Microsoft Reports First-Quarter Results |
By: Microsoft Corp. Posted: 2009-10-24 07:05:00 |
Microsoft Corp. today announced revenue of $12.92 billion for the first quarter ended Sept. 30, 2009, a 14% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $4.48 billion, $3.57 billion and $0.40 per share, which represented declines of 25%, 18% and 17%, respectively, when compared with the prior year period.
These financial results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability. Adding back the deferred revenue, revenue totaled $14.39 billion, a 4% year-over-year decline, and EPS totaled $0.52 per share, an increase of 8% over the same period of the prior year. "We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," said Chris Liddell, chief financial officer at Microsoft. "We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions." Windows 7 and Windows Server 2008 R2 launched globally on Oct. 22 as anticipated. Also during October, Microsoft released Microsoft Exchange Server 2010 to manufacturing and in July announced a strategic partnership with Yahoo! Inc. to provide search results for their global properties. "The worldwide launches of Windows 7, Exchange Server 2010 and Windows Server 2008 R2 are exciting milestones for Microsoft, our partners and customers," said Kevin Turner, chief operating officer at Microsoft. "We are pleased by the early positive response we are receiving for these products." Business Outlook Microsoft is reducing operating expense guidance to $26.2 billion to $26.5 billion, for the full year ending June 30, 2010. Management will discuss first-quarter results and the company's business outlook on a conference call and webcast at 7:30 a.m. PDT (10:30 a.m. EDT) today. Webcast Details Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 7:30 a.m. PDT (10:30 a.m. EDT) today to discuss details of the company's performance for the quarter and certain forward-looking information. The session may be accessed at website. The webcast will be available for replay through the close of business on Oct. 23, 2010. Adjusted Financial Results - Reconciliation of Non-GAAP Measures 3 Months Ended Year-over-Year September 30, 2009 Growth ------------------ --------------- Diluted Diluted Earnings Earnings Per Per ($in billions, except per share amounts) Revenue Share Revenue Share ---------------------------------------- ------- ----- ------- ----- As Reported per GAAP $12.92 $0.40 -14% -17% Deferred Revenue for Windows 7 Upgrade Program and Pre-sales $1.47 $0.12 ---------------------------------------- ------- ----- ------- ----- As Adjusted (Non-GAAP) $14.39 $0.52 -4% 8% This information has been provided to aid readers of the financial statements in further understanding the company's financial performance. The impact of certain items and events on the financial results may not be indicative of trends affecting the company's business. For comparability of reporting, management considers this information in conjunction with GAAP amounts in evaluating business performance. The non-GAAP financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. 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 the value of our investment portfolio or demand for Microsoft's products and services; * 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. All information in this release is as of Oct. 23, 2009. 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 September 30, --------------------- 2009 2008 ---- ---- Revenue $12,920 $15,061 Operating expenses: Cost of revenue 2,842 2,848 Research and development 2,065 2,283 Sales and marketing 2,790 3,044 General and administrative 741 887 Employee severance - - --- --- Total operating expenses 8,438 9,062 ----- ----- Operating income 4,482 5,999 Other income (expense) 283 (8) --- -- Income before income taxes 4,765 5,991 Provision for income taxes 1,191 1,618 ----- ----- Net income $3,574 $4,373 ====== ====== Earnings per share: Basic $0.40 $0.48 Diluted $0.40 $0.48 Weighted average shares outstanding: Basic 8,914 9,084 Diluted 8,983 9,183 Cash dividends declared per common share $0.13 $0.13 Microsoft Corporation Balance Sheets (In millions) September 30, June 30, 2009 2009 (1) ------------- -------- (Unaudited) Assets Current assets: Cash and cash equivalents $8,823 $6,076 Short-term investments (including securities pledged as collateral of $3,261 and $1,540) 27,905 25,371 ------ ------ Total cash, cash equivalents, and short-term investments 36,728 31,447 Accounts receivable, net of allowance for doubtful accounts of $436 and $451 8,587 11,192 Inventories 1,150 717 Deferred income taxes 2,441 2,213 Other 3,325 3,711 ----- ----- Total current assets 52,231 49,280 Property and equipment, net of accumulated depreciation of $7,853 and $7,547 7,512 7,535 Equity and other investments 6,006 4,933 Goodwill 12,582 12,503 Intangible assets, net 1,653 1,759 Deferred income taxes - 279 Other long-term assets 1,628 1,599 ----- ----- Total assets $81,612 $77,888 ======= ======= Liabilities and stockholders' equity Current liabilities: Accounts payable $3,287 $3,324 Short-term debt 2,250 2,000 Accrued compensation 2,224 3,156 Income taxes 847 725 Short-term unearned revenue 13,567 13,003 Securities lending payable 3,534 1,684 Other 3,052 3,142 ----- ----- Total current liabilities 28,761 27,034 Long-term debt 3,746 3,746 Long-term unearned revenue 1,201 1,281 Deferred income taxes 155 - Other long-term liabilities 6,537 6,269 Commitments and contingencies Stockholders' equity: Common stock and paid-in capital - shares authorized 24,000; outstanding 8,900 and 8,908 62,293 62,382 Retained deficit, including accumulated other comprehensive income of $1,334 and $969 (21,081) (22,824) ------- ------- Total stockholders' equity 41,212 39,558 ------ ------ Total liabilities and stockholders' equity $81,612 $77,888 ======= ======= (1) Derived from audited financial statements Microsoft Corporation Cash Flows Statements (In millions) (Unaudited) Three Months Ended September 30, --------------------- 2009 2008 ---- ---- Operations Net income $3,574 $4,373 Adjustments to reconcile net income to net cash from operations Depreciation, amortization, and other noncash items 646 585 Stock-based compensation 443 443 Net losses (gains) on investments and derivatives (66) 36 Excess tax benefits from stock-based compensation (9) (44) Deferred income taxes (46) 376 Deferral of unearned revenue 6,679 4,186 Recognition of unearned revenue (6,237) (6,044) Changes in operating assets and liabilities Accounts receivable 2,748 3,985 Other current assets (654) (558) Other long-term assets (78) (116) Other current liabilities (1,239) (4,552) Other long-term liabilities 346 700 --- --- Net cash from operations 6,107 3,370 ----- ----- Financing Short-term borrowings, maturities of 90 days or less, net 378 1,975 Proceeds from issuance of debt, maturities longer than 90 days 695 - Repayments of debt, maturities longer than 90 days (823) - Common stock issued 248 228 Common stock repurchased (1,540) (6,493) Common stock cash dividends (1,157) (998) Excess tax benefits from stock-based compensation 9 44 --- --- Net cash used in financing (2,190) (5,244) ------ ------ Investing Additions to property and equipment (435) (778) Acquisition of companies, net of cash acquired (39) (377) Purchases of investments (10,490) (4,246) Maturities of investments 3,498 464 Sales of investments 4,417 7,075 Securities lending payable 1,850 (1,543) ----- ------ Net cash from (used in) investing (1,199) 595 Effect of exchange rates on cash and cash equivalents 29 (56) --- --- Net change in cash and cash equivalents 2,747 (1,335) Cash and cash equivalents, beginning of period 6,076 10,339 ----- ------ Cash and cash equivalents, end of period $8,823 $9,004 ====== ====== Microsoft Corporation Segment Revenue and Operating Income (Loss) (In millions) (Unaudited) Three Months Ended September 30, --------------------- 2009 2008 ---- ---- Revenue ------- Windows & Windows Live Division $2,620 $4,278 Server and Tools 3,434 3,417 Online Services Division 490 520 Microsoft Business Division 4,404 4,954 Entertainment and Devices Division 1,891 1,893 Unallocated and other 81 (1) --- --- Consolidated $12,920 $15,061 ======= ======= Operating Income (Loss) ----------------------- Windows & Windows Live Division $1,463 $3,059 Server and Tools 1,283 1,044 Online Services Division (480) (321) Microsoft Business Division 2,863 3,185 Entertainment and Devices Division 312 159 Corporate-level activity (959) (1,127) ---- ------ Consolidated $4,482 $5,999 ====== ====== |
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