Microsoft just announced earnings for its third fiscal quarter. Revenues were down 6 percent to $13.65 billion, and net income was down a whopping 32 percent to $2.98 billion or $0.33 EPS. Analysts consensus was closer to $14 billion for revenues and $0.39 for non-GAAP EPS, which Microsoft met thanks to its cost-cutting measures. Still, this can’t be feeling good for Microsoft.
The company is exposed to the weaknesses in the economy in general, and soft demand for PCs and servers in particular. Revenues in its Client business (Windows) was down 15.6 percent to $3.40 billion. It’s servers and tools business proved the the healthiest with a 7 percent increase in revenues to $3.47 billion, marking the first time I believe that servers and tools brought in more revenues than the client business. The online business saw revenues decline 14.5 percent to $721 million, and its loss doubled to $575 million.
The online business suffered from a 16 percent decline in advertising revenues, driven by lower display ad rates. On teh bright side, page views and search queries on Microsoft sites were both up.
1.7 million Xbox360 consoles were sold in the quarter, up 30 percent, but revenues for the Entertainment and Devices business remained flat at $1.57 billion. And it actually dipped into an operating loss of $31 million.
Net cash from operations was $6 billion in the quarter, $1 billion less than a year ago, but Microsoft still ended the quarter with $25.3 billion in cash on its balance sheet.
Here is the breakdown in revenues and operating profits by business:
MICROSOFT CORPORATION
Segment Revenue and Operating Income (Loss)
(In millions) (Unaudited)
|
Three Months Ended
March 31, |
Nine Months Ended
March 31, |
| |
2009 |
2008 |
|
2009 |
2008 |
|
|
| Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Client |
$3,404 |
$4,033 |
|
$11,604 |
$12,506 |
|
| Server and Tools |
3,467 |
3,238 |
|
10,616 |
9,381 |
|
| Online Services Business |
721 |
843 |
|
2,357 |
2,377 |
|
| Microsoft Business Division |
4,505 |
4,731 |
|
14,330 |
13,663 |
|
| Entertainment and Devices Division |
1,567 |
1,592 |
|
6,564 |
6,616 |
|
| Unallocated and other |
(16) |
17 |
|
(133) |
40 |
|
|
|
|
|
|
|
|
| Consolidated |
$13,648 |
$14,454 |
|
$45,338 |
$44,583 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Operating Income (Loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Client |
$2,514 |
$3,115 |
|
$8,689 |
$9,855 |
|
| Server and Tools |
1,344 |
1,080 |
|
3,978 |
3,170 |
|
| Online Services Business |
(575) |
(226) |
|
(1,521) |
(737) |
|
| Microsoft Business Division |
2,877 |
3,127 |
|
9,325 |
9,010 |
|
| Entertainment and Devices Division |
(31) |
106 |
|
299 |
668 |
|
| Corporate-level activity |
(1,691) |
(2,912) |
|
(4,394) |
(5,374) |
|
|
|
|
|
|
|
|
| Consolidated |
$4,438 |
$4,290 |
|
$16,376 |
$16,592 |
|
|
|
|
|
|
|
|
And here is the main income statement and balance sheet:
MICROSOFT CORPORATION
INCOME STATEMENTS
(In millions, except per share amounts) (Unaudited)
|
Three Months Ended
March 31, |
Nine Months Ended
March 31, |
| |
2009 |
2008 |
|
2009 |
2008 |
|
|
| Revenue |
$13,648 |
$14,454 |
|
$45,338 |
$44,583 |
|
| Operating Expenses: |
|
|
|
|
|
|
|
|
2,814 |
2,514 |
|
9,569 |
8,732 |
|
|
|
2,212 |
2,035 |
|
6,785 |
5,757 |
|
|
|
2,981 |
3,274 |
|
9,687 |
9,377 |
|
|
General and administrative |
|
913 |
2,341 |
|
2,631 |
4,125 |
|
|
|
290 |
- |
|
290 |
- |
|
|
|
|
|
|
|
|
|
|
9,210 |
10,164 |
|
28,962 |
27,991 |
|
|
|
|
|
|
|
|
| Operating income |
4,438 |
4,290 |
|
16,376 |
16,592 |
|
| Other income (expense) |
(388) |
520 |
|
(697) |
1,254 |
|
|
|
|
|
|
|
|
| Income before income taxes |
4,050 |
4,810 |
|
15,679 |
17,846 |
|
| Provision for income taxes |
1,073 |
422 |
|
4,155 |
4,462 |
|
|
|
|
|
|
|
|
| Net income |
$2,977 |
$4,388 |
|
$11,524 |
$13,384 |
|
|
|
|
|
|
|
|
| Earnings per share: |
|
|
|
|
|
|
|
|
$0.33 |
$0.47 |
|
$1.29 |
$1.43 |
|
|
|
|
|
|
|
|
|
|
$0.33 |
$0.47 |
|
$1.28 |
$1.41 |
|
|
|
|
|
|
|
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
8,891 |
9,307 |
|
8,960 |
9,349 |
|
|
|
|
|
|
|
|
|
|
8,904 |
9,428 |
|
9,008 |
9,492 |
|
|
|
|
|
|
|
|
| Cash dividends declared per common share |
$0.13 |
$0.11 |
|
$0.39 |
$0.33 |
|
|
|
|
|
|
|
|
MICROSOFT CORPORATION
BALANCE SHEETS
(In millions)
|
|
|
| |
|
|
|
March 31, 2009 |
June 30, 2008 (1) |
|
|
| |
|
|
|
(Unaudited) |
|
|
| Assets |
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
$7,285 |
$10,339 |
|
|
Short-term investments (including securities pledged as collateral of $1,445 and $2,491) |
|
|
|
|
18,055 |
13,323 |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, and short-term investments |
|
|
|
|
25,340 |
23,662 |
|
| Accounts receivable, net of allowance for doubtful accounts of $242 and $153 |
|
|
|
9,182 |
13,589 |
|
| Inventories |
|
|
|
657 |
985 |
|
| Deferred income taxes |
|
|
|
1,926 |
2,017 |
|
| Other |
|
|
|
3,619 |
2,989 |
|
|
|
|
|
|
|
|
|
|
|
|
|
40,724 |
43,242 |
|
| Property and equipment, net of accumulated depreciation of $7,236 and $6,302 |
|
|
|
7,112 |
6,242 |
|
| Equity and other investments |
|
|
|
4,112 |
6,588 |
|
| Goodwill |
|
|
|
12,554 |
12,108 |
|
| Intangible assets, net |
|
|
|
1,756 |
1,973 |
|
| Deferred income taxes |
|
|
|
956 |
949 |
|
| Other long-term assets |
|
|
|
1,639 |
1,691 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$68,853 |
$72,793 |
|
|
|
|
|
|
|
|
| Liabilities and stockholders’ equity |
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
$3,017 |
$4,034 |
|
|
|
|
|
|
1,999 |
- |
|
|
|
|
|
|
2,644 |
2,934 |
|
|
|
|
|
|
773 |
3,248 |
|
|
Short-term unearned revenue |
|
|
|
|
10,924 |
13,397 |
|
|
Securities lending payable |
|
|
|
|
1,533 |
2,614 |
|
|
|
|
|
|
2,933 |
3,659 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
|
|
23,823 |
29,886 |
|
| Long-term unearned revenue |
|
|
|
1,388 |
1,900 |
|
| Other long-term liabilities |
|
|
|
6,699 |
4,721 |
|
| Commitments and contingencies |
|
|
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
|
|
| Common stock and paid-in capital – shares authorized 24,000; outstanding 8,898 and 9,151 |
|
|
|
61,896 |
62,849 |
|
| Retained deficit, including accumulated other comprehensive income of $726 and $1,140 |
|
|
|
(24,953) |
(26,563) |
|
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
|
|
36,943 |
36,286 |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
|
|
|
$68,853 |
$72,793 |
|
|
|
|
|
|
|
|
(1) Derived from audited financial statements.
What are “Corporate-level activities” ? They lose there so much cash!
I don’t understand all these numbers. Can anyone direct me to a tutorial?
Maybe they need to announce another Zune…
Bigger news here- the company has re-worded the release date for Windows 7 from ‘calendar 2010′ to ‘fiscal 2010′. The company’s fiscal year starts on Oct 1, 2009. This comment was slipped into the official earnings release and indicates that Windows 7 will come out before the holidays:
http://finance....16777.html?.v=1
Umm, MSFT fiscal year starts July 1st, not October 1st. And profits are still in billions, so yes things are still selling well, just not well enough because of economy.
Oh, is that so? Can we expect Windows 7 by October. If it is true, then that is a great news. Maybe Microsoft is advancing the release date to push itself ahead of competitors. Anyhow, that is a welcome move.
But PCs are so much cheaper. Why aren’t they making any money?
Oh that makes sense.
learn how to add and the come back. Microsoft has a much wide range of products than other fruit y companies, plus this is not like they are losing money. Now since PC are cheaper that means that what those extra 500 dollars the fruit company charges you is what’s really making that fruit company profitable… then again it is the Ipods and the Iphone that are keeping Apple make their sales… if Apple did not have the ipod line, right now they would be loosing money. So learn to read a financial statement before you comment on a topic like this.
If MSFT did not have the Windows & Office line, they would be six feed under for decades
What’s your point?
His point is that these numbers are meaningless without some context. In other words, show me something meaningful rather than just trying to dog on microsoft.He used apple as an example of just how rediculously pointless the analysis was. So put your fanboy defenses on stun and go back to sleep, the big boys have other things to discuss.
I hardly call my post defence.
Why would I need to defence Apple?
Bad news is bad news.
Microsoft bolster cheap machines, then suffer profit decrease with your coolness.
Oh wait, apparently PCs et al are not cool enough for the reality.
Your comments show how ignorant you are. Microsoft is so much more than Windows and Office.
Yes, those are bread and butter products but they have a huge business applications business, database servers business, hardware business (keyboards and mice), development product business, etc…
Honey, I replied under tons of MSFT financial details.
And yes I do read the article first.
Note the word “decades”?
The logic is simple.
A long long time ago circa 1980
No Office = No Windows
No Windows = No GUI Platform
No Platform = No Empire
Got it?
For what it’s worth, I *just* compared various traffic stats for http://simpy.com/ for last 30 days. vs. 30 days exactly a year ago.
Numbers for all browsers were up, except for:
- Internet Explorer
- XP
- Win2K
… other MS things
What is Simpy.com? Seriously. I’ve never heard of it. It’s just one website, but it must be very powerful if it can be used to predict the downfall of Microsoft. I haven’t even visited the site but now I’m an instant convert. All Hail Simpy! BOW DOWN TO SIMPY!
Recession is taking its mark now.. the big companies are struggling! Imagine, this time next year when financial times will be 10x worse than now. Losses rather than profits? Who knows.
Funny how the same earnings release can create such different headlines.
Microsoft Reports a Massive Miss With Net Earnings Down 32 Percent — Techcrunch
Microsoft Profit Meets Estimates After Cutting Jobs, Expenses — Bloomberg.com
Microsoft Profit, Revenue Fall but Match Forecasts — CNBC
Microsoft profit sinks 32% on weak PC sales — CNN
Just an observation.
Indeed, the TechCrunch bias is getting somewhat tiresome…
What? This is the most pro-Microsoft blog on the web, outside of MS-hosted and MS-corporate ones.
True, but you can’t blame them :p
Yeah, wasn’t a completely fair headline since MSFT met analysts’ non-GAAP, downwardly revised numbers. So I changed it.
Wow, an Erick who doesn’t take a swing at Microsoft at every chance? Say it ain’t so!
A few years ago, M$ had a $60 Billion cash reserve. The money is gone, so the company has been operating at a loss for years. They have disguised this loss by purchasing other companies and adding their revenue to the M$ bottom line. We can all now see how well that’s gone, and the M$FT share price shows it. Windows is never going to get any better, as M$ sheds employees – it’s game over.
We know everyone hates Microsoft but please. It is not a huge miss.
The adjusted EPS is exactly what the analysts estimated. Stick to tech news not financials guys.
The last six months can be compared to the “end times” and they have a 6% drop. Come on guys look at the numbers
Cash in 2008 – 23 Billion
Cash in 2009 – 25 Billion
Hmmmmmmmmm…..
Since when meeting a YOY 30% down EPS guideline become a somewhat OK thing?
Talking about depressed.
Not to mention MSFT missed the revenue estimate number by hundreds of millions.
How did they managed to keep the margin up?
They fire people, like 5000 of them.
MSFT online business strategy proven to be totally wrong… loss doubled to $575 million.
Compared that to GOOG $1 billion profits on $5 billion revenue for its latest quarter.
Yup, all of microsoft’s profits remain in dead or dying businesses. Netbooks swithing to operating systems that don’t suck (e.g. not made by Microsoft) will be the final nail in the coffin.
mhhh..thats bad, tommorow i’m going to see steve ballmer at the cologne university of applied sciences! maybe he tells something about microsofts revenue!
So if E&D actually lost money this quarter despite selling more Xbox360s, does that mean they STILL are selling the hardware at a loss?
Yes and No
Keyword: Zune
Let’s talk numbers for the latest quarter:
Revenues Profit Market Cap
Apple $8.16B $1.21B $111.68B
Google $5.51B $1.42B $121.29B
Microsoft $13.65B $2.98B $168.21B
You do the math.
Looking at this, sell google! thier market cap is insane. Especially in this economy!
Apple 14,8 % profit
Google 25,7 % profit
Microsoft 21,8 % profit
A better comparison…
Anyone who reads Techcrunch and expects unbiased information is delusional. This posting showcases that again.
Yes, but I love to read Sarah as she talks about herself.
What bias? The one in the balance sheet?
FYI, The Microsoft employees are apparently paid to write nasty comments on this blog. Probably why they are sucking so much wind these days.
u shud write BTW… not FYI… FYI means that you are writing something which has some factual basis… not when its a figment of limited imagination
The point is, Microsoft’s downward profit slide is much much worse than the general economic downturn.
What absolute garbage.
Their critical annuity revenue was steady you ignorant moron.
Cash was up from $23b in 2008 to $25b in 2009.
Worse than general economic conditions? Glad the economy is NOT in your hands.
Microsoft’s decline on the search side of the house appears to be driven by a steady loss of advertisers, according to some sources:
http://adquants...Advertising.php
Bad. Profit margin only about three times that of greedy oil companies like Exxon.
Microsoft Business Division is growing in revenue and profit. Seems Microsoft is moving into B2B despite of all their efforts B2C.
My blog post: http://is.gd/ufeN
“I’m sure it’ll be fine, fine,” said Bill Gates, upping his hours at his charitable foundation and scheduling the sale of several more packages of Microsoft stock.
MSFT stock up 7% as I write this. Not biased indeed…
We just lost a really great employee to Microsoft awhile back. Hope his job is not jeopardized (as much as we would like to have him back!)
Microsoft’s (rather) new model to ‘lease’ their sfwr on a monthly basis for things like web hosting can mean smaller companies can use advanced tools like SQL Server without paying the large license fee up front – this is a model that will serve them well..
It’s a different problem that’s been looming for some time. Old posts, but still valid.
http://stephesb...will_not_b.html
http://stephesb...rted_the_w.html
Micro not so soft ?
Naturally, “On teh bright side” is a parody of lax typists. Clever!
Regardless of the actual figures its my opinion that Microsoft is fighting more than just recession. Forgetting for a minute the losses it makes to piracy, lets look at the “Microsoft is so much more than Windows and office” comment from Jim Z.
We will put aside the increasing popularity of OpenOffice as, IMO users find out that really the requirements in an office suite can be found for free with FOSS packages. We will put aside the fact that whatever the stats for Linux use its now more popular than its ever been.
Lets look at the “so much more…”
360? Nope that was lost to WII (and proved costly IMO with all the returns of faulty xbox’s)
Zune? Nope lost that to Apple IMO and had a rather embarassing incident on new years eve.
MSlive (or whatever its being called this month) do I even need to say the word Google?
So what exactly is bringing in the money for Microsoft and what can future investors look forward to?
I read once a comment on Microsoft Watch by another user who said “Microsoft always arrives at the party late and under dressed” and with the rumors of an international Zune I can see why.
It may explain why MS has been so keen to attack with its patent portfolio.
Ill stop there for fear of boring people, but leave mentioning we havent even got the ruling from the latest EU anti-trust panel yet.
Yes Microsoft is so much more than Windows & Office and IMO its not pretty. Microsoft have ruled the roost for so long in my opinion, they now are fighting a battle on many fronts where alternatives to their products are being seen as not only viable but desirable.
Just my opinion. I await the Microsoft hater comments.