REDMOND, Wash. — Jan. 28, 2010 — Microsoft Corp. today announced record revenue of $19.02 billion for the second quarter ended Dec. 31, 2009, a 14% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $8.51 billion, $6.66 billion and $0.74 per share, which represented increases of 43%, 60% and 57%, respectively, when compared with the prior year period.
These financial results include the recognition of $1.71 billion of deferred revenue, an impact of $0.14 of diluted earnings per share, relating to the Windows 7 Upgrade Option Program and pre-sales of Windows 7 to OEMs and retailers before general availability. Adjusting for the deferred revenue recognition, second-quarter revenue totaled $17.31 billion, and diluted earnings per share totaled $0.60 per share.
“Exceptional demand for Windows 7 led to the positive top-line growth for the company,” said Peter Klein, chief financial officer at Microsoft. “Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth.”
Windows 7 and Windows Server 2008 R2 launched globally on October 22 as anticipated. Through the second quarter, Microsoft has sold over 60 million Windows 7 licenses making it the fastest selling operating system in history.
“This is a record quarter for Windows units,” said Kevin Turner, chief operating officer at Microsoft. “We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7.”
Business Outlook
Management will discuss second-quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today.
In addition, Microsoft offers operating expense guidance of $26.2 billion to $26.5 billion, for the full year ending June 30, 2010.
Webcast Details
Peter Klein, chief financial officer, Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on Jan. 28, 2011.
Adjusted Financial Results – Reconciliation of Non-GAAP Measures
| |
3 Months Ended December 31, 2009 |
Year-over-Year Growth |
|
|
|
|
|
|
|
|
| ($ in billions, except per share amounts) |
Revenue |
Diluted Earnings Per Share |
|
Revenue |
Diluted Earnings Per Share |
|
|
|
| As Reported (GAAP) |
$19.02 |
$0.74 |
|
14% |
57% |
|
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|
|
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|
|
| |
Deferred Revenue Recognition for Windows 7 Upgrade Option |
|
|
|
|
|
|
|
|
|
$1.71 |
$0.14 |
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|
|
|
| As Adjusted (Non-GAAP) |
$17.31 |
$0.60 |
|
4% |
28% |
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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 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 Jan. 28, 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.
For more information, press only:
Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070, rrt@waggeneredstrom.com
For more information, financial analysts and investors only:
Bill Koefoed, general manager, Investor Relations, (425) 706-3703
Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft web page at http://www.microsoft.com/presspass/ on Microsoft’s corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. PST conference call with investors and analysts, is available at http://www.microsoft.com/msft.
MICROSOFT CORPORATION
INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
| |
Three Months Ended
December 31, |
Six Months Ended
December 31, |
| |
2009 |
2008 |
|
2009 |
2008 |
|
|
|
| Revenue |
$19,022 |
$16,629 |
|
$31,942 |
$31,690 |
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
3,628 |
3,907 |
|
6,470 |
6,755 |
|
|
|
2,079 |
2,290 |
|
4,144 |
4,573 |
|
|
|
3,619 |
3,662 |
|
6,409 |
6,706 |
|
| |
General and administrative |
|
1,124 |
831 |
|
1,865 |
1,718 |
|
|
|
59 |
- |
|
59 |
- |
|
|
|
|
|
|
|
|
|
|
|
10,509 |
10,690 |
|
18,947 |
19,752 |
|
|
|
|
|
|
|
|
|
| Operating income |
8,513 |
5,939 |
|
12,995 |
11,938 |
|
| Other income (expense) |
370 |
(301) |
|
653 |
(309) |
|
|
|
|
|
|
|
|
|
| Income before income taxes |
8,883 |
5,638 |
|
13,648 |
11,629 |
|
| Provision for income taxes |
2,221 |
1,464 |
|
3,412 |
3,082 |
|
|
|
|
|
|
|
|
|
| Net income |
$6,662 |
$4,174 |
|
$10,236 |
$8,547 |
|
|
|
|
|
|
|
|
|
| Earnings per share: |
|
|
|
|
|
|
|
|
$0.75 |
$0.47 |
|
$1.15 |
$0.95 |
|
|
|
$0.74 |
$0.47 |
|
$1.14 |
$0.94 |
|
|
|
|
|
|
|
|
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
8,856 |
8,903 |
|
8,885 |
8,994 |
|
|
|
8,951 |
8,914 |
|
8,975 |
9,052 |
|
|
|
|
|
|
|
|
|
| Cash dividends declared per common share |
$0.13 |
$0.13 |
|
$0.26 |
$0.26 |
|
|
|
|
|
|
|
|
|
MICROSOFT CORPORATION
BALANCE SHEETS
(In millions)
| |
|
|
| |
|
|
|
December 31, 2009 |
June 30, 2009(1) |
|
|
|
|
|
|
|
(Unaudited) |
|
|
| Assets |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
| |
Cash and cash equivalents |
|
|
|
|
$9,422 |
$6,076 |
|
| |
Short-term investments (including securities loaned of $2,654 and $1,540) |
|
|
|
|
26,677 |
25,371 |
|
|
|
|
|
|
|
|
|
| |
Total cash, cash equivalents, and short-term investments |
|
|
|
|
36,099 |
31,447 |
|
| |
Accounts receivable, net of allowance for doubtful accounts of $506 and $451 |
|
|
|
|
11,196 |
11,192 |
|
|
|
|
|
|
589 |
717 |
|
|
|
|
|
|
2,056 |
2,213 |
|
|
|
|
|
|
2,547 |
3,711 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,487 |
49,280 |
|
| Property and equipment, net of accumulated depreciation of $8,170 and $7,547 |
|
|
|
7,402 |
7,535 |
|
| Equity and other investments |
|
|
|
6,976 |
4,933 |
|
| Goodwill |
|
|
|
12,368 |
12,503 |
|
| Intangible assets, net |
|
|
|
1,346 |
1,759 |
|
| Deferred income taxes |
|
|
|
- |
279 |
|
| Other long-term assets |
|
|
|
1,517 |
1,599 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$82,096 |
$77,888 |
|
|
|
|
|
|
|
|
|
| Liabilities and stockholders' equity |
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
$3,171 |
$3,324 |
|
|
|
|
|
|
2,249 |
2,000 |
|
|
|
|
|
|
2,417 |
3,156 |
|
|
|
|
|
|
721 |
725 |
|
| |
Short-term unearned revenue |
|
|
|
|
11,361 |
13,003 |
|
| |
Securities lending payable |
|
|
|
|
2,911 |
1,684 |
|
|
|
|
|
|
2,885 |
3,142 |
|
|
|
|
|
|
|
|
|
| |
Total current liabilities |
|
|
|
|
25,715 |
27,034 |
|
| Long-term debt |
|
|
|
3,746 |
3,746 |
|
| Long-term unearned revenue |
|
|
|
1,167 |
1,281 |
|
| Deferred income taxes |
|
|
|
377 |
- |
|
| Other long-term liabilities |
|
|
|
6,808 |
6,269 |
|
| Commitments and contingencies |
|
|
|
|
|
|
| Stockholders' equity: |
|
|
|
|
|
|
| |
Common stock and paid-in capital - shares authorized 24,000; |
|
|
|
|
|
|
|
| |
outstanding 8,811 and 8,908 |
|
|
|
|
62,566 |
62,382 |
|
| |
Retained deficit, including accumulated other |
|
|
|
|
|
|
|
| |
comprehensive income of $1,322 and $969 |
|
|
|
|
(18,283) |
(22,824) |
|
|
|
|
|
|
|
|
|
| |
Total stockholders' equity |
|
|
|
|
44,283 |
39,558 |
|
|
|
|
|
|
|
|
|
| |
Total liabilities and stockholders' equity |
|
|
|
|
$82,096 |
$77,888 |
|
|
|
|
|
|
|
|
|
(1) Derived from audited financial statements
MICROSOFT CORPORATION
CASH FLOWS STATEMENTS
(In millions)(Unaudited)
| |
Three Months Ended
December 31, |
Six Months Ended
December 31, |
| |
2009 |
2008 |
|
2009 |
2008 |
|
|
|
|
| Operations |
|
|
|
|
|
|
| Net income |
$6,662 |
$4,174 |
|
$10,236 |
$8,547 |
|
| Adjustments to reconcile net income to net cash from operations: |
|
|
|
|
|
|
| |
Depreciation, amortization, and other noncash items |
|
615 |
632 |
|
1,261 |
1,217 |
|
|
|
485 |
417 |
|
928 |
860 |
|
| |
Net recognized losses (gains) on investments and derivatives |
|
(188) |
139 |
|
(254) |
175 |
|
| |
Excess tax benefits from stock-based compensation |
|
(15) |
(2) |
|
(24) |
(46) |
|
|
|
550 |
454 |
|
504 |
830 |
|
| |
Deferral of unearned revenue |
|
6,926 |
5,969 |
|
13,605 |
10,155 |
|
| |
Recognition of unearned revenue |
|
(9,126) |
(6,364) |
|
(15,363) |
(12,408) |
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
(2,789) |
(1,647) |
|
(41) |
2,338 |
|
|
|
1,244 |
797 |
|
590 |
239 |
|
|
|
16 |
(69) |
|
(62) |
(185) |
|
| |
Other current liabilities |
|
285 |
614 |
|
(954) |
(3,938) |
|
| |
Other long-term liabilities |
|
304 |
668 |
|
650 |
1,368 |
|
|
|
|
|
|
|
|
|
|
|
4,969 |
5,782 |
|
11,076 |
9,152 |
|
|
|
|
|
|
|
|
|
| Financing |
|
|
|
|
|
|
| Short-term borrowings (repayments), maturities of 90 days or less, net |
(475) |
21 |
|
(97) |
1,996 |
|
| Proceeds from issuance of debt, maturities longer than 90 days |
1,046 |
- |
|
1,741 |
- |
|
| Repayments of debt, maturities longer than 90 days |
(573) |
- |
|
(1,396) |
- |
|
| Common stock issued |
729 |
96 |
|
977 |
324 |
|
| Common stock repurchased |
(3,867) |
(2,820) |
|
(5,407) |
(9,313) |
|
| Common stock cash dividends |
(1,152) |
(1,157) |
|
(2,309) |
(2,155) |
|
| Excess tax benefits from stock-based compensation |
15 |
2 |
|
24 |
46 |
|
|
|
|
|
|
|
|
|
| |
Net cash used in financing |
|
(4,277) |
(3,858) |
|
(6,467) |
(9,102) |
|
|
|
|
|
|
|
|
|
| Investing |
|
|
|
|
|
|
| Additions to property and equipment |
(376) |
(842) |
|
(811) |
(1,620) |
|
| Acquisition of companies, net of cash acquired |
(63) |
(450) |
|
(102) |
(827) |
|
| Purchases of investments |
(4,287) |
(6,596) |
|
(14,777) |
(10,842) |
|
| Maturities of investments |
1,896 |
290 |
|
5,394 |
754 |
|
| Sales of investments |
3,361 |
5,700 |
|
7,778 |
12,775 |
|
| Securities lending payable |
(623) |
(601) |
|
1,227 |
(2,144) |
|
|
|
|
|
|
|
|
|
| |
Net cash used in investing |
|
(92) |
(2,499) |
|
(1,291) |
(1,904) |
|
| Effect of exchange rates on cash and cash equivalents |
(1) |
(83) |
|
28 |
(139) |
|
|
|
|
|
|
|
|
|
| Net change in cash and cash equivalents |
599 |
(658) |
|
3,346 |
(1,993) |
|
| Cash and cash equivalents, beginning of period |
8,823 |
9,004 |
|
6,076 |
10,339 |
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents, end of period |
$9,422 |
$8,346 |
|
$9,422 |
$8,346 |
|
|
|
|
|
|
|
|
|
MICROSOFT CORPORATION
Segment Revenue and Operating Income (Loss)
(In millions) (Unaudited)
| |
Three Months Ended
December 31, |
Six Months Ended
December 31, |
| Revenue |
2009 |
2008 |
|
2009 |
2008 |
|
|
|
| Windows & Windows Live Division |
$6,904 |
$4,064 |
|
$9,528 |
$8,337 |
|
| Server and Tools |
3,844 |
3,755 |
|
7,278 |
7,172 |
|
| Online Services Business |
581 |
609 |
|
1,067 |
1,132 |
|
| Microsoft Business Division |
4,745 |
4,881 |
|
9,149 |
9,835 |
|
| Entertainment and Devices Division |
2,902 |
3,256 |
|
4,793 |
5,149 |
|
| Unallocated and Other |
46 |
64 |
|
127 |
65 |
|
|
|
|
|
|
|
|
|
| Consolidated |
$19,022 |
$16,629 |
|
$31,942 |
$31,690 |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Windows & Windows Live Division |
$5,394 |
$2,712 |
|
$6,854 |
$5,761 |
|
| Server and Tools |
1,491 |
1,375 |
|
2,767 |
2,409 |
|
| Online Services Business |
(466) |
(320) |
|
(950) |
(635) |
|
| Microsoft Business Division |
3,010 |
3,021 |
|
5,867 |
6,199 |
|
| Entertainment and Devices Division |
375 |
130 |
|
686 |
290 |
|
| Corporate-level activity |
(1,291) |
(979) |
|
(2,229) |
(2,086) |
|
|
|
|
|
|
|
|
|
| Consolidated |
$8,513 |
$5,939 |
|
$12,995 |
$11,938 |
|
|
|
|
|
|
|
|
source: http://www.microsoft.com/msft/earnings/fy10/earn_rel_q2_10.mspx
