Robust holiday sales and enterprise demand drive revenue growth of 30%
REDMOND, Wash., Jan. 24 /PRNewswire-FirstCall/ -- Microsoft Corp. today
announced second quarter records for revenue, operating income and diluted
earnings per share of $16.37 billion, $6.48 billion and $0.50,
respectively. Compared to the year ago period, these figures represent
growth of 30%, 87% and 92% for revenue, operating income and diluted
earnings per share, respectively.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000822/MSFTLOGO)
Results in the prior year were impacted by the deferral of $1.64
billion of revenue and operating income and $0.11 of diluted earnings per
share from the second to the third quarter of fiscal 2007, due primarily to
technology guarantee programs. Without these deferrals, second quarter
growth rates for revenue, operating income and earnings per share would be
15%, 27% and 32%, respectively.
"Revenue of over $16 billion this quarter exceeds our previous record
by $2 billion," said Chris Liddell, chief financial officer at Microsoft.
"We are extremely pleased by the broad based strength of our business
performance and field execution. Throughout the first half of our fiscal
year, all of our businesses met or beat our expectations."
Since Windows Vista became generally available one year ago,
Microsoft's Client business has grown over 20% on average and sales of
Windows Vista have surpassed 100 million licenses.
"We are pleased with the progress of Windows Vista in the market. We've
hit our stride with partners and customers and are looking forward to the
release of our first service pack later this quarter," said Kevin Johnson,
president of the Platforms and Services Division at Microsoft.
Sales to business customers remained brisk in the quarter with
Microsoft Business Division and the Server and Tools business each
experiencing double-digit revenue growth rates over the prior year and
together increased revenue over $1 billion versus the comparable quarter
last year. Microsoft Business Division generated 23% business revenue
growth driven by the versions of Microsoft Office, Microsoft SharePoint and
Microsoft Exchange that were launched last November.
"We are in the midst of another strong year with great momentum heading
into calendar year 2008," said Kevin Turner, chief operating officer at
Microsoft. "We continue to see healthy demand from both businesses and
consumers in the United States and our growth in emerging markets is
especially strong. Looking across Brazil, Russia, India and China, our
field revenue reached a combined growth rate over 65% this quarter. As we
look ahead, our Windows Server 2008 launch, with our virtualization
solution, will further our quest to bring exceptional value to our
customers."
Microsoft rolled out new consumer focused offerings during the quarter
such as Windows Home Server, new versions of the Zune media player and the
next generation of Windows Live Online Services. Exiting the calendar year,
the life to date sales of Xbox 360 consoles reached 17.7 million units,
representing a 70% increase from the prior year.
Business Outlook
Microsoft management offers the following guidance for the quarter
ending March 31, 2008:
-- Revenue is expected to be in the range of $14.3 billion to
$14.6 billion.
-- Operating income is expected to be in the range of $5.6 billion to
$5.7 billion.
-- Diluted earnings per share are expected to be in the range of $0.43 to
$0.45.
Management offers the following guidance for the full fiscal year
ending June 30, 2008:
-- Revenue is expected to be in the range of $59.9 billion to $60.5
billion.
-- Operating income is expected to be in the range of $24.2 billion to
$24.4 billion.
-- Diluted earnings per share are expected to be in the range of $1.85 to
$1.88.
Webcast Details
Microsoft will hold an audio webcast at 2:30 p.m. PST (5:30 p.m. EST)
today with Chris Liddell, senior vice president and chief financial
officer, Frank Brod, corporate vice president and chief accounting officer,
and Colleen Healy, general manager of Investor Relations, to discuss
details of the company's performance for the quarter and certain
forward-looking information. The session may be accessed at
http://www.microsoft.com/msft. The webcast will be available for replay
through the close of business on January 26, 2009.
Three Months Ended Three Months Ended
December 31, 2007 December 31, 2006
($ in millions,
except per
share amounts) Diluted Diluted
Operating earnings Operating earnings
Revenue income per share Revenue income per share*
As reported $16,367 $6,481 $0.50 $12,542 $3,472 $0.26
Technology
Guarantee &
pre-shipment
deferrals $1,637 $1,637 $0.11
As adjusted $14,179 $5,109 $0.38
* Items may not add due to rounding
Year over Year
Growth
Diluted
($ in millions, except Operating earnings
per share amounts) Revenue income per share
As reported 30% 87% 92%
As adjusted 15% 27% 32%
This information has been provided to aid readers of the financial
statements in further understanding the company's financial performance and
the impact that certain items and events had 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 produce offsetting
increases in revenue;
-- changes in general economic conditions that affect demand for computer
hardware or software;
-- adverse results in legal disputes;
-- unanticipated tax liabilities;
-- Microsoft's consumer hardware products may experience quality or supply
problems;
-- impairment of goodwill or amortizable intangible assets causing a
charge to earnings;
-- exposure to increased economic and regulatory uncertainties from
operating a global business;
-- geo-political conditions, natural disaster, cyber-attack 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;
-- sales channel disruption such as the bankruptcy of a major distributor;
and
-- Microsoft's ability to implement operating cost structures that align
with revenue growth.
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
website at http://www.microsoft.com/msft.
All information in this release is as of January 24, 2008. 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 Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenue $16,367 $12,542 $30,129 $23,353
Operating expenses:
Cost of revenue 3,543 3,620 6,218 5,316
Research and development 1,885 1,637 3,722 3,423
Sales and marketing 3,392 2,999 6,006 5,190
General and administrative 1,066 814 1,784 1,478
Total operating expenses 9,886 9,070 17,730 15,407
Operating income 6,481 3,472 12,399 7,946
Investment income and other 339 333 637 900
Income before income taxes 6,820 3,805 13,036 8,846
Provision for income taxes 2,113 1,179 4,040 2,742
Net income $4,707 $2,626 $8,996 $6,104
Earnings per share:
Basic $0.50 $0.27 $0.96 $0.62
Diluted $0.50 $0.26 $0.95 $0.61
Weighted average shares outstanding:
Basic 9,361 9,806 9,370 9,867
Diluted 9,503 9,942 9,519 9,996
Cash dividends declared per common
share $0.11 $0.10 $0.22 $0.20
Microsoft Corporation
Balance Sheets
(In millions)
December 31, June 30,
2007 2007 (1)
(Unaudited)
Assets
Current assets:
Cash and equivalents $7,460 $6,111
Short-term investments (including
securities pledged as collateral of
$1,984 and $2,356) 13,616 17,300
Total cash and short-term investments 21,076 23,411
Accounts receivable, net of allowance
for doubtful accounts of $149 and $117 11,621 11,338
Inventories, net 755 1,127
Deferred income taxes 1,483 1,899
Other current assets 2,840 2,393
Total current assets 37,775 40,168
Property and equipment, net 4,965 4,350
Equity and other investments 9,413 10,117
Goodwill 10,309 4,760
Intangible assets, net 1,717 878
Deferred income taxes 1,200 1,389
Other long-term assets 1,960 1,509
Total assets $67,339 $63,171
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $3,612 $3,247
Accrued compensation 1,977 2,325
Income taxes 863 1,040
Short-term unearned revenue 10,221 10,779
Securities lending payable 2,166 2,741
Other current liabilities 3,219 3,622
Total current liabilities 22,058 23,754
Long-term unearned revenue 1,957 1,867
Other long-term liabilities 8,893 6,453
Commitments and contingencies
Stockholders' equity:
Common stock and paid-in capital - shares
authorized 24,000; outstanding 9,329 and
9,380 62,528 60,557
Retained deficit, including accumulated
other comprehensive income of $1,628 and
$1,654 (28,097) (29,460)
Total stockholders' equity 34,431 31,097
Total liabilities and stockholders'
equity $67,339 $63,171
(1) Derived from audited financial statements
Microsoft Corporation
Cash Flows Statements
(In millions) (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Operations
Net income $4,707 $2,626 $8,996 $6,104
Depreciation, amortization, and
other noncash items 481 365 916 614
Stock-based compensation 360 437 693 893
Net recognized gains on investments (134) (29) (321) (235)
Excess tax benefits from
stock-based payment arrangements (33) (8) (102) (48)
Deferred income taxes 323 (517) 680 (351)
Unearned revenue 5,995 6,029 9,816 9,246
Recognition of unearned revenue (5,368) (4,265) (10,333) (8,315)
Accounts receivable (2,586) (2,945) 220 (444)
Other current assets 445 723 210 (357)
Other long-term assets (55) (264) (66) (399)
Other current liabilities 325 (354) (864) (1,196)
Other long-term liabilities 107 244 600 591
Net cash from operations 4,567 2,042 10,445 6,103
Financing
Common stock issued 2,335 4,449 2,981 4,834
Common stock repurchased (4,057) (5,797) (6,987) (13,480)
Common stock cash dividends (1,034) (980) (1,972) (1,877)
Excess tax benefits from
stock-based payment arrangements 33 8 102 48
Other - (3) - (23)
Net cash used in financing (2,723) (2,323) (5,876) (10,498)
Investing
Additions to property and equipment (695) (572) (1,205) (983)
Acquisition of companies, net of
cash acquired (433) (125) (5,829) (461)
Purchases of investments (6,317) (9,102) (12,314) (21,957)
Maturities of investments 470 1,325 800 2,159
Sales of investments 6,696 7,448 15,816 26,149
Securities lending payable (770) (932) (574) (404)
Net cash from (used in) investing (1,049) (1,958) (3,306) 4,503
Effect of exchange rates on cash
and equivalents 28 22 86 37
Net change in cash and equivalents 823 (2,217) 1,349 145
Cash and equivalents, beginning of
period 6,637 9,076 6,111 6,714
Cash and equivalents, end of period $7,460 $6,859 $7,460 $6,859
Microsoft Corp.
Segment Revenue and Operating Income / (Loss)
(In millions) (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
2007 2006 2007 2006
Revenue
Client $4,335 $2,586 $8,473 $5,893
Server and Tools 3,278 2,843 6,178 5,339
Online Services Business 863 625 1,534 1,161
Microsoft Business Division 4,811 3,513 8,922 6,941
Entertainment and Devices Division 3,060 2,969 4,989 3,980
Unallocated and Other 20 6 33 39
Total revenue $16,367 $12,542 $30,129 $23,353
Operating Income / (Loss)
Client $3,358 $1,838 $6,727 $4,485
Server and Tools 1,172 981 2,132 1,751
Online Services Business (245) (118) (510) (236)
Microsoft Business Division 3,185 2,152 5,879 4,391
Entertainment and Devices Division 357 (302) 524 (423)
Corporate-Level Activity (1,346) (1,079) (2,353) (2,022)
Total operating income $6,481 $3,472 $12,399 $7,946
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SOURCE Microsoft Corporation
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CONTACT:
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Microsoft Corporation
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