Microsoft Reports Record Third-Quarter Revenue
Windows 7 momentum continues.
REDMOND, Wash., April 22 /PRNewswire-FirstCall/ -- Microsoft Corp. today announced record third-quarter revenue of $14.50 billion for the quarter ended Mar. 31, 2010, a 6% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.17 billion, $4.01 billion and $0.45 per share, which represented increases of 17%, 35% and 36%, respectively, when compared with the prior year period.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000822/MSFTLOGO)
The results include the deferral of $305 million of revenue relating to the Microsoft Office 2010 Technology Guarantee program. Adjusting for the revenue deferral, third-quarter revenue totaled $14.81 billion, an increase of 8% over the prior year period.
“Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services,” said Peter Klein, chief financial officer at Microsoft. “Our record third-quarter revenue along with continued rigor on cost management resulted in exceptional EPS growth.”
Windows revenue was up 28%, compared with the same quarter a year earlier, driven by strong demand for Windows 7. More than 10% of all PCs worldwide are running Windows 7 today, making Windows 7 by far the fastest-selling operating system in history.
“Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong,” said Kevin Turner, chief operating officer. “We are also seeing tremendous interest in our market-leading cloud services for business.”
Business Outlook
Microsoft offers operating expense guidance of $26.1 billion to $26.3 billion for the full year ending June 30, 2010.
Webcast Details
Peter Klein, chief financial officer, Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on Apr. 22, 2011.
About Microsoft
Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.
Forward-Looking Statements
Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
- challenges to Microsoft’s business model;
- intense competition in all of Microsoft’s markets;
- Microsoft’s continued ability to protect its intellectual property rights;
- claims that Microsoft has infringed the intellectual property rights of others;
- the possibility of unauthorized disclosure of significant portions of Microsoft’s source code;
- actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability;
- government litigation and regulation affecting how Microsoft designs and markets its products;
- Microsoft’s ability to attract and retain talented employees;
- delays in product development and related product release schedules;
- significant business investments that may not gain customer acceptance and produce offsetting increases in revenue;
- unfavorable changes in general economic conditions, disruption of our partner networks or sales channels, or the availability of credit that affect demand for Microsoft’s products and services or the value of our investment portfolio;
- adverse results in legal disputes;
- unanticipated tax liabilities;
- quality or supply problems in Microsoft’s consumer hardware or other vertically integrated hardware and software products;
- impairment of goodwill or amortizable intangible assets causing a charge to earnings;
- exposure to increased economic and regulatory uncertainties from operating a global business;
- geopolitical conditions, natural disaster, cyberattack or other catastrophic events disrupting Microsoft’s business;
- acquisitions and joint ventures that adversely affect the business;
- improper disclosure of personal data could result in liability and harm to Microsoft’s reputation; and
- outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure.
For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations Web site at http://www.microsoft.com/msft.
All information in this release is as of Apr. 22, 2010. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
Microsoft Corporation |
||||||||
Income Statements |
||||||||
(In millions, except per share amounts) (Unaudited) |
||||||||
Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||
2010 |
2009 |
2010 |
2009 |
|||||
Revenue |
$ 14,503 |
$ 13,648 |
$ 46,445 |
$ 45,338 |
||||
Operating expenses: |
||||||||
Cost of revenue |
2,755 |
2,814 |
9,225 |
9,569 |
||||
Research and development |
2,220 |
2,212 |
6,364 |
6,785 |
||||
Sales and marketing |
3,203 |
2,981 |
9,612 |
9,687 |
||||
General and administrative |
1,152 |
913 |
3,017 |
2,631 |
||||
Employee severance |
- |
290 |
59 |
290 |
||||
Total operating expenses |
9,330 |
9,210 |
28,277 |
28,962 |
||||
Operating income |
5,173 |
4,438 |
18,168 |
16,376 |
||||
Other income (expense) |
168 |
(388) |
821 |
(697) |
||||
Income before income taxes |
5,341 |
4,050 |
18,989 |
15,679 |
||||
Provision for income taxes |
1,335 |
1,073 |
4,747 |
4,155 |
||||
Net income |
$ 4,006 |
$ 2,977 |
$ 14,242 |
$ 11,524 |
||||
Earnings per share: |
||||||||
Basic |
$ 0.46 |
$ 0.33 |
$ 1.61 |
$ 1.29 |
||||
Diluted |
$ 0.45 |
$ 0.33 |
$ 1.59 |
$ 1.28 |
||||
Weighted average shares outstanding: |
||||||||
Basic |
8,767 |
8,891 |
8,846 |
8,960 |
||||
Diluted |
8,876 |
8,904 |
8,955 |
9,008 |
||||
Cash dividends declared per common share |
$ 0.13 |
$ 0.13 |
$ 0.39 |
$ 0.39 |
||||
Microsoft Corporation |
||||
Balance Sheets |
||||
(In millions) |
||||
March 31, |
June 30, |
|||
(Unaudited) |
||||
Assets |
||||
Current assets: |
||||
Cash and cash equivalents |
$ 8,155 |
$ 6,076 |
||
Short-term investments (including securities loaned of $2,480 and $1,540) |
31,511 |
25,371 |
||
Total cash, cash equivalents, and short-term investments |
39,666 |
31,447 |
||
Accounts receivable, net of allowance for doubtful accounts of $381 and $451 |
9,137 |
11,192 |
||
Inventories |
501 |
717 |
||
Deferred income taxes |
2,222 |
2,213 |
||
Other |
2,992 |
3,711 |
||
Total current assets |
54,518 |
49,280 |
||
Property and equipment, net of accumulated depreciation of $8,393 and $7,547 |
7,372 |
7,535 |
||
Equity and other investments |
7,797 |
4,933 |
||
Goodwill |
12,463 |
12,503 |
||
Intangible assets, net |
1,282 |
1,759 |
||
Deferred income taxes |
- |
279 |
||
Other long-term assets |
1,478 |
1,599 |
||
Total assets |
$ 84,910 |
$ 77,888 |
||
Liabilities and stockholders' equity |
||||
Current liabilities: |
||||
Accounts payable |
$ 3,279 |
$ 3,324 |
||
Short-term debt |
2,249 |
2,000 |
||
Accrued compensation |
2,885 |
3,156 |
||
Income taxes |
901 |
725 |
||
Short-term unearned revenue |
11,171 |
13,003 |
||
Securities lending payable |
2,794 |
1,684 |
||
Other |
3,145 |
3,142 |
||
Total current liabilities |
26,424 |
27,034 |
||
Long-term debt |
3,746 |
3,746 |
||
Long-term unearned revenue |
1,089 |
1,281 |
||
Deferred income taxes |
828 |
- |
||
Other long-term liabilities |
7,113 |
6,269 |
||
Commitments and contingencies |
||||
Stockholders' equity: |
||||
Common stock and paid-in capital - shares authorized 24,000; |
||||
outstanding 8,762 and 8,908 |
62,517 |
62,382 |
||
Retained deficit, including accumulated other comprehensive income |
||||
of $1,453 and $969 |
(16,807) |
(22,824) |
||
Total stockholders' equity |
45,710 |
39,558 |
||
Total liabilities and stockholders' equity |
$ 84,910 |
$ 77,888 |
||
(1) Derived from audited financial statements |
||||
Microsoft Corporation |
||||||||||
Cash Flows Statements |
||||||||||
(In millions) (Unaudited) |
||||||||||
Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||
2010 |
2009 |
2010 |
2009 |
|||||||
Operations |
||||||||||
Net income |
$ 4,006 |
$ 2,977 |
$ 14,242 |
$ 11,524 |
||||||
Adjustments to reconcile net income to net cash from operations: |
||||||||||
Depreciation, amortization, and other noncash items |
694 |
664 |
1,955 |
1,881 |
||||||
Stock-based compensation |
481 |
432 |
1,409 |
1,292 |
||||||
Net recognized losses (gains) on investments and derivatives |
(68) |
507 |
(322) |
682 |
||||||
Excess tax benefits from stock-based compensation |
(14) |
(2) |
(38) |
(48) |
||||||
Deferred income taxes |
(241) |
(368) |
263 |
462 |
||||||
Deferral of unearned revenue |
6,087 |
5,899 |
19,692 |
16,054 |
||||||
Recognition of unearned revenue |
(6,395) |
(6,670) |
(21,758) |
(19,078) |
||||||
Changes in operating assets and liabilities: |
||||||||||
Accounts receivable |
1,947 |
1,697 |
1,906 |
4,035 |
||||||
Other current assets |
(284) |
106 |
306 |
345 |
||||||
Other long-term assets |
(81) |
26 |
(143) |
(159) |
||||||
Other current liabilities |
897 |
114 |
(57) |
(3,824) |
||||||
Other long-term liabilities |
364 |
662 |
1,014 |
2,030 |
||||||
Net cash from operations |
7,393 |
6,044 |
18,469 |
15,196 |
||||||
Financing |
||||||||||
Short-term borrowings (repayments), maturities of 90 days or less, net |
(349) |
(329) |
(446) |
1,667 |
||||||
Proceeds from issuance of debt, maturities longer than 90 days |
851 |
328 |
2,592 |
328 |
||||||
Repayments of debt, maturities longer than 90 days |
(502) |
- |
(1,898) |
- |
||||||
Common stock issued |
422 |
112 |
1,399 |
436 |
||||||
Common stock repurchased |
(2,023) |
(18) |
(7,430) |
(9,331) |
||||||
Common stock cash dividends |
(1,139) |
(1,155) |
(3,448) |
(3,310) |
||||||
Excess tax benefits from stock-based compensation |
14 |
2 |
38 |
48 |
||||||
Net cash used in financing |
(2,726) |
(1,060) |
(9,193) |
(10,162) |
||||||
Investing |
||||||||||
Additions to property and equipment |
(408) |
(632) |
(1,219) |
(2,252) |
||||||
Acquisition of companies, net of cash acquired |
(143) |
- |
(245) |
(827) |
||||||
Purchases of investments |
(11,217) |
(10,683) |
(25,994) |
(21,525) |
||||||
Maturities of investments |
1,054 |
915 |
6,448 |
1,669 |
||||||
Sales of investments |
4,927 |
3,327 |
12,705 |
16,102 |
||||||
Securities lending payable |
(117) |
1,064 |
1,110 |
(1,080) |
||||||
Net cash used in investing |
(5,904) |
(6,009) |
(7,195) |
(7,913) |
||||||
Effect of exchange rates on cash and cash equivalents |
(30) |
(36) |
(2) |
(175) |
||||||
Net change in cash and cash equivalents |
(1,267) |
(1,061) |
2,079 |
(3,054) |
||||||
Cash and cash equivalents, beginning of period |
9,422 |
8,346 |
6,076 |
10,339 |
||||||
Cash and cash equivalents, end of period |
$ 8,155 |
$ 7,285 |
$ 8,155 |
$ 7,285 |
||||||
Microsoft Corporation |
||||||||
Segment Revenue and Operating Income (Loss) |
||||||||
(In millions) (Unaudited) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
2010 |
2009 |
2010 |
2009 |
|||||
Revenue |
||||||||
Windows & Windows Live Division |
$ 4,415 |
$ 3,448 |
$ 13,943 |
$ 11,805 |
||||
Server and Tools |
3,575 |
3,491 |
10,854 |
10,663 |
||||
Online Services Division |
566 |
507 |
1,634 |
1,620 |
||||
Microsoft Business Division |
4,243 |
4,508 |
13,392 |
14,343 |
||||
Entertainment and Devices Division |
1,665 |
1,629 |
6,458 |
6,778 |
||||
Unallocated and other |
39 |
65 |
164 |
129 |
||||
Consolidated |
$ 14,503 |
$ 13,648 |
$ 46,445 |
$ 45,338 |
||||
Operating Income (Loss) |
||||||||
Windows & Windows Live Division |
$ 3,061 |
$ 2,273 |
$ 9,914 |
$ 8,053 |
||||
Server and Tools |
1,255 |
1,224 |
3,945 |
3,597 |
||||
Online Services Division |
(713) |
(411) |
(1,659) |
(1,067) |
||||
Microsoft Business Division |
2,622 |
2,756 |
8,492 |
8,958 |
||||
Entertainment and Devices Division |
165 |
(41) |
851 |
249 |
||||
Corporate-level activity |
(1,217) |
(1,363) |
(3,375) |
(3,414) |
||||
Consolidated |
$ 5,173 |
$ 4,438 |
$ 18,168 |
$ 16,376 |
||||
SOURCE Microsoft Corp.
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