Revenue Recognized from Licensing Transition

Toward the end of FY’02, many volume licensing customers signed up for an older upgrade program, Upgrade Advantage (UA), which was replaced after July 31, 2002, by Software Assurance (SA). Because these UA payments covered two years, Microsoft recorded the revenue from these payments as unearned revenue, then slowly recognized it over the subsequent quarters.

This chart shows the amount of revenue recognized in each of the last seven quarters from previously booked UA payments, the total revenue for those quarters, and the percentage of total revenue that can be attributed to previously booked UA payments. Microsoft shared this information to quell concerns over the fact that only 10% to 30% of these customers are expected to sign up for SA when their current agreements expire.

Quarter	Revenue Earned from Carry-forward	Total Revenue	% of Total Attributable to Carry-forward
Q1’03	$464	$7,746	6.0%
Q2’03	$480	$8,541	5.6%