Microsoft Corporation 2012 Annual Report

Commitments & Guarantees


Construction and Operating Leases

We have committed $353 million for constructing new buildings, building improvements, and leasehold improvements as of June 30, 2012.

We have operating leases for most U.S. and international sales and support offices and certain equipment. Rental expense for facilities operating leases was $639 million, $525 million, and $530 million, in fiscal years 2012, 2011, and 2010, respectively. Future minimum rental commitments under noncancellable facilities operating leases in place as of June 30, 2012 are as follows:

(In millions)  
Year Ending June 30,  
2013 $    527
2014 421
2015 327
2016 223
2017 164
Thereafter 315
Total $ 1,977


We provide indemnifications of varying scope and size to certain customers against claims of intellectual property infringement made by third parties arising from the use of our products and certain other matters. We evaluate estimated losses for these indemnifications, and we consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, we have not encountered significant costs as a result of these obligations and have not accrued any liabilities related to these indemnifications in our financial statements.

Yahoo! Commercial Agreement

On December 4, 2009, we entered into a 10-year agreement with Yahoo! Inc. ("Yahoo!") whereby Microsoft will provide the exclusive algorithmic and paid search platform for Yahoo! websites. Microsoft provided Yahoo! with revenue per search guarantees for a period of 18 months after implementation of the Microsoft search ads platform in each country, extended by an additional 12 months for the U.S. and Canada. These guarantees are calculated, paid, and adjusted periodically and are rate guarantees, not guarantees of search volume. We estimate the remaining cost of the revenue per search guarantees during the guarantee period could range up to $120 million.