business migration cycle for the newest Windows operating system offerings.  In addition, Windows desktop operating systems average earned revenue per licensed operating system decreased compared to fiscal 1999.  Windows Platform Server revenue growth over fiscal 1999 was particularly strong led by increased adoption by customers of Windows NT Server and Windows 2000 Server.

In fiscal 1999, Windows units licensed through the OEM channel, particularly Windows NT Workstation, increased strongly over the prior year.  Organizational licensing of Windows NT Workstation and Windows 98 also contributed to the growth.  The revenue growth rate for Windows NT Server was healthy.  In fiscal 1998, Windows units licensed through the OEM channel, including Windows 95, Windows 98, and Windows NT Workstation, exhibited robust growth over the prior year.



Consumer and Other

Consumer and Other revenue was $1.94 billion, $2.43 billion, and $3.11 billion in 1998, 1999, and 2000.  Consumer and Other products include Internet access and online services; learning and entertainment software; hardware devices; consulting services; and training and certification.

In fiscal 2000, online revenue growth was very strong and reflected higher subscriber totals, offset by lower net prices for Internet access subscriptions compared to the prior year.  Additionally, the continued success of the Company’s new hardware device offerings and strong sell-through of entertainment software produced robust revenue growth.

In fiscal 1999, online advertising revenue and consulting services rose substantially and Internet access revenue increased moderately, while revenue from hardware devices, consumer software, and Microsoft Press was relatively flat.  In fiscal 1998, online revenue increased due to higher Internet access subscriber levels and hardware and learning and entertainment revenue increased.

Distribution Channels

Microsoft distributes its products primarily through OEM licenses, organizational licenses, online properties, and retail packaged products.  OEM channel revenue represents license fees from original equipment manufacturers who preinstall Microsoft products, primarily on PCs.  Microsoft has three major geographic sales and marketing organizations: the South Pacific and Americas Region; the Europe, Middle East, and Africa Region; and the Asia Region.  Sales of organizational licenses and packaged products via these channels are primarily to and through distributors and resellers.  

OEM revenue was $4.72 billion in 1998, $6.40 billion in 1999, and $7.01 billion in 2000.  The relatively low growth rate in fiscal 2000 was due to lower business PC shipment growth percentages, especially as a result of the soft demand for business PCs and component shortages for part of the year.  These issues combined with post mid-year availability of the newest business operating system, Windows 2000 Professional, resulted in lower revenue growth.  Average earned revenue per license also declined compared to the prior year, due in part to a mix shift to the lower-priced Windows 98 operating system reflecting the softness in demand for business PCs and lower prices on operating