the company's proxy statement. The board recommends approval of the proposal. The third item is the ratification of the company's independent auditor, Deloitte LLP, for fiscal year 2015. The board recommends approval of that proposal. The fourth and final item is the shareholder proposal on proxy access.
This is a proposal to enable certain shareholders to nominate a limited number of director candidates who would appear in the company's proxy statement and ballot. The full shareholder proposal and its supporting statement are set forth in the company's proxy statement. Hopefully, everyone has had an opportunity to read that. The proposal has been submitted by Ms. Myra Young. I'd like to recognize Ms. Young's representative, Bruce Herbert, for a period of three minutes to speak in favor of the proposal. Bruce, I believe you're here. Take it away.
Thank you very much, and appreciation for this opportunity. I do stand to represent Myra Young to move proposal number four on page 58 of the proxy. We were delighted to see new additions to the board since submitting this proposal in early June. That makes five new directors in less than a year. While this substantially reduces board entrenchment and other issues that are raised in the proposal, it does not eliminate the need for long-time shareholders with a substantial investment in Microsoft to be able to place the names of nominees in the proxy. Being in the proxy isn't the same as winning seats. Any nominee will still need to get a majority vote. In its rebuttal, Microsoft makes some minor points as to how the proposal could be improved, and we welcome such improvements.
A vote for this proposal today simply asks the board to amend our governing documents. While it does specify some language, the proponent has no problem with Microsoft adopting amendments that remain within the spirit of what is requested. The major idea here is that we benefit from a real competition of ideas. Let's allow groups of shareholders who own 3% of Microsoft stock, if they also held that stock for three years, to place their nominees in the proxy. Proxy access would drive competition among board candidates and would create direct accountability to shareholders. The CFA Institute, the group that certifies chartered financial analysts, recently issued a thoroughgoing report which concluded that proxy access has the potential to enhance board performance and raise overall U.S. market capitalization by up to $140.3 billion. When this proposal was filed back in early June, Microsoft was underperforming the NASDAQ.
We're delighted to see performance picking up since then, new members on the board have no doubt contributed greatly to that progress. Allowing proxy access would only add to this momentum. Therefore, please join us in voting for proposal number four, proxy access. Thank you.
Great. Well, thank you, Mr. Herbert. The board recommends a vote against this proposal for the reasons stated in the company's proxy statement. Well, the discussion of matters for shareholder consideration is now closed, the polls are also now closed. I'll share with you now the preliminary voting tabulation because that's been completed, I'll walk you through that, then we'll have more information about the precise numbers later. First, each of the 10 nominees on the ballot to become a director are elected with over 90% of votes cast to serve until the next annual meeting of shareholders and until their successors are elected and qualified. Proposal two, the advisory vote on executive compensation, and proposal three, ratification of the company's independent auditor, Deloitte, have been approved by a majority of the votes cast. Finally, the shareholder proposal on proxy access was not approved.
We expect to post the details of final voting results down to the precise decimal point on all of these matters on our investor relations website later today. We'll also report the results in a Form 8-K, which will be filed with the Securities and Exchange Commission within four business days. This means we've completed the formal business of the meeting, the formal portion of it, the formal meeting is now adjourned. With that, let me hand the stage over to our Chief Financial Officer, Amy Hood. Thank you.
Great. Thank you, Brad. Hello, everyone, thank you for being here today. At our last shareholder meeting, my first as CFO, I shared with you my enthusiasm about the opportunities ahead for Microsoft. As I reflect on the last year, a year marked by significant change, I'm pleased to be here today to share our results and the progress we've made in our company's transformation. We finished the fiscal year with $86.8 billion in revenue, up 12% over the prior year. We remain disciplined in our spending, growing our operating expense by 4%, while we invest in new growth areas such as our cloud services. We grew total operating income to $27.8 billion and our earnings per share to $2.63. We also returned 28% more cash to shareholders in 2014, paying more than $9.2 billion in dividends and buying back $6.4 billion in shares.
Let me discuss some of the highlights in our 2014 results. Our commercial businesses continued to outperform the broader IT spend environment, growing 9% to reach nearly $50 billion. Businesses chose Microsoft technologies to increase reliability, reduce their costs, and improve productivity. Our cloud business represents one of the best growth opportunities for our company. Our commercial cloud revenue grew a robust 116% for the year, driven by increased adoption of Office 365, our cloud productivity offering, as well as Azure, our cloud computing platform. In our devices and consumer businesses, we have made significant progress across our entire portfolio, with total revenue of $37.6 billion, up 17% over last year. We introduced the world to Xbox One, which delivers a unique gaming, communication, and entertainment experience for our loyal Xbox fans worldwide. We also released Surface Pro 3.
It's the first tablet that can replace your laptop, both customers and expert reviewers concur it's our very best Surface yet. With Office 365 Home subscriptions, we've reached millions of customers who are using it on their PC, tablet, and phone of their choice. We welcome Nokia's devices and services business into our family, working diligently to integrate the business responsibly and with a sense of urgency. We've continued this momentum into fiscal year 2015. Strong results in hardware and our cloud businesses drove record first quarter revenue, $23.2 billion. Our commercial and consumer segments performed well and grew by double digits. We again increased our cash return to shareholders with $4.6 billion paid out in dividends and buybacks, our highest quarterly amount since 2011. In September, we announced an 11% increase in our dividend to $0.31 a share.
We've completed acquisitions like Minecraft, Aorato, and just on Monday, Acompli, to open up new opportunities across PCs, consoles, tablets, mobile devices, and the cloud. Thoughtful innovation in products like Windows 10 and the new Microsoft Band will move us further towards helping consumers and our customers get more done on any device with an experience that's familiar, consistent, and secure. In closing, I'm very pleased with the results we delivered in 2014 and excited about the opportunities we have as a company in 2015 and beyond. We have a strong enterprise business today. Our leadership in the cloud solidifies and strengthens that position for tomorrow. We have an exciting consumer and devices business with innovative new devices, rich consumer services, and improved execution and profitability. We remain focused on rigorous financial discipline through both strong expense management and focused reprioritization to invest in our best growth ideas.
We firmly believe that the highest shareholder value has always been created by delivering products and services that customers love and use, which will enable us to capitalize on the massive opportunities in our mobile first, cloud first world. Thank you all. Now, I have the great privilege to welcome Satya Nadella, our chief executive officer, to share his thoughts on Microsoft's future direction. Satya? Thanks.
Thanks a lot, Amy. Thank you so much. Thank you. Thank you all. Thank you, Amy. First, I want to welcome you all to the 2014 shareholder meeting. I understand many of you have traveled a long way to be with us here today, and I greatly appreciate your commitment and the commitment of all shareholders of Microsoft. It's been an extraordinary year for Microsoft, for our shareholders, for our customers, and for me personally. I'm humbled and honored to lead this company and build on the foundation that Bill and Steve have laid. As Microsoft shareholders, you're the owners of a great company, and we are ultimately accountable to you. Everything my management team and I do is grounded in our commitment to return long-term value to you. To that end, we're making smart and disciplined decisions. Most importantly, taking bold action to step forward.
Today, I'm excited to talk about where we are headed. In July, I shared Microsoft's bold ambition to be the productivity and platform company that thrives in a mobile first, cloud first world. Our customers see the challenges of these new technologies and the opportunities in this world. Are increasingly desiring to grow at using these technologies. Microsoft has the unique opportunity and sensibility in this context. Only Microsoft has the capability and the trusted partnerships to be able to enable every person in every walk of life, every business in every industry, every geography to fully realize the promise of this digital transformation. We are very focused on this opportunity ahead of us. This last year, we have made tremendous progress at Microsoft. We made clear progress in the cloud. Amy talked about this triple-digit growth, in our commercial cloud revenue.
Double-digit sales growth in our servers, powered by the unique capability we have with private and hybrid cloud. Office 365 commercial seats have nearly doubled. In fact, our consumer subscriptions of Office 365 are 7 million and counting. We've had over 40 million downloads of Office on the iPad. There's new vibrancy with Windows. Ecosystem with Microsoft devices as well as the full range of exciting new devices. There are great complete PCs at opening price points this holidays from many of our partners. We have a fantastic range of tablets coming into the market. We have Surface Pro 3 that's growing a legion of fans who like the fact that they can now have a tablet that can replace their laptop.
We have innovation all up and down the chain of the product line when it comes to two-in-ones, convertibles, all-in-ones, all-in-ones for office, at home, as well as all-in-ones for creatives. We also have fantastic gaming PCs, which is a huge part of the PC market. That's all innovation in the ecosystem. The Lumia product line is from 535 to 930, the best product line that we have for Windows Phone. The 535 is unquestionably the best affordable smartphone. Finally, our gaming business is thriving with the Xbox One hitting 10 million units sold, and I'm thrilled to welcome Mojang and Minecraft community to Microsoft. I'm proud of the progress we've made. I'm more enthusiastic about the plans we have in place to fuel the growth long into the future. Our goal is to thrive in a mobile-first, cloud-first world by excelling in productivity and platforms.
Let's talk about the big ideas we have set in motion and how we're going to make this happen. First, we'll make computing more personal and natural. Innovation in touch, speech, vision, inking, and much more will come together with intelligent agent and shell technologies to make computing more personal and natural a reality. Second, we will reinvent productivity, and by delivering essential digital tools for your digital work and digital life so that you can achieve more and do more. Third, Microsoft Cloud will be the most complete distributed cloud platform in the industry. That means it'll meet the diverse needs of enterprises, regulated industries, public sector organizations, startups, research institutions in every part of the world. We won't realize these big ideas overnight, but we will make strong progress in the coming year. Let me share a few examples, starting with Windows 10.
Windows 10 is the start of a new generation of Windows that's more personal. It'll unlock new experiences for customers to work, play, and connect. Windows delivers a consistent and natural experience across all devices for users and a universal platform for developers to deploy apps to billions of devices, from the smallest Internet of Things devices to a conference room that has a 90-inch screen. Windows 10 will enable a new generation of opportunities for partners, developers, enterprises around the world to create these intelligent personal experiences across all kinds of devices. Our Microsoft hardware efforts will drive leading-edge innovation that showcases innovation in Windows, creates new categories, and will stimulate demand for the entire ecosystem. As we make computing more personal and natural, we will also reinvent productivity through the tools that help every individual and organization do more and achieve more.
Microsoft Office has shaped the core productivity and communication categories for many years, but we're not standing still. We are innovating and building on a new generation of tools for digital work and life. An upcoming feature in Skype called Skype Translator offers a powerful hint of what's possible. The Skype Translator tackles one of the hardest, oldest human challenges of all time, which is the language barrier. Skype Translator will enable people to speak different languages to hold fluent cross-language conversations filled with all the nuances and subtleties that you have in any conversation and automatically translate these conversations. It's actually a result of research which goes back decades.
It's the coming together of these independent streams of research, from speech recognition to speech synthesis to machine translation, that have been brought together into one deep learning network that operates now at scale using Skype data to achieve this breakthrough. We'll show you a demo of Skype Translator later on today. Cortana, the truly personal digital assistant for Windows Phone, is another fantastic example. It's the ultimate human-to-machine translator, which uses natural language interaction and deep knowledge of the user to automatically accomplish everyday tasks like scheduling an appointment or tracking a flight and advising you on the right time to leave a meeting because it knows about the traffic and your flight. That's just the start. As Cortana learns more about who and what is important to you, it can work on your behalf in proactive ways that are truly relevant and amazing.
We are creating more new tools that are not yet household names, like Delve and Power BI. Delve is one of my favorite tools that I use every day. It helps people discover information in new ways by surfacing the full depth of the knowledge inside of your organization that's in SharePoint or Exchange, these repositories of knowledge inside enterprises. Researchers at Oslo University Hospital are using Microsoft Power BI to analyze and gain insights from complex radiology data through rich visualizations and natural language interaction. We'll show you even Power BI in action later today. Lastly, our work to build the most complete cloud platform is well underway.
The flexibility of deployment, public, private, hybrid cloud. The openness of the development frameworks, .NET, Java, Windows, Linux, the richness of the services for IT and developers makes the Microsoft cloud the most complete cloud for real-world needs of enterprises and startups in every industry and every geography. Customers are already taking advantage of it to transform their organizations. For example, Carnegie Mellon's Center for Building Performance and Diagnostics, the researchers in that institution are using Azure Machine Learning services to conduct experiments that are leading to energy savings in buildings on campus and everywhere else in the world. They've reduced the time it takes to run these experiments from 45 minutes to a few seconds. That's the kind of richness and power the cloud enables. Another example is Milliman. Milliman is one of the world's largest independent actuarial and risk management consulting firms.
They use Azure to help assess risk in the insurance industry. Using the power and the scale of Azure, Milliman can run massive simulations that look at financial implications of any decision and thousands of economic scenarios far into the future, as far as 30 years, quickly, accurately, and most affordably. In the year ahead, Microsoft, along with our partners, will continue to build out our cloud platform to have more reach and richness and help organizations of all sizes all over the world to use the power of the cloud to power their own digital transformations. I'm even more enthusiastic of what is ahead for our billions of customers around the world. We have more than 100,000 employees in 190 countries who are hungry to delight customers.
I'm certain that great things happen for our diverse customers when a diverse employee base does its best work every day. That's why we're focused on ensuring that Microsoft will be the best place to work for smart, curious people across cultures, genders, ethnicities, and lifestyles. We will make progress every year towards building a more diverse workforce and creating opportunities at every level of the company for all of Microsoft's employees. Next year marks the 40th year since the founding of Microsoft. It's amazing to think about how far we have come and how much our customers, partners, and employees have achieved during the first 40 years. Together, we have truly played a central role in transforming almost every aspect of how people live, work, and play. Now we look ahead to the next 40 years.
Our opportunity to improve lives, unleash creativity, and provide the platforms for new businesses, new growth, is greater than it ever has been. I'm excited about our future and confident that we have the ambition, the vision, and talent to deliver the innovation that'll touch every individual and every organization in every corner of the globe. Our ultimate responsibility as leaders and stewards of this great company is to you, our shareholders. We come to work every day committed to building a thriving organization that generates long-term value for our shareholders through our unique ability to deliver technology that enables global transformation using digital technologies. Thank you for being here today and for your continued support for our mission and our work.
With that, I'll turn it over to Ashley Frank, who's going to come over and show you some of the products that I talked about in action. Again, thank you very, very much, and I'll be back for Q&A. Thanks. Ashley, over to you.
Thank you. As Satya mentioned, Microsoft is reinventing productivity for the mobile-first, cloud-first world. Today, we have access to infinite amount of data and devices, but our time and attention remains finite. We need intelligent tools that can anticipate and prioritize our needs and tools that work naturally and learn to work the way that we do. Today, I'm going to give you a few examples of how we're thinking differently about productivity in order to take the most of every moment. Here I'm running Windows 10 Technical Preview. You can see that we've brought back the familiar Windows start menu, but with some modern enhancements. Now you can pin your favorite apps, you can personalize them, and now, just like my phone, the live tiles reflect the information that I care the most about.
Also, the applications coexist on the desktop, making multitasking easier than ever before. Windows 10 is going to run on an incredibly broad set of devices. Everything from a 4-inch smartphone to a large touch display, even devices that don't have a screen. While we'll tailor that experience for each device, it's truly one product family that will share one platform and one store. Whether you're a developer building a game or a line-of-business application, you now have one way to write a universal app that targets the entire family of devices. Keep in mind, this is the technical preview of the desktop experience, and we have a lot more coming in 2015 for you around Windows 10. In my day-to-day job, I manage the strategic relationship between Adobe and Microsoft.
Over the last year, we've spent a lot of time working closely with them around their new Adobe Illustrator launch, and it's designed to work uniquely on the Surface Pro 3. Like introducing any new product, we research demographics and preferences of key markets to help guide that joint launch planning. I want to give you some insights into our process by showing you a little bit about what we're doing with analytics, data, intelligence, so that we can uncover some of those insights and make better decisions. The tool I'm going to show you is called Power BI Q&A. It's part of the Office 365 service, and in the same way that we ask people questions, now we can ask questions of data. Let's just say that we're taking a look at the demographics in the European market to help guide this launch plan.
Let's start by looking up the average annual income per person. There we go. It's taking a second. Great. Well, do a little refresh, give that another try. All right. Average annual income per person. Enabling. Ta-da. All right. Now we're seeing countries like Germany, France, things that we expected to see, but let's go ahead and layer on population. Got to spell it right. All right. Now we can see that Germany is starting to fit some of our criteria, and it seems like this could be a good place for the launch. There's one more piece of important criteria for this particular Illustrator launch in the European market. Like Microsoft, Adobe is a cloud-first company, and we want that first user experience to be unbelievable. Let's take a look at the fixed broadband internet subscribers by country. Let's sort this.
Take a look at what pops at the top. Great. It's Germany again. Clearly, Germany is a perfect place for our launch. These are just a few examples of what Q&A can do to quickly discover, analyze, and visualize data to get insights into my business through some intelligent tools. While data is great, sometimes we want to tap into the knowledge and expertise of somebody local. Let's step over and give my German colleague, Melanie, a call. Before I do that, I do want to mention that the technology I'm about to show you is in beta and it's not meant for an auditorium, so bear with me, but we're going to give it a shot. Hi, Melanie. How are you?
I'm all right. It's a beautiful day today, I have a lot of work.
No problem. I totally understand. I'll make this quick. I'm actually here at our Annual Shareholders Meeting with our CEO and about 400 shareholders. No pressure.
No problem.
Your family is from Berlin, Germany originally, correct?
Yes, that's right. I grew up in Berlin. Why do you ask?
I'm planning a business trip to Europe in the second week of January. I'm going to Amsterdam. I have a partner meeting in Berlin. I wanted to get some recommendations from you on where I should stay in Berlin. I'm thinking I want to stay somewhere with some real German character. If I have time, I want to get out and see the city. Great. Sounds perfect. Thank you, Melanie. Goodbye.
Bye.
We've given you a sneak peek into how we're reinventing productivity with Windows 10, how you can use big data and natural language to drive predictive insights with Power BI Q&A, and how Skype is going to break down communication barriers regardless of your location or your language. There's so much more coming in 2015, and we're truly looking forward to sharing it with you all. Thank you, and have a great rest of your meeting.
Now we'll turn to the Q&A section of the meeting. I'll moderate the Q&A. We have 45 minutes. We have four microphones here in the room for anyone who would like to ask questions. I'll also be taking some questions that are coming in from the web. I'll be using my Surface for that. As we did last year, if there are more people who have questions than time to answer them, Amy Hood and I will stick around a little bit afterwards to talk with people one-on-one. Jesse Jackson, I think we were hoping you might do us the honor of asking the first question this morning.
How the Bulls beat the Clippers. Chairman Thompson, Mr. Nadella, board members, Microsoft leaders, fellow shareholders. I speak to you today representing the Rainbow PUSH Coalition about the need to open up a new era of growth and inclusion of African Americans and people of color and women in the technology industry. First, let me congratulate and commend our new leadership chairman, John Thompson, with whom I have had the privilege of working with over the years. Ascending from Florida A&M University, an HBCU school that teaches computer science and engineering, succeeding Bill Gates to become chairman of our board. To Satya Nadella, thank you for taking the time to meet with me and our team this week to share your values of learning and inclusiveness that drive Microsoft in this ever-changing global technological economy.
This past year, Rainbow PUSH Coalition has challenged companies to disclose their EEO-1 and workforce diversity data. We researched the racial and gender composition of corporate boards and C-suite leadership. The tech industry is data-driven, the diversity and inclusion data are indisputable and undeniable. The leadership and workforce of the technology industry does not look like America or reflect the population and consumers that it relies upon for success. Most companies have between 0%-3% Blacks in their tech workforce, virtually the same for their non-tech workforce. Of the 20 companies we researched, three African Americans out of 189 board of directors, one Latino, 153 men and just 36 women. 11 have all-white boards. Of 307 top C-suite leaders, there are just six African Americans and three Latinos, 244 men and just 65 women. Seven of the 20 companies have all-white leadership.
To its credit, Microsoft demonstrates unusual inclusion with John and Satya occupying the top leadership positions of our company. More importantly, the technology industry is not capturing the tremendous value that will propel it into the future. It's like a one-eyed quarterback, you can't see half the field. After all, African Americans, Latinos, people of color represent money, market, talent, and location. People of color are the biggest per capital users of social media and the internet. We use Microsoft software and play the Xbox. We use Windows, iPhones, and Android mobile phones. We're the innovators of the future, the consumers of the future. It's time the board of directors and C-suites and workforce transform themselves to look like the new America. We issue a call to action. Now that the data has been delivered, let's turn to the next steps to change the face of technology.
To place inclusion, diversity, and innovation at the forefront of the agenda. Let's see measurable goals, targets, and timetables to move the media, not the cost of doing business, but good business. Microsoft is uniquely positioned to lead this new era. Inclusion and fairness is part of the DNA of Microsoft's history. Your supplier diversity program and business partnership with minority businesses is at the top of their class. Your law firm diversity program is one which deserves to be replicated throughout the industry. We argue there is no talent deficit but an opportunity deficit. And by tapping the unfound talent, untapped capital, and underutilized markets in communities of color, the technology industry, looking forward, can unleash a new era of opportunity where everybody's included. Lastly, the tech industry has demonstrated that it can solve the most challenging, complex problems in the world. Inclusion is a complex problem.
If we put our collective minds to it, we can solve it too. There's nothing we can't do together. Access to technology and its boundless opportunities are this era's civil rights imperative. There's some new, right now, shovel-ready companies that we must seize instead of the opportunities, . The TEALS program right here in Seattle, a STEM-focused school teaching 600 students, but they are operating out of trailers. Our mission to ensure that Blacks, Latinos, people of color, women, everybody shares in this opportunity and it grows together. We did not know how good baseball could be until everybody could play.
We didn't know how good football could be until Sherman and Wilson showed up. Three questions, Mr. Chairman. Will Microsoft commit to annually releasing its Equal Employment Opportunities Report? Will Microsoft commit to a bylaw amendment that will require an explicit and active search for women and people of color for all future board meetings openings? Commit to a Rooney Rule-like provision to mandate that women and people of color are included as part of any search for C-suite level positions. Will you consider expanding your board? Will Microsoft commit to the inclusion of Blacks and minority firms in debt offerings in future financial transactions? Will Microsoft set goals, targets, and timetables to measure its diversity and inclusion progress related to workforce, supplier diversity, and inclusion of people of color in your financial and professional services work?
Will Microsoft consider legislation that will provide tax credits to corporations who repatriate offshore profits, like $5 trillion plus in offshore tax havens? That money must be somehow sequenced back into the American economy, back to the U.S., to be invested in the developmental bank aimed at reinvesting in America's infrastructure, establishing a technology education inclusion fund. Lastly, what programs will Microsoft put in place, and what partnerships, local and nationally, can be designed and expanded to build the pipeline needed to create a 21st century multiracial, inclusive workforce? Thank you again for the opportunity to speak to you today. Let's make the technology industry look like America. Inclusion leads to growth, and where there's growth, everybody wins. Let's grow and win together. Thank you very much.
Thank you.
Thank you, Jesse Jackson, first for being here and your comments, your questions, your push. Diversity and inclusiveness is a critical topic for our time, for our industry, for Microsoft, and it's great to have a candid conversation about it, but most importantly, robust action. To me, at Microsoft, there is nothing more important than diversity and inclusion. It's sort of core to everything we do. It's not something that we do on the side, but it's at the core of what we do. To the specifics of your question on the first part, which is on the EEO-1 data. Since 2006, we've had demographic data that we have transparently disclosed. In fact, last October, we disclosed more additional information, and I think this transparency helps us both internally galvanize and talk about it internally and externally.
In that context, I think that this push to get our EEO-1 data out is a good one. I want us to take action, so by end of this month, we will get it done. That one, you can consider it done by end of this month.
Thank you.
On the second question I turn it to John to talk about how we are approaching the board.
I think from a board perspective, if anything, I am a reflection of the belief in diversity of this company. However, as we go forward, clearly there will be additional opportunities for us to supplement the skill base of our board, and I can assure you that we will, in fact, look at a diverse slate, just as we have through all of the other experiences. That said, we have a governance and nominating committee meeting today, and we will discuss changing the charter of that committee to make sure that it does reflect this notion of inclusion in the charter of our nominating and governance committee. We appreciate you bringing that to our attention.
Thank you.
To all the other suggestions and questions, they're all great ones. It's something that I will definitely, along with the board and the rest of the leadership team, take a good look at. One of the things, Reverend, I wanted to talk about is we want to have high ambition for both what we do around diversity and inclusion inside and even outside. One of the programs that we have put in place, which has got three core pillars inside that we're vigorously working on, has grounded on the first principles of equal pay for equal work. One of the things that Microsoft has done over the years is to ensure that the salary ranges are strictly enforced.
Because of that, we, in fact, can proudly say that within a very tight band of 0.5%, we have equal pay for equal work, and it requires constant vigil, and that's something that we're very committed to. The more important thing is, of course, equal opportunity for equal work. That's something that we are, again, working vigorously as a leadership team. We have a set of metrics that we want to make year-on-year improvements so that we can create those proactive opportunities for everyone, gender, ethnicity, lifestyles. The second thing that we're also very focused on is to make sure that we get a diverse talent base into the company and then retain them as they grow inside the company.
Again, that's a place where the senior leadership team has monthly meetings to look at the data, reflect on the data, both the quantitative and the qualitative aspects of what it takes to have a diverse workforce thrive is something that we are committed to up and down Microsoft. Lastly, perhaps most importantly, and the learning for us has been that you have to have a culture of inclusiveness. In fact, the SLT or the leadership team at Microsoft, we just went through our own unconscious bias training internally, which is one of the things that I want everyone, including me and everyone in the leadership team and every employee at Microsoft, to not only go through the training, but to practice it in a daily basis. Every decision one makes, the hiring decision, the promotion decision, the stretch assignment decision, because that's what we do as leaders.
We want to be able to do that with that inclusive culture being front and center to how we drive the organization forward. I want us to really make progress on those three things, it's not just internally having high ambition. One of the things that we are doing is making sure that when we spend money, we spend money with an eye towards minority and women-owned businesses. One of the things that we have done a fantastic job is growing that base. We had $600 million or so of spend in 2006, now we have over $2 billion, representing approximately 7% of Microsoft spend is with minority and women-owned businesses, which I think is best in class. We also want to engage in the community. Some of the examples are the schools you used.
We want to obviously focus on the STEM education in K through 12. We want to focus on computer science education, we want to be able to vector some of the programs we have, like YouthSpark or TEALS, to be able to reach, for example, students in African American community, Hispanic communities. Those are things that we will absolutely have high ambition and actual action in the coming years and the coming year itself. I'm looking forward to making progress on all of these and having a constant dialogue. Again, I appreciate you coming here and pushing us and sharing your thoughts and ideas. It'll take us to have both a robust dialogue, but most importantly, action.
Well, Mr. Nadella, we're concerned that historically by cultural habits and rhythms of people locked out, not so much intention, but just kind of locked out. It's the one-eyed quarterback that does well, means well, but can't see half the field. What we don't see is untapped capital, unutilized talent, we don't see market money talent location thus achieve the growth of the whole company. Secondly, the people that said they cannot be found, the school where Chairman Thompson comes from, Florida A&M, it teaches computer science and STEM and engineers. There's a body of those schools who specialize, North Carolina A&T and Howard and the like, that specializes in being a pipeline from the HBCU schools to the interns into the company and beyond. The next to last point is that there is this issue of where does the money come from to educate our children?
In this city, I mentioned a school, TAF, a former Microsoft worker
Yeah
founded the school with some of your help. 600 students, and they're just bright and effervescent, but they're taking classes in trailers as if it's an afterthought.
Yeah.
They deserve a school to become STEM workers and trained.
Absolutely.
I would like to say that with $5 trillion plus in offshore tax havens, money in a sense now that is patient capital with very little productivity for America. Some of that must be some negotiation to repatriate a portion of that money back to America to invest in our infrastructure and to invest in first startup companies. We might use our money to develop American capacity. Lastly, there are a number of, as much as we focus on STEM and engineers, about 60% of the work is not STEM. It's not engineers. It's advertising and marketing. It is Ariel Investments. It's financial service. That whole range. I look forward to working with you and of course, with Chairman Thompson on this. Chairman Thompson has a peculiar passion offshore for football.
His team, Florida A&M, played my school, North Carolina A&T, at our homecoming and went back home sad. Having said that, let's work together. Thank you for having me.
Thank you very much.
Before we relive what will be stories about the Super Bowl, I want to call on the person who's been standing patiently at microphone number four.
I have a very short question. I'm really impressed with all the interconnectivity that you're showing us. What I haven't seen is any way to add more security. When are we going to get something that has fingerprint, eye, some kind of identity where we do not have to use 20 million passwords?
Let me just first say, in fact, the fingerprint reader has been there in Windows and Windows devices for a very long time. We continue to be great supporters of it, and I'm hoping that in Windows 10, there will be more designs and more use. One of the technologies you just mentioned is a technology that I'm very hopeful to solve this password problem, which is basically image recognition. That's something that as we disclose and talk more about Windows 10, you'll hear more about. It's a problem where individual security, individual identity, and identification to get rid of the password problem, because password is actually becoming a big security vector, is a huge issue. Also what you do with the data, and how we think about encryption both at rest, in flight.
We have a very robust set of investments that are in place, both on the quote-unquote, the "client devices" in the cloud, and in the network. You will hear us talk more about it as we talk about every one of our technologies going forward.
Where do we go to find out how to get the fingerprint identity?
I think you buy any PC which has a fingerprint reader, and you can use it. I'm happy to follow up and make sure that someone from the Microsoft stores can follow up with you as well.
We'll probably sell you one before you leave. Let's go to microphone number one.
Thank you. Norm Klippenstine from Canada. 30 years, and it seems to me we're looking, going back to the future. I began the industry with data on the mainframe, accessing it from terminals. We were happy with the PC and getting all data local. Now it seems everyone's tripping all over themselves to get it back into the cloud, which is now a mainframe made up of PCs, perhaps. Social media companies have come along, and they seem to mine people's data almost shamelessly and even appropriate it to monetize it. Microsoft has made statements about privacy and confidentiality about data, and this seems like a real differentiator and kind of not forgetting about some traditional values.
I'm just wondering if there's a battle looming here, because there's many companies, like some of the very prominent competitors of yours, who are actively buying into this new model and leaving me increasingly uncomfortable. Maybe you could just speak to where you see this going. Thank you.
Overall, these two aspects of privacy and security are very important, and the key for a company is to take a stance and be very principled about it. In our case, we are very clear. When it comes to privacy, we believe that the user is in control, and we want to be transparent, and everything that we do is transparent. In fact, overall, Microsoft's approach is to be able to use the data in order to create the features that the user benefits from. Even that process is governed by the user's control over the data that's being collected, and that, to us, is pervasive. Yes, you're absolutely right that that's going to be a differentiator for us in the industry for all of our products and services. Second aspect is security.
Even there, you have to be very principled about being able to make sure that you can create assurances for customers, individuals, and organizations about their data, the protection of that data, the jurisdictional protection of that data. Again, there, we have taken a clear stance of what we believe in. Our policies are well-stated, and you will increasingly see us both advocate that position, market that position, and most importantly, stand by those.
Can we go to microphone number three?
Sorry. Okay. Good morning. Thank you for this opportunity. I would like to ask you, as you can see, I'm a visually challenged or blind individual. In the world, there is 15% of the population have some sort of eye challenge. Not only that, as we age-wise, like a good wine, one of the thing that goes is our eyesight. There is many more members to join me ahead, which is not a wish, but that's a true reality. In most situation, the technology is the most frustrating area for people like me. Microsoft can do a lot to make my life easier and others to come. What are you going to do about it? What is being done? There are so many things it can be done to help the blind people to be technologically challenged and connected.
I can tell you, I wish there is a time or someone from your department I can meet and show them what it looks like, life as a blind woman, how Microsoft can make a big difference with a helping hand. I want your answer in that area. What are you going to do about it? We are here. We need your help, not yesterday, in the coming years ahead, because this situation is not going to stop with me. Thank you.
Thank you. Thank you so much, ma'am, for that question. It's a topic that's pretty near and dear to my heart. I believe we are at a threshold of real breakthroughs on universal design. I think one of the things that you said is perhaps the biggest change that is happening. Instead of thinking about accessibility as some bolt-on, we now get to build our products with universal design so that every one of us can use them because, as you said, one thing that's guaranteed is each one of us will be having some disability of some sort at some point in our life, and we want to still be able to use computing devices in the most natural of ways.
Very specifically, I'm very committed, Microsoft is very committed to making progress for the visually impaired and all the other disability groups because we believe deeply in universal design. In fact, some of the breakthroughs that we are working on, that we've talked about publicly even this year that are exciting as our use of these natural language technologies and the natural interface technologies are to do with how it increases the inclusiveness of our technologies. One specific piece of work that Microsoft Research has done is around these 3D soundscapes. In fact, we are piloting in London, England, and working with the Guide Dogs Foundation in England to figure out how we can use sound and mobile devices as a mechanism for people to navigate.
For example, you can come out of your apartment, get to the underground, go to work, create mobility for the individual with visual impairment by using basically radio beacons and ultrasound coming to you and these headphones, which are bone conducting headphones that help you guide your direction. Those are some of the things that are absolutely imminent possible breakthroughs that we are very committed to. Also, we're committed to doing a lot of the basics, like the narrator in Windows and Office. You will see us take much more rigorous action when it comes to these accessibility technologies in the core of what we do in Windows and Office and all our products.
What you speak to as the challenges of individuals with disabilities and the opportunities they have to use computing, I want for us to graduate from that being a challenge to being a great enabler. I believe the technology and some of the work we're doing will absolutely bear fruit in the years to come.
Let's go back to microphone number four.
Thank you. My name is Lonnie Lusardo from Seattle. I'm going to conflate two questions into one. One is more of an observation. I've heard at least two references, probably more than two, to the elements of diversity that are important to Microsoft, including race, gender, and lifestyle. If the use of the term lifestyle, as used by other corporations, references LGBTQ consumers and employees, please be transparent in saying, we are attentive to gay and lesbian people at this company. Because if you don't, you are not. The question I have for you is, there are great efforts being made to employ a diverse workforce. What metrics, Satya, you mentioned metrics. What metrics can you tell us that is statistical evidence that that process is working? I ask that not because I doubt the productivity benefits, but because I'm sure of the productivity benefits.
Can you give us that proof?
Proof of diversity and inclusiveness inside of the workforce?
Transferring to productivity and profit for the company.
On the first question or the first comment, I fully subscribe to that, and we will make sure we are clear. We have been very clear that Microsoft is fully supportive of the LGBT community and making sure that when we talk about lifestyles, I've used it synonymously with that. It's a good push from you to be clear about it.
Thank you.
You're basically asking what's the business case for inclusiveness and be clear about it. It's something that I've got to reflect more on and see if we can be more transparent, because I think that by being more transparent, that'll make the case that much more better for everyone to have a much more open, robust dialogue, as well as to be able to take more forceful action. The thing that I start from, though, is when I look at the customers that we are serving, the diversity, the income streams, the ethnicity, the genders, I don't believe we can be successful. The sensibility that is required in order to build products that are loved by people that is by definition diverse is not going to be possible if you don't have diversity in the workforce.
Absolutely correct that we should go look for more metrics, get more quantitative and more articulate about it. I'm not waiting to seek that before we get started. There's got to be some core fundamental truths that you have to believe because you see it and you sense it, because you will build better products. That's where I start from. Again, your comments are well taken, and I'll definitely put more thought into it.
Once you have those data, share that with other corporations. That you are a leader. I believe in this company, I truly do. If you're out there, out in front doing this stuff, let other corporations know there's a benefit to them as well.
Yeah.
Thank you.
Thank you.
Thank you.
Let me take one question from the web. This is on capital allocation. Why was the dividend raise only 11%? Why do you have so much cash?
I'm going to assume that's for me. Actually, we're very proud. We talked about in my comments, about the progress and the growth, in both our dividend and in our share repurchases, and our commitment to return our cash to shareholders over time, and we continue to grow that. That is, of course, an important dynamic of total shareholder return. As well as our focus, as we said, on the greatest creator of shareholder return, which has always been building the world's greatest products with the most innovation, and the most love from people who purchase them. I do think it's an important topic. We obviously discussed it at the board, as John well knows, and it's a topic that I'm used to getting asked about, including on the current earnings call. Thanks.
Go to microphone number 1.
Hi. Okay. I'm a senior citizen, and the technological advancement devices you have really interest me, but I don't know how to use them. My grandson, all of my grandchildren live far away. What do you do about educating senior citizens how to use these wonderful devices? Answer?
I want to make sure the question is finished. I would say perhaps one of the biggest changes that I've seen in our approach to getting everyone to enjoy our technologies, that I'm most proud of, is what we've done with our stores. It's amazing to see the diverse set of folks who come to our stores, people who are new to these devices, and most importantly, how helpful the people who are employed in our stores are to the needs of folks who are sort of using technology. My humble recommendation to you would be that, in fact, I think we have representatives of the Microsoft Store right there.
Back in the left.
They can be very helpful today. More importantly, that's a great source. I'm not saying that that's the only place, and we want to be able to achieve the goal where you take a Microsoft product out of the box, and it should be intuitive. That's our goal, and we want to be able to achieve that. Short of it, we want to have great online help, but most importantly, we want to be proactively reaching out to the communities through what we are doing in our stores. I would encourage you to hopefully stop by our store one of these days.
Okay. I'll certainly do that. I know college kids talk to each other, and they teach each other, and my little granddaughter knows how to use these things who's four years old, and grandma doesn't. I'll go to the Microsoft Store. Thank you so much.
Thank you.
I've enjoyed my first meeting.
Thank you.
Thank you.
Go to microphone number 4.
Hi, my name is Ruth Wong. I traveled all the way from New York, 3,000 miles to Seattle to tell you that I want to run for the board. When I was talking to your people when I was in New York, they said, "Well, you're all the way in New York. You can't apply for a job here. You have to be here." I'm here now.
Welcome.
I'm putting you on.
Well, I would have to say thank you for traveling 3,000 miles to express your interest. We clearly have had a transformation of our board. As a matter of fact, 5 of the 10 current members are new within the last year. One of the focuses for us right now is to bring this group together so they can work to support Satya and the team. However, as we work our way through, let's say, the next six months or so, we will certainly look up to see what skills and experiences we might need to supplement the current board.
Yeah, I have the skills that you need.
Why don't you leave your resume with the people at the front desk, and we'll take a look at it a little bit later.
We definitely have a process where anybody on the planet can register their interest in being a Microsoft director. I'd be happy to talk with you afterwards. We can make sure you're connected with that and that we have your information, and it gets to John and the other members of the Governance and Nominating Committee. Should we go back to, I guess, microphone number 3?
Thank you, Mr. Nadella. Also, one thing I like to see, I don't think you have, let's not, call it, challenged people on the board. Is that possible? Because in order to understand about that person, you got to be in that person's shoe. Because you can tell me from your point of view, but if I express to you from my point of view, it's entirely different. That's one area I can look into it.
Yeah.
The other question is also, if you have someone from your department, just like to send what looks like as a blind person life, maybe to see, to watch, perhaps that person can learn, understand the need, and remove that barrier, remove that problem. Life can be lived as full as it can be. What can you do about that? Thank you.
Thank you for the comments. I think that as we look on the board, I'm sure we look at all of those factors, and it's a good push, and we'll take that. One of the things that I should have mentioned is when we do research in universal design, and quite frankly, we do have a very active, vibrant community of people who have a variety of different challenges that are actively driving and making sure that our products are getting better. In fact, one of the things that I so distinctly remember is we have developers at Microsoft who want to make sure that our development tools are best in class for, in fact, visually impaired developers. That's how we have, in fact, gotten on the improvement cycle of those products. Overall, we do research.
In fact, living in the shoes and the eye of others is the most important way to do user research, and we will definitely take that into advisement, and that's what we have a very strong focus on user research that's grounded on those principles of developing that deep empathy, and we will definitely do that. Let's go to microphone number 1.
Thank you for the comments today. I'm curious about the kind of growth you see coming forward in the four major economic zones, the U.S., China, India, and the E.U. What, as shareholders, should we expect in the coming years?
Amy, you want to talk about sort of the macro view?
Sure. I actually am not sure that I have a macro view that's any different than is generally shared by many. I think on our last earnings call, we did talk a bit about our geo-specific performance. We actually specifically talked about strength, which I think many people saw in the U.S., and I think that's something that we continue to see, especially, you can see it in the strength of the US dollar. You can also see it in the price of oil, putting some money in people's pockets for this holiday season, which I think many people are hopeful about. Outside of that, I think we saw some weakness in China, which we talked about. That's been consistent for us for the past couple of quarters. Again, I don't think we're unique in seeing that weakness amongst other multinationals doing business.
Outside of that, I think we've continued to often outperform the macroeconomic indicators the same way we've grown in excess of worldwide IT spend. We did see some strong performance out of Europe as well. Even with a bit of this change in the exchange rate, I do focus on macro, I tend to more think about how we can continue to take share. No matter what the macroeconomic conditions are, it's about continuing to help your customers. That's really where I try to keep our focus, and I know Kevin Turner does as well, who's here running our sales force.
Let me take another question from the web. With Office available cross-platform, how do you plan on differentiating Windows?
Yeah. One of the things that we've always done at Microsoft is to make sure that our applications are available for everyone to use on all devices. If you look at our history, we've had Office on the Mac since the very beginning. In fact, we had Office as a graphical application on the Mac before we had it even on Windows, so it's not new to us. We want to be aggressive on it, which is we want to make sure that Office 365 is available to everyone on every device, and that's what we're committed to. In fact, it's driving some good adoption and usage, and so on. That doesn't mean we don't get to take advantage of the fact that Microsoft has the unique capability to bring our apps and our operating systems, as well as now our hardware together in unique ways.
Surface Pro 3 is a fantastic example of that. If you look at the technical breakthroughs between what we've done in OneNote, what we did in inking in Windows to get that high precision or get rid of the parallax error that happens when you do ink on glass, and the actual pen itself. That's innovation that we can uniquely do, and we're very committed to being able to differentiate using that set of capabilities that we now have. I think of Windows as the coming together of the best of Microsoft in the most natural way. There are some things that you can only do if you actually make changes to the core operating system, to the core shell. Those are things that we will exploit. That doesn't mean we are not going to also have great applications for people to use.
I want to have a Microsoft folder on every device and Microsoft Windows on more devices. That's how I think our strategy going forward will shape out.
Microphone number four.
In recent years, a number of stock analysts have thought that Microsoft had too many shares outstanding. Today, you mentioned that there has been a repurchase of a certain number of shares. Is that reflective of an agreement that there really have been too many shares outstanding? What would the future look like on that? Thank you.
Sure. The way I tend to think about it is our actual shares outstanding have been relatively stable within a pretty tight band, especially over the past couple of years. Our buyback is really reflective of thinking about total shareholder return, and the best place to invest our cash, both in terms of operating expenses, investments, actually, in capital to run the data centers we talk about, as well as purchasing our own shares and a combination of returning dividends. I would think of it more in a stable state as opposed to any recognition it's too high or too low.
Microphone number 3.
As a longtime shareholder, I'd like to thank the board for reinventing Microsoft. One of the best things that you've done is put in the Microsoft Stores. That also leads to an observation regarding diversity, because when I visit the particular Microsoft Store, when I visited about two months ago, I walked in I was surprised to see that an individual wearing one of the green Microsoft Xbox shirts had gray hair.
I walked up to him and I said, "What are you doing here?" He said, "I'm here so that when people with gray hair walk in the store, they feel comfortable." I said, "Well, that's a good idea." He said, "You have a question?" I said, "Yes." I gave him the question, and he said, "I don't know the answer, I went over and got a guy about 21 and brought him over here." I do have a question. I'd like to have you give some background on this case that the Chinese have brought forth about a back tax bill of some significant amount. I know that you can't speak in confidential material, but what was the background of this? How did this come out of the wall? Thank you.
I'll give you a bit of an answer.
I'm happy to.
Amy may want to provide some more detail.
Yeah.
The truth is, the news reporting was less than helpful and accurate. This came out of a negotiation between the U.S. and China under the tax treaty. This went back a few years ago, and pursuant to that process, it was clear that discussions would go forward. It would result in the amount of tax that Microsoft would then pay to China. We then get a tax credit under U.S. law. It, frankly, was a lot less dramatic than the news accounts made it sound, and it was pretty much what we have always expected would unfold over the last few years. I think we have time for one last question, so let me go to microphone number 1 for that.
Well, thank you. Just a further question on capital allocation. At what point, maybe I can put it this way, at what price would Microsoft not buy back its own stock again? Because that may be becoming an issue.
Let me take it this way, which is, I think we've all talked about today, and even the demoer showed, that we actually believe the future is very bright. Our opportunities are broad, our geographic opportunities are broad, our product vision is broad, and I generally believe that our ability to grow is really only limited by our own imagination. I tend to think that the stock price over time reflects our ability to execute on that broad dream. I'll leave it at that.
Well said. Yeah. I think that was a great last question, a great note for the future. We'd like to thank you all very much. Amy and I will stick around, thank you for coming this morning.
Thank you so much.
Much appreciated. Thank you.