Microsoft Corporation - Page 9




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         5.25-inch diskettes, and 3.5-inch diskettes.                                 
              The software masters remained petitioner’s property and were            
         unavailable for distribution to third parties.  After petitioner             
         provided the foreign OEM or CFC with a software master, the licensee         
         stored the information on a network computer and archived the master         
         for security or production purposes.  Upon transfer to the network,          
         the licensee’s duplication equipment accessed the digital                    
         information to initiate duplication runs.                                    
         E.  Petitioner’s Export Transactions                                         
              Petitioner distributed its computer software products                   
         worldwide.  In connection with its sales abroad, petitioner used two         
         types of channels: (1) The foreign OEM channel, and (2) the                  
         international retail channel.  The products distributed through              
         these channels were duplicated both in the United States and abroad.         
         Petitioner’s international revenues (from both the foreign OEM and           
         retail channels) constituted 54.9 percent of petitioner’s total              
         revenues for 1990 and 57.3 percent for 1991.                                 
         F.  Foreign OEM Channel                                                      
              Petitioner’s foreign OEM channel consisted of computer                  
         manufacturers that installed petitioner’s software directly into the         
         hard drive of a computer and/or “bundled” software-encoded media             
         along with the computer.  The foreign OEM’s distributed petitioner’s         
         computer software as a component of their own computer systems.              








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