sec filings - microsoft - 0000891020-95-000018

8/14/2019 SEC Filings - Microsoft - 0000891020-95-000018

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0000891020-95-000018.txt : 199505150000891020-95-000018.hdr.sgml : 19950515ACCESSION NUMBER: 0000891020-95-000018CONFORMED SUBMISSION TYPE: S-4PUBLIC DOCUMENT COUNT: 14

FILED AS OF DATE: 19950209SROS: NASD

FILER:

COMPANY DATA:COMPANY CONFORMED NAME: MICROSOFT CORPCENTRAL INDEX KEY: 0000789019STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED

SOFTWARE [7372]IRS NUMBER: 911144442STATE OF INCORPORATION: DEFISCAL YEAR END: 0630

FILING VALUES:FORM TYPE: S-4SEC ACT: 1933 ActSEC FILE NUMBER: 033-57651FILM NUMBER: 95507740

BUSINESS ADDRESS:STREET 1: ONE MICROSOFT WAY #BLDG 8STREET 2: NORTH OFFICE 2211

CITY: REDMONDSTATE: WAZIP: 98052BUSINESS PHONE: 2068828080

MAIL ADDRESS:STREET 1: ONE MICROSOFT WAY - BLDG 8STREET 2: NORTH OFFICE 2211CITY: REDMONDSTATE: WAZIP: 98052-6399


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S-41MICROSOFT CORPORATION S-4

1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ONFEBRUARY 9, 1995.

REGISTRATION NO. 33- .- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

------------------------

FORM S-4REGISTRATION STATEMENT

UNDERTHE SECURITIES ACT OF 1933

MICROSOFT CORPORATION(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

WASHINGTON 7372 91-1144442(STATE OR OTHER JURISDICTION (PRIMARY STANDARDINDUSTRIAL (IRS EMPLOYER

OF INCORPORATION OR CLASSIFICATION CODE NUMBER)IDENTIFICATION NO.)

ORGANIZATION)

ONE MICROSOFT WAYREDMOND, WASHINGTON 98052-6399

(206) 882-8080

(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,INCLUDING AREA CODE,OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

ROBERT A. ESHELMAN, ESQ.MICROSOFT CORPORATIONONE MICROSOFT WAY

REDMOND, WASHINGTON 98052-6399(206) 882-8080

(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,INCLUDING AREA CODE,

OF AGENT FOR SERVICE)


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WITH COPIES TO:

RICHARD B. DODD, ESQ. GORDON K. DAVIDSON,

ESQ.MARK R. BEATTY, ESQ. EDWIN N. LOWE, ESQ.PRESTON GATES & ELLIS KENNETH A. LINHARES,

ESQ.5000 COLUMBIA CENTER FENWICK & WEST

701 FIFTH AVENUE TWO PALO ALTO SQUARE, STE.800

SEATTLE, WA 98104-7078 PALO ALTO, CA 94306

Approximate date of commencement of proposed sale of the securities to thepublic: At the effective time of the merger of a wholly-owned subsidiary of theregistrant with and into Intuit Inc., which shall occur as soon as practicableafter the effective date of this registration statement and the satisfaction ofthe conditions to the merger.

If the securities being registered on this Form are being offered inconnection with the formation of a holding company and there is compliance withGeneral Instruction G, check the following box: / /

If any of the securities being registered on this Form are being offered on

a delayed or continuous basis pursuant to Rule 415 under the Securities Act of1933, check the following box: /X/.

------------------------

CALCULATION OF REGISTRATION FEE

- -------------------------------------------------------------------------------------------------- -----------------------------------------------------------------------------------------

-------- PROPOSED PROPOSEDTITLE OF CLASS AMOUNT MAXIMUM MAXIMUMOF SECURITIES TO BE OFFERING PRICE AGGREGATE

AMOUNT OFTO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING

PRICE(2) REGISTRATION FEE- -------------------------------------------------------------------------------------------------Common Stock............. 28,271,076 $66.25 $1,401,915,256 $483,419- -------------------------------------------------------------------------------------------------


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- -------------------------------------------------------------------------------------------------

(1) Represents maximum number of Microsoft Shares issuable in the Merger,assuming no adjustment to the exchange ratio of 1.336.

(2) Estimated solely for purposes of calculating the registration fee pursuantto Rule 457(f)(1), based on 21,160,985 Intuit Shares being exchanged forMicrosoft Shares, using the average of the high and low prices of IntuitShares of $66.25 per share as reported on the Nasdaq Stock Market onFebruary 7, 1995.

(3) A filing fee of $270,454.81 was paid by the registrant in connection with aPreliminary Proxy Statement/Prospectus filed on November 17, 1994 and,

pursuant to rule 457(b), is credited to the registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATIONSTATEMENT ON SUCH DATE ORDATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTILTHE REGISTRANT SHALLFILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THATTHIS REGISTRATIONSTATEMENT SHALL THEREAFTER BECOME EFFECTIVE INACCORDANCE WITH SECTION 8(A) OFTHE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATIONSTATEMENT SHALL BECOME

EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANTTO SAID SECTION 8(A),MAY DETERMINE.- --------------------------------------------------------------------------------- --------------------------------------------------------------------------------

2

CROSS REFERENCE SHEET

ITEM AND CAPTIONIN FORM S-4CAPTION IN

PROXY/PROSPECTUS- -------------------------------------------------------- ------------

-------------------------

Item 1. Forepart ofRegistration Statement and

Outside Front Cover ofProspectus........... Outside Front


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Cover PageItem 2. Inside Front Cover and

Outside Back CoverPages of

Prospectus.........................Inside Front Cover Page;

AVAILABLE

INFORMATION;Item 3. Risk Factors, Ratio of

Earnings to FixedCharges and Other

Information...............SUMMARY OF PROXY

STATEMENT/PROSPECTUS;

SELECTED

FINANCIAL DATA;FINANCIAL ANALYSIS

Item 4. Terms of theTransaction....................SUMMARY OF PROXY


THE MERGER AND

RELATED TRANSACTIONS;DESCRIPTION OF

CAPITAL STOCK;

COMPARISON OF RIGHTS

OF SHAREHOLDERS OFINTUIT AND

MICROSOFT

Item 5. Pro Forma Financial

Information............. NotApplicableItem 6. Material Contacts with

the Company being

Acquired....................................THE MERGER AND

RELATED

TRANSACTIONS --Background of the

Merger


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Item 7. Additional InformationRequired for

Reoffering by Persons andParties Deemed

Underwriters................................

Not ApplicableItem 8. Interests of Named

Experts and Counsel......LEGAL MATTERS

Item 9. Disclosure ofCommission Position on

Indemnification forSecurities Act

Liabilities.................................

Not ApplicableItem 10. Information with

Respect to S-3

Registrants.................................Not Applicable

Item 11. Incorporation ofCertain Information by

Reference...................................

Not Applicable

Item 12. Information withRespect to S-2 or S-3

Registrants.................................

SUMMARY OF PROXY

STATEMENT/PROSPECTUS;SELECTED

FINANCIAL DATA --

Microsoft;

FINANCIAL ANALYSIS --Microsoft

Management's Discussion and

Analysis

of Financial Condition andResults of

Operations; COMPARATIVE

MARKET


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PRICES; MICROSOFT'SBUSINESS;

DESCRIPTION OF CAPITAL

STOCK;

FINANCIAL STATEMENTSItem 13. Incorporation of

Certain Information by

Reference...................................INCORPORATION OF

DOCUMENTS BY

REFERENCEItem 14. Information with

Respect to Registrantsother than S-3 or S-2

Registrants........... NotApplicable

Item 15. Information withRespect to S-3 Companies... Not

Applicable

3

ITEM AND CAPTIONIN FORM S-4

CAPTION INPROXY/PROSPECTUS

- -------------------------------------------------------- ------------

-------------------------

Item 16. Information withRespect to S-2 or S-3

Companies...................................SUMMARY OF PROXY


SELECTED

FINANCIAL DATA -- Intuit;FINANCIAL

ANALYSIS -- Intuit

Management's


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Discussion and Analysis of

Financial

Condition and Results ofOperations;

COMPARATIVE MARKET

PRICES; INTUIT'S

BUSINESS; THE INTUITSPECIAL

STOCKHOLDERS

MEETING; DESCRIPTION OF

CAPITAL STOCK;FINANCIAL STATEMENTSItem 17. Information withRespect to Companies Other

than S-3 or S-2Companies................... Not

ApplicableItem 18. Information if

Proxies, Consents orAuthorizations are to be

Solicited..........

INCORPORATION OFDOCUMENTS BY

REFERENCE; SUMMARY

OF PROXY

STATEMENT/PROSPECTUS; THE INTUIT

SPECIAL STOCKHOLDERS

MEETING; THE

MERGER AND RELATEDTRANSACTIONS;

COMPARISON OF RIGHTS

OF SHAREHOLDERS

OF INTUIT ANDMICROSOFT

Item 19. Information ifProxies, Consents or

Authorizations are not to

be Solicited or in


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an ExchangeOffer........................... Not

Applicable

4

[LOGO]

155 LINFIELD AVENUEMENLO PARK, CALIFORNIA 94025

FEBRUARY , 1995

Dear Intuit Stockholder:

You are cordially invited to attend a Special Meeting of Stockholders ofIntuit Inc. ("Intuit"), which will be held in the VMOVA Conference Room at 75Willow Road, Menlo Park, California 94025, on Friday, March 24, 1995,commencingat 8:00 a.m., local time.

At the Special Meeting, you will be asked to consider and vote on aproposal to approve and adopt the Agreement and Plan of Reorganization dated asof October 13, 1994 (the "Reorganization Agreement") entered into by Intuit,Microsoft Corporation ("Microsoft") and M/I Acquisition Corporation, a wholly-owned subsidiary of Microsoft ("M/I"), a related Agreement of Merger betweenIntuit and M/I (collectively with the Reorganization Agreement, the "Merger

Agreements") and the merger (the "Merger") of M/I with and into Intuit pursuantto the Merger Agreements.

If the proposed Merger is approved and becomes effective, Intuit willbecome a wholly-owned subsidiary of Microsoft, and (subject to the adjustmentformula described below) each share of Intuit Common Stock, $0.01 par value (an"Intuit Share") that is outstanding at the time of the Merger will be convertedinto 1.336 shares of Microsoft Common Stock, $0.00005 par value ("MicrosoftShares"), and each then-outstanding option to purchase one Intuit Share will beassumed by Microsoft and converted into an option to purchase 1.336 MicrosoftShares. However, if the average closing price at which Microsoft Shares trade

during the ten trading days ending two days prior to the closing of the Merger(the "Microsoft Average Closing Price") is less than $53.144 per share, then thenumber of Microsoft Shares into which each Intuit Share will be converted in theMerger (and the number of Microsoft Shares that will be purchasable upon theconversion of each option to purchase one Intuit Share) will be increased from1.336 to the number of Microsoft Shares obtained by dividing $71.00 by theMicrosoft Average Closing Price and rounding to the third decimal point. If theMerger Agreements and the Merger are approved by Intuit's stockholders at theSpecial Meeting, the Merger is expected to be consummated on or about March 27,1995, or as soon thereafter as practicable after satisfaction of all necessaryclosing conditions.


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After the Merger occurs, I will serve as Microsoft's Executive VicePresident of Electronic Commerce, and William Campbell, Intuit's current ChiefExecutive Officer, will continue to serve in that position and as a Senior VicePresident of Microsoft, and William H. Harris, Jr., an Intuit Executive Vice

President, will serve as a Vice President of Microsoft. Most of the members ofIntuit's current executive management team are expected to continue as officersof Intuit following the Merger. The combination of Intuit with Microsoft willenable Intuit to accelerate its efforts to fundamentally change the way thatindividuals and small businesses handle their financial affairs.

After careful consideration, your Board of Directors has unanimouslyapproved the Merger Agreements, the Merger and the transactions provided for bythe Merger Agreements and has concluded that they are in the best interests ofIntuit and its stockholders. Your Board of Directors unanimously recommends avote in favor of the Merger.

In the material accompanying this letter, you will find a Notice of SpecialMeeting of Stockholders, a Proxy Statement/Prospectus relating to the actions tobe taken by Intuit stockholders at the Special Meeting

5

and a proxy. The Proxy Statement/Prospectus more fully describes the proposedMerger and includes information about Intuit and Microsoft. Please read itcarefully.

We hope that you will be able to attend the Special Meeting in person.However, whether or not you plan to attend the Special Meeting, please complete,

sign, date and return your proxy in the enclosed envelope. If you attend theSpecial Meeting, you may vote in person if you wish, even though you havepreviously returned your proxy. It is important that your shares be representedand voted at the Special Meeting.

Sincerely,

/s/ SCOTT D. COOK---------------------Scott D. CookChairman of the Board

6

[LOGO]

155 LINFIELD AVENUEMENLO PARK, CALIFORNIA 94025

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Our Stockholders:

A Special Meeting of Stockholders of Intuit Inc., a Delaware corporation

("Intuit"), will be held at 8 a.m., local time, on Friday, March 24, 1995 at


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Intuit's offices in the VMOVA Conference Room at 75 Willow Road, Menlo Park,California 94025 (the "Special Meeting"), for the following purposes:

1. To consider and vote upon a proposal to approve: (a) the Agreement

and Plan of Reorganization dated October 13, 1994 (the "ReorganizationAgreement") entered into by Intuit, Microsoft Corporation, a Washingtoncorporation ("Microsoft"), and M/I Acquisition Corporation, a Washingtoncorporation that is a wholly-owned subsidiary of Microsoft ("M/I"), and therelated Agreement of Merger (together with the Reorganization Agreement,the "Merger Agreements") to be entered into between Intuit and M/I, and (b)the merger (the "Merger") of M/I with and into Intuit pursuant to theMerger Agreements, whereby, among other things, Intuit will survive theMerger and become a wholly-owned subsidiary of Microsoft, each outstandingshare of Intuit Common Stock, $0.01 par value (an "Intuit Share"), will beconverted into no fewer than 1.336 shares of Microsoft Common Stock, parvalue $0.00005 per share ("Microsoft Shares"), and Microsoft will assumeall outstanding options to purchase Intuit Shares, which options will beconverted into options to purchase Microsoft Shares at the same conversionratio at which Intuit Shares will be converted into Microsoft Shares in theMerger.

2. To transact such other business as may properly come before theSpecial Meeting or any adjournment thereof.

The above proposal is more fully described in the ProxyStatement/Prospectus accompanying this Notice.

Only holders of record of Intuit Shares at the close of business onFebruary 10, 1995 are entitled to notice of, and will be entitled to vote at,the Special Meeting or any adjournment thereof. Approval of the MergerAgreements and the Merger will require the affirmative vote of the holders of amajority of the outstanding Intuit Shares entitled to vote thereon.

BY ORDER OF THE BOARD OF DIRECTORS

WILLIAM H. LANE, III----------------------------------

William H. Lane III, SecretaryMenlo Park, CaliforniaFebruary , 1995

TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THESPECIAL MEETING, YOU AREURGED TO COMPLETE, DATE, AND SIGN THE ENCLOSED PROXY ANDMAIL IT PROMPTLY IN THEPOSTAGE PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLANTO ATTEND THE SPECIALMEETING IN PERSON. YOUR PROXY CAN BE REVOKED ANDWITHDRAWN BY YOU AT ANY TIME

BEFORE IT IS VOTED.


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7

MICROSOFT CORPORATION

PROSPECTUS

------------------------

INTUIT INC.

PROXY STATEMENTFOR

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD FRIDAY, MARCH 24, 1995

This Proxy Statement/Prospectus constitutes the proxy statement of IntuitInc. ("Intuit") relating to the solicitation of proxies for use at the SpecialMeeting of Stockholders of Intuit (the "Special Meeting") scheduled to be heldat 8:00 a.m. on Friday, March 24, 1995, and any adjournment thereof and theprospectus of Microsoft Corporation ("Microsoft") relating to shares ofMicrosoft common stock, par value $.00005 per share (the "Microsoft Shares")that will be issued in connection with the merger (the "Merger") of M/IAcquisition Corporation, a wholly-owned subsidiary of Microsoft ("M/I"), withand into Intuit. The Merger will be effected pursuant to an Agreement and Planof Reorganization (the "Reorganization Agreement") dated as of October 13, 1994by and among Microsoft, M/I, and Intuit. Microsoft has filed a registration

statement with the Securities and Exchange Commission (the "Commission") withrespect to the issuance of the Microsoft Shares.

No person has been authorized to give any information or to make anyrepresentation other than those contained in this Proxy Statement/Prospectus inconnection with the solicitations of proxies or the offering of securities madeby this Proxy Statement/Prospectus and, if given or made, such information orrepresentations must not be relied upon as having been authorized by Microsoftor Intuit. Neither the delivery of this Proxy Statement/Prospectus nor anydistribution of securities made hereunder shall under any circumstances createany implication that there has been no change in the information set forth

herein since the date of this Proxy Statement/Prospectus. This ProxyStatement/Prospectus does not constitute an offer to sell, or a solicitation ofan offer to buy, any securities, or the solicitation of a proxy, by anyone inany jurisdiction in which such offer or solicitation is not authorized or inwhich the person making such offer or solicitation is not qualified to do so orto anyone to whom it is unlawful to make such offer or solicitation.

NEITHER THE MERGER NOR THESE SECURITIES HAVE BEENAPPROVED OR DISAPPROVEDBY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATESECURITIES COMMISSION NORHAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE

SECURITIES COMMISSION


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PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXYSTATEMENT/PROSPECTUS. ANYREPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this Proxy Statement/Prospectus is February , 1995.8

AVAILABLE INFORMATION

Microsoft and Intuit are subject to the information requirements of theSecurities Exchange Act of 1934, as amended (the "Exchange Act"), and inaccordance therewith file reports, proxy statements and other information withthe Securities and Exchange Commission (the "Commission"). The reports, proxystatements and other information filed by Microsoft and Intuit with theCommission can be inspected and copied at the public reference facilitiesmaintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,D.C. 20549, and at the Commission's Regional Offices at Seven World TradeCenter, 13th Floor, New York, New York 10048 and at Northwestern AtriumCenter,500 West Madison Street, Chicago, Illinois 60661-2511. Copies of such materialcan also be obtained from the Public Reference Section of the Commission at 450Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The commonstocks of both Microsoft and Intuit are traded as "national market securities"on The Nasdaq Stock Market. Material filed by Microsoft and Intuit can beinspected at the offices of the National Association of Securities Dealers,Inc., Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.

Microsoft has filed with the Commission a registration statement on FormS-4 (the "Registration Statement") under the Securities Act of 1933, as amended,with respect to the Microsoft Shares to be issued pursuant to or as contemplatedby this Proxy Statement/Prospectus. This Proxy Statement/Prospectus does notcontain all the information set forth or incorporated by reference in theRegistration Statement and the exhibits and schedules relating thereto, certainportions of which have been omitted as permitted by the rules and regulations ofthe Commission. For further information, reference is made to the RegistrationStatement and the exhibits filed or incorporated as a part thereof, which are onfile at the offices of the Commission and may be obtained upon payment of thefee prescribed by the Commission, or may be examined without charge at the

offices of the Commission. Statements contained in this ProxyStatement/Prospectus as to the contents of any contract or other documentreferred to herein or therein are not necessarily complete, and in each instancereference is made to the copy of such contract or other document filed as anexhibit to the Registration Statement or such other document.

INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents filed with the Commission by either Microsoft orIntuit pursuant to the Exchange Act are incorporated by reference in this ProxyStatement/Prospectus:

1. Microsoft's Annual Report on Form 10-K for the year ended June 30,


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1994;

2. Microsoft's Proxy Statement dated September 27, 1994;

3. Microsoft's Quarterly Report on Form 10-Q, as amended by Form10-Q/A, for the quarter ended September 30, 1994;

4. Intuit's Annual Report on Form 10-K, as amended by Amendment No. 1thereto on Form 10-K/A, for the ten-month transition period ended July 31,1994;

5. Intuit's Quarterly Report on Form 10-Q for the quarter endedOctober 31, 1994; and

6. Intuit's Report on Form 8-K dated September 27, 1994, as amendedby Amendment No. 1 thereto on Form 8-K/A dated December 8, 1994.

All documents and reports subsequently filed by Microsoft and Intuitpursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the dateof this Proxy Statement/Prospectus and prior to the date of the Special Meetingshall be deemed to be incorporated by reference in this ProxyStatement/Prospectus and to be a part hereof from the date of filing of suchdocuments or reports. Any statement contained in a document incorporated ordeemed to be incorporated by reference herein shall be deemed to be modified orsuperseded for purposes of this Proxy Statement/Prospectus to the extent that astatement contained herein or in any other subsequently filed document whichalso is or is deemed to be incorporated by reference herein modifies or

supersedes such statement. Any such statement so modified or superseded shallnot be deemed, except as so modified or superseded, to constitute a part of thisProxy Statement/Prospectus.

ii9

This Proxy Statement/Prospectus incorporates documents by reference whichare not presented herein or delivered herewith. Such documents (other thanexhibits to such documents unless such exhibits are specifically incorporated byreference herein) are available to any person, including any beneficial owner,

to whom this Proxy Statement/Prospectus is delivered, on written or oralrequest, without charge, in the case of documents relating to Microsoft,directed to Microsoft Corporation, One Microsoft Way, Redmond, WA 98052(telephone number (206) 882-8080), Attention: David Corning; or in the case ofdocuments relating to Intuit, directed to Intuit Inc., 66 Willow Place, MenloPark, CA 94025 (telephone number (415) 329-3555), Attention: William H. LaneIII. In order to ensure timely delivery of the documents, any requests should bemade by March 10, 1995.

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TABLE OF CONTENTS


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PAGE

----

SUMMARY OF PROXYSTATEMENT/PROSPECTUS.................................................

1SELECTED FINANCIAL

DATA............................................................... 8Microsoft........................................................................... 8Intuit.............................................................................. 8

COMPARATIVE MARKETPRICES............................................................. 9

FINANCIALANALYSIS.................................................................... 9

Microsoft Management's Discussion and Analysis ofFinancial Condition and Results of

Operations.......................................................................9

Intuit Management's Discussion and Analysis of FinancialCondition and Results of

Operations.......................................................................15

THE INTUIT SPECIAL STOCKHOLDERSMEETING............................................... 25

Date, Time and Place ofMeeting..................................................... 25

Record Date and OutstandingShares.................................................. 25

Voting of Proxies...................................................................25

Vote Required and Voting Intentions of CertainStockholders......................... 25

Solicitation of Proxies andExpenses................................................ 26

THE MERGER AND RELATED

TRANSACTIONS................................................... 26General............................................................................. 26Background of the

Merger............................................................ 27Intuit's Reasons for the

Merger..................................................... 29Board

Recommendation................................................................30

Opinion of FinancialAdvisor........................................................ 30

Interests of Certain Persons in the

Merger.......................................... 34


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RelatedAgreements.................................................................. 35

Representations andCovenants....................................................... 36

Conditions to theMerger............................................................ 37

Termination orAmendment............................................................ 38

Certain U.S. Federal Income TaxMatters............................................. 39

AccountingTreatment................................................................ 41

RegulatoryRequirements............................................................. 41

Surrender of Certificates; LostCertificates........................................ 42

Affiliates' Restrictions on Sale of IntuitShares................................... 42

No Dissenters' Rights...............................................................43

Merger Expenses andFees............................................................ 43

MICROSOFT'SBUSINESS.................................................................. 43

General............................................................................. 43Products............................................................................ 44Localization........................................................................

48Marketing and

Distribution.......................................................... 48Finished Goods

Channels............................................................. 48Product Support.....................................................................

49Customers...........................................................................

50Product

Development................................................................. 50

Competition.........................................................................50Product Protection..................................................................

51Manufacturing.......................................................................

51Employees...........................................................................

51Properties..........................................................................

51Legal Proceedings...................................................................

52


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iv11

PAGE

----

INTUIT'SBUSINESS..................................................................... 53Background..........................................................................

53Products............................................................................

54Product Development and

Marketing................................................... 57Sales and

Distribution.............................................................. 59International.......................................................................

61Customer Service and Technical

Support.............................................. 61Seasonality; Quarterly Fluctuations inRevenue...................................... 61

Competition.........................................................................62

Proprietary Rights..................................................................64

Manufacturing andShipping.......................................................... 64

Employees...........................................................................64

Acquisition of Parsons Technology,Inc.............................................. 65

Management of

Growth................................................................ 65Properties..........................................................................65

LegalProceedings................................................................... 66

DESCRIPTION OF CAPITALSTOCK.......................................................... 67

Microsoft...........................................................................67

Intuit.............................................................................. 67COMPARISON OF RIGHTS OF SHAREHOLDERS OF

INTUIT AND MICROSOFT.......................... 68

Amendment to Certificate/Articles of


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Incorporation.................................. 68Right to Call Special Meeting of

Shareholders....................................... 68Anti-Takeover Provisions and Interested

Stockholder................................. 69Mergers, Sales of Assets and Other

Transactions..................................... 70Transactions With Officers or

Directors............................................. 71Appraisal or Dissenters'

Rights..................................................... 71Dividends...........................................................................

72Limitation of Liability and Indemnification of Officers

and Directors............... 72LEGAL

MATTERS.........................................................................73

EXPERTS...............................................................................73

INDEX TO MICROSOFT FINANCIALSTATEMENTS............................................... F-1

INDEX TO INTUIT FINANCIALSTATEMENTS.................................................. F-16

LIST OF ANNEXES

Annex A Agreement and Plan of Reorganization

Annex B Opinion of Morgan Stanley & Co. Incorporated

v12

INDEX OF SIGNIFICANT DEFINED TERMS

TERMPAGE DEFINED- ---------------------------

------ ------------

A/P..............................54

AcquiringPerson................. 70

AcquisitionTransaction.......... 37

Affiliates.......................


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35Affiliates

Agreements............ 35Best.............................

16Certificate Transmittal

Form..... 42CheckFree........................

57ChipSoft.........................

15Closing..........................

35Code.............................

39Commission.......................

iiConsumer Software

Comparables.... 32Department of

Justice............ 41DGCL.............................

68Effective Time...................

3Exchange

Act..................... ii

ExchangeAgent................... 42

ExchangeRatio................... 3

FTC..............................41

HSR Act..........................41

Intuit...........................i

Intuit Option....................

3Intuit Shares....................2

M/I..............................i

TERMPAGE DEFINED

- --------------------------------- ------------

Merger...........................


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iMerger

Agreements................1

Microsoft........................i

MicrosoftArticles............... 68

Microsoft AverageClosing

Price..........................3

Microsoft PreferredShares....... 67

MicrosoftSecurities............. 67

MicrosoftShares................. i

MorganStanley................... 2Novell...........................

4NPC..............................

16OEM..............................

10Parsons..........................

16Personal Finance SoftwareBusiness.......................

38Productivity Software

Comparables....................32

Record Date......................1

RegistrationStatement........... ii

Reorganization...................40Reorganization

Agreement......... iSecurities Act...................

35Special

Meeting.................. 1Stockholder

Agreements........... 35Tax Opinions.....................

40

WBCA.............................


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67

vi

13

SUMMARY OF PROXY STATEMENT/PROSPECTUS

The following is a summary of certain information contained elsewhere inthis Proxy Statement/ Prospectus. This summary is not, and is not intended tobe, complete in itself. Reference is made to, and this summary is qualified inits entirety by, the more detailed information contained in this ProxyStatement/ Prospectus and the attached Annexes, which stockholders of Intuit areencouraged to review. Unless otherwise defined in this summary, capitalizedterms used in this summary are defined elsewhere in this Proxy

Statement/Prospectus.

INTRODUCTION............... The Board of Directors of Intuit has unanimouslyapproved and adopted the Reorganization Agreement,pursuant to which M/I will be merged with and intoIntuit, if the stockholders of Intuit adopt theMerger by the requisite vote and certain otherconditions are satisfied. Intuit will be thesurviving corporation in the Merger as awholly-owned subsidiary of Microsoft. A copy of theReorganization Agreement is attached hereto asAnnex A and incorporated herein by reference.

THE COMPANIES

Microsoft CorporationOne Microsoft WayRedmond, Washington 98052(206) 882-8080 Microsoft develops, manufactures, markets,

licenses, and supports a wide range of softwareproducts, including operating systems for personalcomputers (PCs), workstations, and servers;business and consumer programs for productivity,

reference, education, and entertainment; andsoftware development tools. Microsoft also marketspersonal computer books and hardware, and isengaged in the research and potential developmentof advanced technology software products. See"MICROSOFT'S BUSINESS."

Intuit Inc.155 Linfield AvenueMenlo Park, CA 94025(415) 329-2785 Intuit develops, manufactures, markets, and

supports software products that enable households


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and small businesses to automate commonly performedfinancial tasks, and markets and sells suppliesdesigned for use with Intuit's software products,including checks, invoices and forms. See "INTUIT'S

BUSINESS."

M/I Acquisition CorporationOne Microsoft WayRedmond, Washington 98052 M/I is a wholly-owned subsidiary of Microsoft

formed solely for the purpose of the Merger and hasconducted no business.

THE INTUIT SPECIALSTOCKHOLDERS MEETING....... A special meeting of stockholders of Intuit (the

"Special Meeting") will be held on Friday, March24, 1995, at 8:00 a.m. local time in the VMOVAConference Room at 75 Willow Road, Menlo Park,California 94025. Stockholders of record of Intuitat the close of business on February 10, 1995 (the"Record Date") are entitled to notice of and tovote at the Special Meeting. See "THE INTUITSPECIAL STOCKHOLDERS MEETING."

Purpose of the Meeting... At the Special Meeting, Intuit stockholders willconsider and vote upon a proposal to approve theReorganization Agreement, a related Agreement ofMerger between Intuit and M/I (collectively, with

the Reorganization Agreement, the "MergerAgreements"), and the Merger. See "THE MERGER ANDRELATED TRANSACTIONS."

Vote Required............ Approval of the Merger Agreements and the Mergerwill require the affirmative vote of the holders ofa majority of the outstanding Intuit common stock,par value $.01 (each an "Intuit Share" andcollectively

1

14

the "Intuit Shares"), entitled to vote. See "THEINTUIT SPECIAL STOCKHOLDERS MEETING -- VoteRequired."

BACKGROUND AND REASONS FORTHE MERGER; RECOMMENDATIONOF THE BOARD OFDIRECTORS................ The Board of Directors of Intuit has unanimously

approved the Reorganization Agreement and theMerger, and has determined that the Merger is fair

to and in the best interests of Intuit and its


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stockholders. The Intuit Board of Directorsunanimously recommends approval of theReorganization Agreement and the Merger by theIntuit stockholders. The primary factors considered

and relied upon by the Intuit Board of Directors inreaching its recommendation are referred to in "THEMERGER AND RELATED TRANSACTIONS -- Intuit's Reasonsfor the Merger;" and "THE INTUIT SPECIALSTOCKHOLDERS MEETING -- Vote Required and VotingIntentions of Certain Stockholders."

INTEREST OF CERTAIN PERSONSIN THE MERGER.............. As described below, certain Intuit management

personnel have entered into employment andnoncompetition agreements with Microsoft that willbecome effective upon consummation of the Merger.In addition, pursuant to the terms of a March 1994employment agreement between Intuit and William V.Campbell, Intuit's President and Chief ExecutiveOfficer, 75,000 of Mr. Campbell's 300,000 Intuitstock options will vest upon consummation of theMerger. Pursuant to a September 1993 employmentagreement between Intuit and William H. Lane III,Intuit's Chief Financial Officer, approximately9,100 of Mr. Lane's 48,620 Intuit stock optionswill vest upon consummation of the Merger. Mr. Lanewill also receive a $40,000 transition bonus from

Microsoft. Messrs. Campbell and Lane and otherofficers of Intuit have entered into employmentagreements with Microsoft under which they will beeligible to receive certain severance benefits inthe event of termination of their employment. See"THE MERGER AND RELATED TRANSACTIONS -- Interestsof Certain Persons in the Merger" and "-- RelatedAgreements -- Employment Agreements."

OPINION OF FINANCIALADVISOR.................... Morgan Stanley & Co. Incorporated ("Morgan

Stanley") has rendered an opinion to the IntuitBoard that, as of the date of such opinion, theconsideration proposed to be received by Intuitstockholders in the Merger is fair from a financialpoint of view to the Intuit stockholders. See "THEMERGER AND RELATED TRANSACTIONS -- Opinion ofFinancial Advisor" and Annex B.

THE MERGER

Effects of the Merger.... The Merger will be consummated promptly afterIntuit stockholder approval and the satisfaction or

waiver of the other conditions to consummation of


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the Merger. Upon consummation of the Merger, Intuitwill become a wholly-owned subsidiary of Microsoft.The Board of Directors and executive officers ofMicrosoft are not expected to change upon

consummation of the Merger, except that Scott D.Cook, Intuit's Chairman, will become an ExecutiveVice President of Microsoft responsible for thedevelopment of Microsoft's products and strategicdevelopment relating to Electronic Commerce,Intuit's President and Chief Executive Officer,William V. Campbell, will become a Senior

215

Vice President of Microsoft, as well as continuingas chief executive officer of Intuit and will beresponsible for Financial Products, a new divisionof Microsoft which will include the business ofIntuit, and William H. Harris, Jr., an ExecutiveVice President of Intuit, will become a VicePresident of Microsoft. Most of the executiveofficers of Intuit are expected to continue asofficers of Intuit following the Merger. If theMerger is approved and consummated, thestockholders of Intuit will become shareholders ofMicrosoft (as described below), and their rights

will be governed by Microsoft's Articles ofIncorporation and Bylaws. See "COMPARISON OF RIGHTSOF SHAREHOLDERS OF INTUIT AND MICROSOFT."

Conversion of Shares..... Upon the consummation of the Merger (the "EffectiveTime"), each Intuit Share then issued andoutstanding will cease to be outstanding and willbe automatically converted into 1.336 MicrosoftShares (the "Exchange Ratio"), subject to apotential upward adjustment, as described below.Cash will be paid in lieu of issuing fractional

shares. However, if the average closing price atwhich Microsoft Shares trade during the ten tradingdays ending two trading days prior to the closingof the Merger (the "Microsoft Average ClosingPrice") is less than $53.144 per share, then theExchange Ratio will be increased from 1.336 to anadjusted Exchange Ratio obtained by dividing $71.00by the Microsoft Average Closing Price and roundingto the third decimal point. Based upon thecapitalization of Intuit and Microsoft as ofFebruary 7, 1995, and assuming each Intuit Share isconverted into 1.336 Microsoft Shares, stockholders

of Intuit will own Microsoft Shares representing


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approximately 4.5% of the Microsoft Sharesoutstanding immediately after consummation of theMerger, exclusive of any options to purchaseMicrosoft Shares. See "THE MERGER AND RELATED

TRANSACTIONS -- General."

Conversion of IntuitStock Options.......... Upon the consummation of the Merger, each then

outstanding option to purchase Intuit Shares (an"Intuit Option") will be assumed by Microsoft andwill automatically be converted into an option topurchase a number of Microsoft Shares determined bymultiplying the number of Intuit Shares subject tothe Intuit Option by 1.336 (or the adjustedExchange Ratio, if applicable), at an exerciseprice equal to the exercise price of the IntuitOption at the time of the Merger divided by 1.336(or the adjusted Exchange Ratio, if applicable). Toavoid fractional shares, the number of MicrosoftShares subject to a converted Intuit Option will berounded to the nearest whole share. The other termsof the Intuit Options, including exercisability andvesting schedules, will, to the extent permitted bylaw and otherwise reasonably practicable, remainunchanged. Microsoft Shares issued upon exercise ofthe assumed Intuit Options will be registered withthe Commission.

As of February 7, 1995, 3,067,622 Intuit Shareswere subject to outstanding Intuit Options. Afterassumption of such Intuit Options in the Merger,4,098,343 Microsoft Shares will be subject to suchoptions (assuming the Exchange Ratio is 1.336).

Effective Time........... It is anticipated that the Merger will becomeeffective as promptly as practicable after therequisite Intuit stockholder approval has been

316

obtained and all other conditions to the Mergerhave been satisfied or waived.

Exchange ofCertificates........... Promptly after the Effective Time, Intuit

stockholders will receive a transmittal form thatwill contain instructions with respect to thesurrender of certificates representing IntuitShares to be exchanged for Microsoft Shares. INTUIT

STOCK CERTIFICATES SHOULD NOT BE FORWARDED TO


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INTUIT OR MICROSOFT AND SHOULD NOT BERETURNED WITH

THE ENCLOSED PROXY. See "THE MERGER ANDRELATED

TRANSACTIONS -- Surrender of Certificates; LostCertificates."

Stockholder Agreements... Certain stockholders of Intuit have agreed withMicrosoft that until the consummation of the Mergeror the termination of the Reorganization Agreementin accordance with its terms, they will (i) votetheir Intuit Shares in favor of the Merger andagainst any proposal made in opposition to or incompetition with the Merger; and (ii) not solicitor encourage any offers competitive to the Merger.These agreements were entered into by tenstockholders of Intuit, including three directors,who on the Record Date together owned beneficially7,549,560 Intuit Shares (approximately 37% of theIntuit Shares then outstanding). See "THE MERGERAND RELATED TRANSACTIONS -- Related Agreements."

Employment Agreements.... Scott D. Cook, William V. Campbell, Mari Baker,Eric C.W. Dunn, Mark R. Goines, William H. Harris,Jr., James J. Heeger, William H. Lane III, JohnMonson, Stephen D. Pelletier, William C. Shepard,and William L. Strauss have entered into employment

and noncompetition agreements with Microsoft. See"THE MERGER AND RELATED TRANSACTIONS -- RelatedAgreements."

Affiliates Agreements.... Certain officers, directors and stockholders ofIntuit have entered into agreements with Microsoftwhereby they agreed not to sell, exchange,transfer, or otherwise reduce their risk orownership of Intuit Shares during the time periodrequired by the pooling of interests method ofaccounting and to limit their sales of Microsoft

Shares following the Merger in order to comply withRule 145 of the Commission. See "THE MERGER ANDRELATED TRANSACTIONS -- Related Agreements."

Agreement with Novell.... Microsoft has entered into an agreement (the "MoneyAgreement") with Novell, Inc. ("Novell"), dated asof October 12, 1994, pursuant to which, and subjectto the closing of the Reorganization Agreement,Microsoft has agreed to sell, transfer, convey andassign to Novell all right, title and interest inand to its Microsoft Money software business,including product code and documentation, related

technology, relevant trademarks and marketing


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materials, together with various licenses and othercontracts related to that business.

Representations and

Covenants............. Under the Reorganization Agreement, Intuit andMicrosoft made a number of representationsregarding their respective capital structures,their financial condition and other matters,including their authority to enter into theReorganization Agreement and to consummate theMerger. Intuit agreed that, until the consummationof the Merger or the termination of theReorganization Agreement, it will maintain itsbusi-

417

ness, it will not take certain actions outside theordinary course without Microsoft's consent and itwill use its best efforts to consummate the Merger.Intuit has agreed not to initiate, solicit, orfacilitate any proposals that compete with theMerger, except that Intuit will not be preventedfrom taking such actions if Intuit's directorsdetermine in good faith after consultation withlegal counsel that their fiduciary duties so

require. Microsoft has agreed to use its bestefforts to consummate the Merger and has made acommitment to Intuit that, if the Merger isconsummated, benefits will be provided to Intuitemployees that are in the aggregate substantiallyequivalent to the benefits provided to Microsoftemployees and credit will be given for priorservice as if such Intuit employees had beenemployed by Microsoft for the period for which theywere employed by Intuit. Microsoft has agreed thatit will use its best efforts to maintain Intuit's

operations in the general areas of Menlo Park andSan Diego, California for a period of approximatelytwo years and has agreed to provide certainseverance payments to any Intuit employee whoseemployment is terminated without cause within oneyear of the Merger. Microsoft also has agreed, ifthe Merger is consummated, that all rights toindemnification (including advancement of expenses)of present or former officers and directors ofIntuit regarding actions taken prior toconsummation of the Merger as provided in Intuit'sCertificate of Incorporation or Bylaws and

indemnification agreements will survive the Merger


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and remain in effect for six years and will beguaranteed by Microsoft. See "THE MERGER ANDRELATED TRANSACTIONS -- Representations andCovenants."

Conditions............... The obligations of Microsoft and Intuit toconsummate the Merger are subject to thesatisfaction of certain conditions, any or all ofwhich may be waived, including (i) the approval ofIntuit's stockholders; (ii) obtaining of allrequired government consents, including expirationor termination of the applicable waiting periodunder the Hart-Scott-Rodino Antitrust ImprovementsAct of 1976, as amended (the "HSR Act"); (iii) theabsence of any statute, rule, regulation, order,decree or injunction prohibiting the Merger; (iv)the absence of any governmental legal actionchallenging or seeking to restrain the Merger,seeking any material damages, or seeking toprohibit or impose any material limitations on theownership or operation of, or compel thedisposition of, Microsoft's or Intuit's personalfinance software business. Other conditions includethe accuracy of the other party's representations,the other party's performance of its covenants, andfavorable legal opinions (including an opinion tothe effect that the Merger will be treated for

federal income tax purposes as a tax-freereorganization). See "THE MERGER AND RELATEDTRANSACTIONS -- Conditions to the Merger" and"INTUIT'S BUSINESS -- Legal Proceedings."

Termination.............. The Reorganization Agreement may be terminated bythe mutual agreement of the parties or by eitherparty (i) as a result of a breach of arepresentation, warranty, covenant or agreement bythe other party which has a material adverse effecton the business of Intuit or Microsoft and such

breach has not been cured, or best efforts are notbeing employed to cure such breach, within 10 daysafter notice of such breach is given; (ii) if theMerger has not been consummated before March 30,1995, subject to extension until June 30, 1995 ifIntuit and Microsoft agree to pursue litigationagainst any administrative or judicial action or

518

proceeding challenging the Merger as violative of

any antitrust law; (iii) if Intuit stockholders


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have voted on but not approved the Merger; or (iv)if any permanent injunction preventing the Mergershall have become final and non-appealable. See"THE MERGER AND RELATED TRANSACTIONS --

Terminationor Amendment."

Termination Fee.......... The Reorganization Agreement also provides that, ifMicrosoft is not then in material breach of theReorganization Agreement, Intuit shall payMicrosoft a termination fee of $15 million if (i)Intuit's Board of Directors shall have withdrawn ormodified, in a manner adverse to Microsoft, theBoard's approval or recommendation of the Merger;(ii) Intuit or its affiliates breach Intuit'scovenant not to initiate, solicit or facilitate anyproposal that competes with the Merger other thanin the exercise of the fiduciary duties of theBoard of Directors of Intuit; (iii) Microsoftterminates the Reorganization Agreement following amaterial breach by Intuit of its representations,warranties, covenants or agreements; or (iv) ifIntuit shall agree with any person other thanMicrosoft to an agreement which results in a 50% ormore change in the voting power of beneficialowners of Intuit before, or within six monthsafter, termination of the Reorganization Agreement.

See "THE MERGER AND RELATED TRANSACTIONS --Termination or Amendment."

Amendment................ The Reorganization Agreement may be amended byMicrosoft and Intuit at any time before or afterapproval of the Intuit stockholders, except that,after stockholder approval, no amendment may bemade which by law requires the further approval ofthe Intuit stockholders without obtaining suchapproval. See "THE MERGER AND RELATEDTRANSACTIONS -- Termination or Amendment."

No Dissenters' orAppraisal Rights....... Stockholders of Intuit who dissent from the Merger

will not be entitled to rights of appraisal underSection 262 of the Delaware General CorporationLaw. See "THE MERGER AND RELATED TRANSACTIONS --

NoDissenters' Rights;" and "COMPARISON OF RIGHTS OFSHAREHOLDERS OF INTUIT AND MICROSOFT -- Appraisalor Dissenters' Rights."

Certain U.S. Federal

Income Tax Matters..... The Merger is expected to be a tax-free


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reorganization for federal income tax purposes, sothat no gain or loss will be recognized by Intuitstockholders on the exchange of Intuit Shares forMicrosoft Shares, except to the extent that Intuit

stockholders receive cash in the exchange (i.e.,cash in lieu of fractional shares) as more fullydescribed in "THE MERGER AND RELATEDTRANSACTIONS -- Certain Federal Income TaxMatters." Intuit stockholders are urged to consulttheir own tax advisors regarding such taxconsequences.

Accounting Treatment..... The Merger is expected to be treated as a poolingof interests for accounting purposes. It is acondition to the obligation of Microsoft toconsummate the Merger that Microsoft receive aletter from Intuit's independent auditor, Ernst &Young LLP, addressed to Intuit, to the effect thatthe Merger will qualify for pooling of interestaccounting treatment (without regard to any actionor conduct of Microsoft). See

619

"THE MERGER AND RELATED TRANSACTIONS --Accounting

Treatment."

EFFECT OF NONAPPROVAL...... If Intuit is unable to obtain approval by itsstockholders before March 30, 1995 (or June 30,1995 if Microsoft and Intuit have mutually agreedto pursue litigation against any action challengingthe Merger as violative of antitrust laws), eitherIntuit or Microsoft may terminate theReorganization Agreement. See "THE MERGER ANDRELATED TRANSACTIONS -- Termination or Amendment."

MARKET PRICE DATA.......... At October 12, 1994, the last full trading daybefore announcement of the Merger, the closingprices of Microsoft and Intuit were $56.25 and$47.00, respectively. On February 7, 1995, theclosing prices were $61.00 for Microsoft and $66.00for Intuit. As of February 7, 1995, there were 670stockholders of record who held Intuit Shares(although Intuit has been informed that there arein excess of 7,845 beneficial owners), as shown onthe records of Intuit's transfer agent for suchshares. Neither Intuit nor Microsoft has in thepast paid cash dividends on its stock. See

"COMPARATIVE MARKET PRICES."


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720

SELECTED FINANCIAL DATA

The following tables set forth selected financial data for Microsoft forthe five fiscal years ended June 30, 1994 and the three months ended September30, 1993 and 1994 and for Intuit for the four fiscal years ended September 30,1993, the ten months ended July 31, 1994, and the three months ended October 31,1993 and 1994. Effective August 1, 1994, Intuit changed its fiscal year end toJuly 31 from September 30. The selected financial data for Microsoft for thefive fiscal years ended June 30, 1994 have been derived from financialstatements audited by Deloitte & Touche LLP. The selected financial data forIntuit for the four fiscal years ended September 30, 1993 and the ten monthsended July 31, 1994 have been derived from Intuit's financial statements auditedby Ernst & Young LLP. The selected financial data for Microsoft for the threemonths ended September 30, 1993 and 1994 have been derived from unauditedfinancial statements of Microsoft and include, in the opinion of management ofMicrosoft, all adjustments (consisting of normal recurring adjustments)necessary to present fairly the results for such periods. The selected financialdata for Intuit for the three months ended October 31, 1993 and 1994 have beenderived from unaudited financial statements of Intuit and include, in theopinion of management of Intuit, all adjustments (consisting of normal recurringadjustments) necessary to present fairly the results for such periods. Theselected financial data should be read in conjunction with the separatefinancial statements and notes thereto of Microsoft and Intuit. See "FINANCIAL

STATEMENTS." This historical data are not necessarily indicative of the resultsto be expected if the Merger is consummated.

MICROSOFT(In millions, except earnings per share)

THREE MONTHS

ENDEDYEAR ENDED

JUNE 30SEPTEMBER 30(1)

-------------------------------------------------- -----------

-------

1990 1991 19921993 1994 1993

1994


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------ ------ ------ ------ ------ ----- ------

Netrevenues...................................

$1,183 $1,843 $2,759$3,753 $4,649 $ 983

$1,247Net

income.....................................279 463 708

953 1,146 239316

Earnings pershare.............................0.52 0.82 1.20

1.57 1.88 0.390.51

Cash and short-terminvestments................ 449

686 1,345 2,2903,614 -- 3,776

Totalassets...................................

1,105 1,644 2,640

3,805 5,363 --5,637

Stockholders'equity...........................919 1,351 2,1933,242 4,450 --

4,430

- ---------------

(1) Unaudited.

INTUIT(In millions, except earnings per share)

THREE MONTHS

TEN


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MONTHS ENDED

YEAR ENDEDSEPTEMBER 30

ENDED OCTOBER 31(1)----------------------------------

- JULY 31 ----------------

1990 1991 1992 1993

1994 1993 1994----- ----- ----- -----

---------- ----- ------

Netrevenues......................................$ 33 $ 45 $ 84 $ 121

$ 194 $ 47 $ 68Charge for purchased research

and development..... -- ---- -- 151 --

44Net income

(loss)................................. 4

4 5 8 (176)7 (54)

Earnings (loss) pershare......................... 0.36

0.42 0.50 0.74(10.43) 0.61 (2.73)

Cash and short-terminvestments................... 4

7 9 40 84-- 34

Total

assets......................................13 19 32 83245 -- 267

Stockholders'equity.............................. 8

12 17 49 186-- 169

- ---------------

(1) Unaudited.


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821

COMPARATIVE MARKET PRICES

The following table sets forth the high and low sales prices of Microsoftand Intuit Shares, traded as "national market securities" on The Nasdaq StockMarket under the symbols MSFT and INTU, respectively, for the periods indicated.The quotations are as reported in published financial sources.

MICROSOFT

INTUIT

-------------------- -------------------

HIGH LOWHIGH LOW

-------- ------- -------

-------

Calendar 1992Third

Quarter....................................$ 41.00 $32.75 *

*Fourth

Quarter...................................$ 47.50 $37.875 *

*

Calendar 1993

FirstQuarter*...................................$ 47.125 $38.375 $31.75

$27.75Second

Quarter...................................$ 49.00 $39.875 $33.50

$24.25Third

Quarter....................................$ 44.25 $35.125 $37.75

$28.25

Fourth


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Quarter...................................$ 43.25 $38.00 $46.00

$33.00

Calendar 1994First

Quarter....................................$ 44.625 $39.00$48.625 $36.375

SecondQuarter...................................$ 54.625 $41.00 $36.50

$27.25Third

Quarter....................................$ 59.25 $46.875 $44.25

$33.50Fourth

Quarter...................................$ 65.125 $53.875

$70.5625 $40.75

Calendar 1995First Quarter (through

February 7, 1995)......... $65.25 $58.25 $70.25

$65.00

- ---------------

* Intuit Shares began trading on March 12, 1993, the date of Intuit's initialpublic offering.

On October 12, 1994, the last full trading day before announcement of theMerger, the closing prices of Microsoft and Intuit were $56.25 and $47.00,respectively. On February 7, 1995, the closing prices were $61.00 for Microsoftand $66.00 for Intuit. As of February 7, 1995, there were 670 stockholders of

record who held Intuit Shares (although Intuit has been informed that there arein excess of 7,845 beneficial owners), as shown on the records of Intuit'stransfer agent for such shares. Neither Intuit nor Microsoft in the past haspaid cash dividends on its stock.

FINANCIAL ANALYSIS

MICROSOFT MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION ANDRESULTS OF OPERATIONS

RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED JUNE 30,


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1992, 1993 AND1994

Microsoft develops, manufactures, markets, licenses, and supports a wide

range of software products, including operating systems for personal computers(PCs), workstations, and servers; business and consumer programs forproductivity, reference, education, and entertainment; and software developmenttools. Microsoft also markets personal computer books and hardware, and isengaged in the research and potential development of advanced technologysoftware products.

Net Revenues

1992 CHANGE 1993

CHANGE 1994------ ------ ------ ----

-- ------

Netrevenues...................................$2,759 36% $3,753

24% $4,649

Software license volume (as opposed to price) increases have been theprincipal factor in Microsoft's revenue growth. The average selling price perlicense has decreased, primarily because of general shifts in sales mix fromretail packaged products to licensing programs, from new products to productupgrades, and from stand-alone desktop applications programs to the MicrosoftOffice(R) integrated suite. Average revenue per

922

license from original equipment manufacturer ("OEM") licenses and corporatelicense programs (such as Microsoft Select) is lower than average revenue perlicense from retail versions. Likewise, product upgrades have lower prices thannew products. The price of Microsoft Office is less than the sum of the pricesfor the individual application programs included in this product when suchprograms are sold separately.

Product groups. Operating systems product group revenues were $1,104million, $1,267 million, and $1,519 million in 1992, 1993, and 1994. TheMS-DOS(R) operating system is preinstalled on PCs by most OEMs, and revenuesfrom such licenses increased steadily in both 1993 and 1994. Revenues from


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retail upgrade versions of MS-DOS decreased in 1994 after a strong increase in1993. The MS-DOS 6 retail upgrade was released in 1993. No major upgrades ofMS-DOS were released in 1994. The Microsoft Windows(R) operating system wasan

increasingly strong contributor to systems revenues as the number of new PCspreinstalled with Windows increased rapidly during the three-year period.

Applications product group revenues were $1,401 million, $2,253 million,and $2,927 million in 1992, 1993, and 1994. Increases in applications revenueswere led by strong sales of Microsoft Office. The Microsoft Office Standardproduct includes Microsoft Excel, Microsoft Word, the Microsoft PowerPoint(R)presentation graphics program, and a Microsoft Mail license, while the MicrosoftOffice Professional product also includes Microsoft Access(R) database. Sales ofstand-alone versions of the Microsoft Excel spreadsheet and the Microsoft Wordword processor increased in 1993 but decreased in 1994 as the sales mixcontinued to shift to integrated products.

Microsoft Home, a broad range of products in Microsoft's consumerapplications group, also showed continued growth. The Microsoft Home brandincludes CD-ROM multimedia library titles and products for children'screativity, personal productivity, and entertainment.

Windows-based software programs represented approximately 85% ofapplications revenues in 1994, up from 65% in 1992 and 75% in 1993.

Hardware product group revenues were $254 million, $233 million, and $203million in 1992, 1993, and 1994. The hardware product group's principal products

are the Microsoft Mouse and BallPoint(R) Mouse pointing devices.

Sales channels. Microsoft has four major channels of distributionincluding: finished goods sales in the U.S. and Canada, Europe, and OtherInternational; and OEM. Sales in the finished goods channels are primarily todistributors and resellers. OEM channel revenues are license fees from originalequipment manufacturers.

U.S. and Canada channel revenues were $1,062 million, $1,371 million, and$1,575 million in 1992, 1993, and 1994.

Revenues in Europe were $997 million, $1,259 million, and $1,363 million in1992, 1993, and 1994. The 8% revenue growth rate in 1994 was lower than the 26%increase in 1993 because of general economic slowness and a more dramatic shiftto corporate licensing programs in Europe than in other geographic areas.

Other international channel revenues were $223 million in 1992, $392million in 1993, and $532 million in 1994. Growth rates continue to be strongdue to customer acceptance of newly localized products and early entrance intoemerging markets.

Microsoft's operating results are affected by foreign exchange rates.Approximately 46%, 44%, and 40% of Microsoft's revenues were collected in

foreign currencies during 1992, 1993, and 1994. Since much of Microsoft's


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international manufacturing costs and operating expenses are also incurred inlocal currencies, the relative translation impact of exchange rates on netincome is less than on revenues.

Microsoft Select was introduced in 1993 and gained popularity in 1994.Select is a corporate license program under which large accounts download acontracted number of copies of specified software products. Average revenue perlicense under Select is lower than the average revenue per retail copy of thesame product shipped through the finished goods channels, reflecting lower costsof distribution.

1023

OEM revenues grew 61% from the prior year to $1,179 million. OEM revenueswere $477 million in 1992 and $731 million in 1993. The primary source of OEMrevenues is licenses of operating systems, particularly MS-DOS and MicrosoftWindows. During 1994, approximately 80% of Windows units were sold throughtheOEM channel, up from approximately 50% in 1992 and 75% in 1993.

Cost of Revenues

1992 CHANGE

1993 CHANGE1994

------ ------ ------

------ ------

Cost ofrevenues...............................$ 467 36% $ 633

21% $ 763

Percentage of netrevenues.....................16.9% 16.9%

16.4%

Cost of revenues as a percentage of net revenues was 16.4% in 1994, downfrom 16.9% in 1992 and 1993. The percentage decreased due to lower disk pricesfrom vendors and a greater percentage of sales of licenses to OEMs andcorporations, offset by increased sales of lower-margin Microsoft Office andupgrade products.


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Operating Expenses

1992 CHANGE

1993 CHANGE1994

------ ------ ------

------ ------

Research anddevelopment.......................$ 352 34% $ 470

30% $ 610Percentage of net

revenues.....................12.8% 12.5%

13.1%

Sales andmarketing............................$ 854 41% $1,205

15% 1,384Percentage of net

revenues.....................31.0% 32.1%

29.8%

General andadministrative.....................$ 90 32% $ 119

39% $ 166Percentage of net

revenues.....................3.3% 3.2%

3.6%

Increases in research and development expenses resulted primarily fromplanned additions to Microsoft's software development and advanced technologystaffs, as well as higher levels of third-party development costs.

In 1994, sales and marketing expenses increased at a slower rate thanrevenues due to a concerted performance orientation at all sales sites withparticular emphasis on slower headcount (personnel) growth. The increases in theabsolute dollars of sales and marketing expenses in 1993 and 1994 were due toincreased marketing programs and advertising for the launch of new products,


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planned hiring of marketing personnel, and continued development of ProductSupport Services.

Increases in general and administrative expenses are primarily attributable

to higher legal costs and growth in the systems and people necessary to supportoverall increases in the scope of Microsoft's operations.

Nonoperating Income

1992 CHANGE

1993 CHANGE1994

------ ------ ---

--- ------ ------

Nonoperatingincome............................$ 45 67% $ 75

15% $ 86Litigation

charge..............................-- --

$ 90

The primary component of nonoperating income is interest income, which was$58 million, $83 million, and $104 million in 1992, 1993, and 1994. Increasedinterest income is the result of a larger investment portfolio generated by cashfrom operations, offset in both 1993 and 1994 by declining interest rates.

In the third quarter of 1994, Microsoft recorded a $120 million charge toreflect the estimated impact of a jury verdict in the Stac Electronics patentlitigation and related expenses. In June 1994, Microsoft reached an agreement

with Stac to settle the litigation and adjusted its estimate accordingly,resulting in a credit of $30 million in the fourth quarter and a net pretaxcharge of $90 million for the year.

1124

Provision for Income Taxes


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1992CHANGE 1993CHANGE 1994

------ ------------ ------ --

----

Provision for incometaxes..................... $

333 35% $448 29% $

576Effective tax

rate.............................32.0%

32.0%33.5%

The effective tax rate increased in 1994 primarily because of an increasein the U.S. statutory income tax rate. The Notes to Financial Statements at PageF-9 describe the differences between the U.S. statutory and effective income taxrates.

Net Income and Earnings Per Share

1992 CHANGE 1993

CHANGE 1994------ ------ ------ ----

-- ------

Netincome.....................................$ 708 35% $ 953

20% $1,146Percentage of net

revenues.....................25.7% 25.4%

24.7%Earnings per

share............................. $1.20 31% $ 1.57


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20% $ 1.88

Net income as a percentage of net revenues decreased in 1994, primarily due

to the Stac Electronics patent litigation charge and increased research anddevelopment expenses, offset by the lower relative level of sales and marketingexpenses. The slight percentage decrease in 1993 from 1992 was attributable tohigher relative sales and marketing expenditures.

Outlook: Issues and Risks

The following issues and risks, among others, should also be considered inevaluating Microsoft's outlook.

Rapid technological change and intense competition. The highly volatile

personal computer software industry is characterized by rapid technologicalchange, intense competition, and uncertainty as to the widespread acceptance ofnew products. See "MICROSOFT'S BUSINESS -- Competition."

Long-term investment cycle. Developing, manufacturing, and licensingsoftware is expensive and the investment in product development often involves along pay-back cycle. Microsoft began investing in the principal products thatare significant to its current revenues in the early 1980s. Microsoft's plansfor 1995 include significant investments in software research and developmentand related product opportunities from which significant revenues are notanticipated for a number of years. As discussed above, spending for research anddevelopment increased during 1994 and 1993. Management expects total spending

for research and development in 1995 to increase over spending in 1994.

Product ship schedules. Delays in the release of new products can causeoperational inefficiencies that impact manufacturing capabilities, distributionlogistics, and telephone support staffing.

Microsoft Office. Revenues from Microsoft Office may increase as apercentage of total revenues in 1995. The price of Microsoft Office is less thanthe sum of the prices for the individual application programs included in thisproduct when such programs are sold separately.

Prices. Future prices Microsoft is able to obtain for its products maydecrease from historical levels depending upon market or other cost factors.

Saturation. Product upgrades, enabling users to upgrade from earlierversions of Microsoft products or from competitors' products, have lower pricesthan new products. As the desktop PC software market becomes saturated, thesales mix shifts from standard products to upgrade products. This trend isexpected to continue in 1995.

Introductory pricing. Microsoft recently offered the Microsoft Accessdatabase product at a low introductory price. This practice may continue withother new product offerings.


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Channel mix. Average revenue per license is lower from OEM licenses thanfrom retail versions, reflecting the relatively lower direct costs of operationsin the OEM channel. An increasingly higher percentage of revenues was achieved

through the OEM channel during 1993 and 1994.

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Volume discounts. In 1994, unit sales increased under Microsoft Select, alarge account program designed to permit large organizations to licenseMicrosoft products. Average revenue per copy from Microsoft Select licenseprograms is lower than average revenue per copy from retail versions shippedthrough the finished goods channels.

Foreign exchange. A large percentage of Microsoft sales are transacted inlocal currencies. As a result, Microsoft revenues are subject to foreignexchange rate fluctuations. See "MICROSOFT FINANCIAL STATEMENTS --Notes toFinancial Statements."

Cost of revenues. Although cost of revenues as a percentage of net revenueswas relatively consistent in 1993 and 1994, it varies with channel mix andproduct mix within channels. Changes in channel and product mix, as well as inthe cost of product components, may affect cost of revenues as a percentage ofnet revenues in 1995.

Sales and marketing and support investments. Microsoft's plans for 1995include continued investments in its sales and marketing and support groups.Competitors may be able to enter the market without making investments of suchscale.

Accounting standards. Accounting standards promulgated by the FinancialAccounting Standards Board change periodically. Changes in such standards mayhave a negative impact on Microsoft's future reported earnings.

Intellectual property rights. Microsoft diligently defends its intellectualproperty rights, but unlicensed copying of software represents a loss of

revenues to Microsoft. While this adversely affects U.S. revenues, revenue lossis more serious outside of the U.S., particularly in certain countries wherelaws are less protective of intellectual property rights. Throughout the world,Microsoft actively educates consumers on the benefits of purchasing genuineproducts and educates lawmakers on the advantages of a business climate whereintellectual property is protected. There can be no assurance that continuedefforts will affect revenues positively. Further, Microsoft's products may fromtime to time inadvertently infringe on intellectual property rights of others,potentially requiring Microsoft to pay damages or license fees or incursubstantial costs to redesign its products.

Growth rates. Management believes Microsoft's recent revenue growth rates

are not sustainable. Operating expenses as a percentage of revenues may increase


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in 1995 because of the above factors.

Litigation. Litigation regarding intellectual property rights, patents, andcopyrights is increasing in the PC software industry. In addition, there are

other general corporate legal risks. See "Notes To Financial Statements"regarding contingencies related to government regulation and legal proceedings.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDEDSEPTEMBER 30, 1993 AND1994

Net Revenues

Revenues for the first quarter of fiscal 1995 increased 27% over revenuesfor the first quarter of fiscal 1994.

Product Groups

Systems product group revenues are primarily from licenses of personaloperating systems and business systems with client-server architectures. Systemsrevenues were $444 million in the first quarter of 1995, compared to $355million recorded in the same period of 1994, an increase of 25%. Revenuesgenerated by both Microsoft MS-DOS and Microsoft Windows operating systemsincreased from the prior year, particularly through the original equipmentmanufacturer channel. During the first quarter of 1995, more than 80% of Windowsunits were licensed through the OEM channel.

Applications product group revenues include licenses of desktopproductivity, consumer, and developer programs. Applications revenues were $754million in the first quarter of 1995, increasing 31% from $577 million in thefirst quarter of 1994. Increases in applications revenues were led by sales ofMicrosoft

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Office. Additionally, during the first quarter of 1995, Microsoft released newMacintosh-based versions of Microsoft Excel, Microsoft Word, and Microsoft

PowerPoint.

Hardware revenues were $49 million and $51 million in the first quarters of1995 and 1994.

Sales Channels. OEM revenues (primarily personal operating systems) grew36% to $348 million from the $255 million recorded in the comparable quarter ofthe prior year. MS-DOS continues to be pre-installed on many PCs sold byoriginal equipment manufacturers. In addition, many major OEMs are alsopreinstalling the Microsoft Windows operating system on PCs, leading toincreased revenues through the OEM channel.

Revenues in the U.S. and Canada were $423 million in the first quarter of


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1995 compared to $328 million in 1994, an increase of 29%. Revenues in Europewere $289 million in the first quarter of 1995 compared to $274 million theprior year. Other International channel revenues showed strong growth,increasing to $187 million in the first quarter of 1995 from $126 million in the

first quarter of 1994. Sales in Japan were particularly strong.

Cost of Revenues, Operating Expenses, and Income Taxes

Cost of revenues as a percentage of revenues was 14.9% in the first quarterof 1995, compared to 16.2% in the first quarter of 1994. Contributing to thedecrease were lower disk prices and a shift to more revenues from OEM andcorporate license programs. While license programs carry lower per unit pricesthan retail versions shipped though the finished goods channels, there is littlecost of revenues associated with such programs.

Research and development expenses increased 33% to $178 million, or 14.3%of revenues in the first quarter of 1995 from $134 million, or 13.6% of revenuesin the corresponding quarter of 1994. The increase in research and developmentexpenses resulted primarily from planned hiring of software developers andhigher levels of third-party development costs.

Sales and marketing expenses increased 27% to $395 million from $312million in the comparable quarter. As a percentage of revenues, sales andmarketing expenses were 31.6% and 31.7% in the respective first quarters of 1995and 1994. The increase in absolute amounts of sales and marketing expenses wasprimarily due to increased marketing costs and headcount related expenses.

General and administrative expenses were 4.1% of revenues in the firstquarter of 1995 and 3.6% of revenues in the first quarter of 1994.

Net interest income increased as a result of a larger investment portfoliogenerated by cash from operations combined with slightly higher interest rates.Other expense did not fluctuate significantly.

The effective income tax rate was 33% in the first quarter of 1995,compared to 34% in the same quarter of 1994.

Net Income

Net income for the third quarter of 1995 was $316 million. Net income as apercentage of revenues was 25.3% in the first quarter of 1995, compared with24.3% in the first quarter of 1994. The increase was the result of the highergross margin percentage and interest income offset by higher levels of operatingexpenses.

FINANCIAL CONDITION

Microsoft's cash and short-term investment portfolio totaled $3.8 billionat September 30, 1994 and represented 67% of total assets. The portfolio isdiversified among security types, industries, and individual issuers.

Microsoft's investments are investment grade and liquid. The portfolio, while


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invested predominantly in U.S. dollar denominated securities, also includesforeign currency positions in anticipation of continued international expansion.

Microsoft has no material long-term debt. The Company has available $70

million of standby multicurrency lines of credit. These lines support foreigncurrency hedging and international cash management. Stockholders' equity atSeptember 30, 1994 exceeded $4 billion.

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Cash generated from operations has been sufficient historically to fundMicrosoft's investment in research and development activities and facilitiesexpansion. As Microsoft grows, investments will continue in research anddevelopment in existing and advanced areas of technology. Microsoft's cash willbe used to acquire technology or other businesses and to fund strategicventures. Additions to property, plant, and equipment are expected to continue,including facilities and computer systems for research and development, salesand marketing, product support, and administrative staff. On September 30, 1994,commitments related to the construction of new buildings approximated $235million. See "MICROSOFT'S BUSINESS -- Properties."

On October 28, 1994, Microsoft shareholders authorized Microsoft to issueup to 100 million shares of preferred stock, which may be used by Microsoft forany proper corporate purpose.

The exercise of stock options by employees provides additional cash. These

proceeds have been used in Microsoft's open market stock repurchase programthrough which Microsoft provides shares for stock option and stock purchaseplans. This practice is continuing in 1995. Additionally, Microsoft enhanced itsstock repurchase program by selling put warrants during the first quarter of1995. See "MICROSOFT FINANCIAL STATEMENTS -- Notes to FinancialStatements."

Management believes existing cash and short-term investments together withfunds generated from operations should be sufficient to meet Microsoft'soperating requirements for the next 12 months.

WINDOWS 95 AVAILABILITY

Microsoft is developing a new personal operating system, designed toreplace MS-DOS, Windows, and Windows for Workgroups, as Microsoft's desktopoperating system offering. Microsoft has consistently cautioned that it will notship its new products until vigorous beta testing has been completed andmanagement believes the products are ready for customers. Recently, Microsoftannounced that Windows 95 may not be available in retail stores before August1995. As a result, the majority of revenues associated with Windows 95 willoccur in Microsoft's fiscal 1996 and later years.

EFFECTS OF THE MERGER


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If the Merger is approved, Intuit would become a wholly owned subsidiary ofMicrosoft whose financial statements would be part of Microsoft's consolidatedfinancial statements. Microsoft's historical financial statements will berestated and presented as if Microsoft and Intuit had been combined for all

periods presented. Microsoft's historical results of operations will not bematerially impacted by the restatement, except for the periods when Intuitrecorded one-time charges for purchased in-process research and development inconnection with the acquisitions of ChipSoft, Inc. and Parsons Technology, Inc.When Intuit completed its acquisition of ChipSoft, Inc. in December 1993, Intuitrecorded a charge of $151 million. Such charge will reduce Microsoft's restatedearnings per share approximately $0.24 for the quarter ended December 31, 1993.When Intuit completed its acquisition of Parsons Technology, Inc. in September1994, Intuit recorded a charge of $44 million. Such charge will reduceMicrosoft's restated earnings per share approximately $0.07 for the quarterended Septe

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