NOTE 8   GOODWILL

Changes in the carrying amount of goodwill for fiscal years 2007 and 2006 by segment were as follows:

(In millions)
	Balance as of June 30, 2005		Acquisitions		Other		Balance as of June 30, 2006		Acquisitions		Other		Balance as of June 30, 2007
Client	$ 0043		$031		$(0 –		$00 74		$ 0 6		$0(3)		$00 77
Server and Tools	241		29		(14)		256		325		(1)		580
Microsoft Business     Division	2,435		246		–		2,681		508		(57)		3,132
Online Services     Business	171		263		21		455		123		(26)		552
Entertainment and     Devices Division	419		23		(42)		400		21		(2)		419
Total	$3,309		$592		$(35)		$3,866		$983		$(89)		$4,760

We test goodwill for impairment annually on July 1 at the reporting unit level using a fair value approach, in accordance with the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. Our annual testing resulted in no impairments of goodwill in fiscal years 2007 and 2006. If an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value, goodwill will be evaluated for impairment between annual tests.

During fiscal year 2007, we acquired the following entities for total consideration of $1.34 billion, which was primarily paid in cash:

• Softricity, Inc., a provider of application virtualization and dynamic streaming technologies;
• TellMe Networks, Inc., a company specializing in speech-recognition technology providing an outsourced, network-based, voice application platform; and
• 11 other entities specializing in areas such as application security, desktop, and data management.

As a result of these acquisitions, we recorded $983 million of goodwill, none of which is expected to be deductible for tax purposes. All of the entities were consolidated with Microsoft since their respective acquisition dates. The purchase price allocations for these acquisitions are preliminary and subject to revision as more detailed analyses are completed and additional information about fair value of assets and liabilities becomes available. Any change in the estimated fair value of the net assets of the acquired companies will change the amount of the purchase price allocable to goodwill. Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in aggregate, were not material.