Microsoft Reports Second-Quarter Results

Modest revenue growth despite difficult economy; announces cost management initiatives.

REDMOND, Wash. — Jan. 22, 2009 — Microsoft Corp. today announced revenue of $16.63 billion for the second quarter ended Dec. 31, 2008, a 2% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year.

Client revenue declined 8% as a result of PC market weakness and a continued shift to lower priced netbooks. However, strong annuity licensing drove Server & Tools revenue growth of 15%. Entertainment and Devices revenue grew 3% driven by strong holiday demand for Xbox 360 consoles with a record 6 million units sold in the quarter.

During the quarter, Microsoft showcased significant new product innovations by debuting Windows 7, Windows Azure, Office Web applications, Windows Server 2008 R2 and Office Communications Server 2007 R2. Microsoft also announced general availability of Silverlight 2, Exchange Online, SharePoint Online, Windows Small Business Server 2008, Windows Essential Business Server 2008 and a new release of Microsoft Dynamics NAV.

“While we are not immune to the effects of the economy, I am confident in the strength of our product portfolio and soundness of our approach,” said Steve Ballmer, chief executive officer at Microsoft. “We will continue to manage expenses and invest in long-term opportunities to deliver value to customers and shareholders, and we will emerge an even stronger industry leader than we are today.”

In light of the further deterioration of global economic conditions, Microsoft announced additional steps to manage costs, including the reduction of headcount-related expenses, vendors and contingent staff, facilities, capital expenditures and marketing. As part of this plan, Microsoft will eliminate up to 5,000 jobs in R&D, marketing, sales, finance, legal, HR, and IT over the next 18 months, including 1,400 jobs today. These initiatives will reduce the company’s annual operating expense run rate by approximately $1.5 billion and reduce fiscal year 2009 capital expenditures by $700 million.

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Good news for the entertainment division.

So 5k job cuts over 18 months, starting with 1,400 today. Much less than the rumors that were flying around.

I'm sure those 5000 employees will be thrilled to know they are laid off while their employer posts revenues.

Agreed, lets face it in this economy things could have been a lot worse. It wasn't listed in this statement but the entertainment division stayed above 3 billion in revenue although it fell short of the 3.5 billion they were anticipating.

Profit numbers should be available soon but it looks like the entertainment divison is holding its own.

poor Microsoft...

Honestly, Microsoft looks to hvae done pretty well for themselves. The market is doing terrible but they seem to be weathering the storm some.

I wouldn't worry much about those 5000 employees. I'm sure doors magically fly open when you have worked for companies like Google and Microsoft.

It's factory workers we should be worried about.

They made a $151 million profit for the quarter in the Xbox division and it says they pushed 6 million consoles in the quarter they must have adjusted up from the previous 5.5 stated.

That means they pushed 28.5 million WW at the end of 2008.

Much better news than expected.

Very correct...