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Earnings Release FY12 Q3

Microsoft Reports Record Third-Quarter Revenue

Strong business demand drives double-digit operating income growth.

 

REDMOND, Wash. — Apr. 19, 2012 — Microsoft Corp. today announced quarterly revenue of $17.41 billion for the quarter ended Mar. 31, 2012, a 6% increase from the prior year period. Operating income was $6.37 billion, up 12% from the prior year period.

Net income and diluted earnings per share for the quarter were $5.11 billion and $0.60 per share, compared with $5.23 billion and $0.61 per share, respectively, in the prior year period. Prior year net income and diluted earnings per share included a $461 million or $0.05 per share tax benefit primarily related to a tax settlement with the U.S. Internal Revenue Service.

“We’re driving toward exciting launches across the entire company, while delivering strong financial results,” said Steve Ballmer, chief executive officer at Microsoft. “With the upcoming release of new Windows 8 PCs and tablets, the next version of Office, and a wide array of products and services for the enterprise and consumers, we will be delivering exceptional value to all our customers in the year ahead.”

The Server & Tools business posted $4.57 billion in third-quarter revenue, a 14% increase from the prior year period, driven by double-digit revenue growth in SQL Server and more than 20% growth in System Center revenue.

The Microsoft Business Division reported $5.81 billion in third-quarter revenue, a 9% increase from the prior year period, reflecting the continued strength of Office 2010 with businesses and consumers. Dynamics posted an 11% revenue increase from the prior year period, with Dynamics CRM revenue growing more than 30%.

The Windows and Windows Live Division posted revenue of $4.62 billion, a 4% increase from the prior year period.  Strong Windows 7 adoption continued with enterprise desktops on Windows 7 now up to 40% worldwide.

“We saw strong demand for our business desktop and infrastructure offerings,” said Peter Klein, chief financial officer at Microsoft. “Solid revenue growth and continued cost discipline drove double-digit operating income growth.”

The Online Services Division reported revenue of $707 million, a 6% increase from the prior year period, and operating loss improvement of approximately $300 million.

The Entertainment & Devices Division posted revenue of $1.62 billion, a decrease of 16% from the prior period due to a soft gaming console market. Xbox remained the top-selling console in the U.S. for the 15th consecutive month, and the company announced new television content partners and experiences for its 40 million Xbox LIVE members.

 “We continue to execute well across our businesses, and we are seeing robust demand for our enterprise products and services,” said Kevin Turner, chief operating officer at Microsoft. “Our investments and offerings in the database platform and public, private, and hybrid cloud are helping our customers transform their operations to meet today’s evolving business demands.”

Business Outlook

Microsoft is revising operating expense guidance downward and now offers a range of $28.3 billion to $28.7 billion for the full year ending June 30, 2012. Microsoft also offers preliminary fiscal year 2013 operating expense guidance of $30.3 billion to $30.9 billion, representing 6% to 8% growth from the mid-point of fiscal year 2012 guidance.

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. PDT (5:30 p.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 http://www.microsoft.com/investor. The webcast will be available for replay through the close of business on Apr. 19, 2013.

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:

·         execution and competitive risks in transitioning to cloud-based computing;

·         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;

·         improper disclosure of personal data that could result in liability and harm to Microsoft’s reputation;

·         outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure;

·         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; and

·         acquisitions, joint ventures and strategic alliances that adversely affect the business 

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/investor.

All information in this release is as of Apr. 19, 2012. 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) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news/. 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/investor.


MICROSOFT CORPORATION

INCOME STATEMENTS

(In millions, except per share amounts) (Unaudited)

Three Months Ended March 31,

Nine Months Ended 
March 31,

 

2012

 

2011

 

2012

 

2011

Revenue

 $  17,407

 $16,428

 $  55,664

 $  52,576

Operating expenses:

  Cost of revenue

       3,952

     3,897

     13,367

     11,869

  Research and development

       2,517

     2,269

       7,217

      6,650

  Sales and marketing

       3,414

     3,393

     10,076

     10,024

  General and administrative

       1,150

     1,160

       3,433

      3,043

    Total operating expenses

     11,033

   10,719

     34,093

     31,586

Operating income

       6,374

     5,709

     21,571

     20,990

Other income (expense)

          (11)

       316

          337

         762

Income before income taxes

       6,363

     6,025

     21,908

     21,752

Provision for income taxes

       1,255

       793

       4,438

      4,476

Net income

 $    5,108

 $  5,232

 $  17,470

 $  17,276

Earnings per share:

  Basic

 $      0.61

 $    0.62

 $      2.08

 $     2.03

  Diluted

 $      0.60

 $    0.61

 $      2.05

 $     2.01

Weighted average shares outstanding:

  Basic

       8,401

     8,420

       8,398

      8,511

  Diluted

       8,498

     8,510

       8,502

      8,609

Cash dividends declared per common
     share

 $      0.20

 

 $    0.16

 

 $      0.60

 

 $     0.48



MICROSOFT CORPORATION

BALANCE SHEETS

(In millions)(Unaudited)

 

March 31,
2012

 

June 30,
2011(1)

Assets

Current assets:

  Cash and cash equivalents

 $             6,388

 $    9,610

  Short-term investments (including securities loaned
    of $1,181 and $1,181)

              53,141

     43,162

    Total cash, cash equivalents, and short-term
      investments

              59,529

     52,772

  Accounts receivable, net of allowance for doubtful
    accounts of $322 and $333

              10,961

     14,987

  Inventories

                1,412

      1,372

  Deferred income taxes

                2,350

      2,467

  Other

                2,608

      3,320

    Total current assets

              76,860

     74,918

Property and equipment, net of accumulated
  depreciation of $10,952 and $9,829

                8,225

      8,162

Equity and other investments

                9,068

     10,865

Goodwill

              19,698

     12,581

Intangible assets, net

                2,756

         744

Other long-term assets

                1,403

      1,434

        Total assets

 $         118,010

 $108,704

Liabilities and stockholders' equity

Current liabilities:

  Accounts payable

 $             3,790

 $    4,197

  Accrued compensation

                3,272

      3,575

  Income taxes

                   958

         580

  Short-term unearned revenue

              13,929

     15,722

  Securities lending payable

                1,210

      1,208

  Other

                3,011

      3,492

    Total current liabilities

              26,170

     28,774

Long-term debt

              11,938

     11,921

Long-term unearned revenue

                1,262

      1,398

Deferred income taxes

                1,456

      1,456

Other long-term liabilities

                8,525

      8,072

    Total liabilities

              49,351

     51,621

Commitments and contingencies

Stockholders' equity:

  Common stock and paid-in capital - shares authorized
    24,000; outstanding 8,400 and 8,376

              65,273

     63,415

  Retained earnings (deficit), including accumulated other
    comprehensive income of $1,332 and $1,863

                3,386

     (6,332)

    Total stockholders' equity

              68,659

     57,083

        Total liabilities and stockholders' equity

 $         118,010

 $108,704

(1) Derived from audited financial statements.


MICROSOFT CORPORATION

CASH FLOW STATEMENTS

(In millions) (Unaudited)

Three Months Ended March 31,

Nine Months Ended
March 31,

 

2012

 

2011

 

2012

 

2011

Operations

Net income

 $    5,108

 $  5,232

 $  17,470

 $  17,276

Adjustments to reconcile net income
  to net cash from operations:

  Depreciation, amortization, and
    other

          766

       720

       2,170

      2,077

  Stock-based compensation
    expense

          591

       541

       1,724

      1,622

  Net recognized losses (gains) on
    investments and derivatives

            68

      (122)

          (74)

        (377)

  Excess tax benefits from
    stock-based compensation

          (10)

         (5)

          (84)

         (14)

  Deferred income taxes

        (134)

        (59)

          282

        (324)

  Deferral of unearned revenue

       8,142

     6,616

     21,825

     19,331

  Recognition of unearned revenue

     (8,283)

   (7,026)

   (23,993)

   (21,189)

  Changes in operating assets and
    liabilities:

    Accounts receivable

       2,770

     3,031

       3,851

      3,435

    Inventories

          (50)

      (170)

          (79)

        (258)

    Other current assets

            73

      (618)

          938

        (487)

    Other long-term assets

              9

         (8)

          (36)

         172

    Accounts payable

        (114)

        (51)

        (380)

        (235)

    Other current liabilities

          492

       237

        (107)

     (1,174)

    Other long-term liabilities

          166

       354

          442

      1,197

        Net cash from operations

       9,594

     8,672

     23,949

     21,052

Financing

Short-term debt repayments,
  maturities of 90 days or less, net

 0

 0

 0

        (186)

Proceeds from issuance of debt,
  maturities longer than 90 days

 0

     2,239

 0

      6,960

Repayments of debt, maturities
  longer than 90 days

 0

 0

 0

        (814)

Common stock issued

       1,091

     1,405

       1,635

      2,242

Common stock repurchased

     (1,023)

      (848)

     (3,999)

   (10,299)

Common stock cash dividends paid

     (1,683)

   (1,349)

     (4,707)

     (3,830)

Excess tax benefits from
  stock-based compensation

            10

           5

            84

           14

Other

 0

        (15)

 0

         (40)

        Net cash from (used in)
          financing

     (1,605)

     1,437

     (6,987)

     (5,953)

Investing

Additions to property and equipment

        (749)

      (658)

     (1,683)

     (1,713)

Acquisition of companies, net of
  cash acquired, and purchases of
  intangible and other assets

          (84)

 0

     (9,586)

         (69)

Purchases of investments

   (23,951)

 (14,394)

   (45,297)

   (27,707)

Maturities of investments

       4,236

     2,286

     13,122

      4,992

Sales of investments

       7,946

     5,738

     23,317

      9,768

Securities lending payable

          361

      (111)

              3

      1,063

        Net cash used in investing

   (12,241)

   (7,139)

   (20,124)

   (13,666)

Effect of exchange rates on cash
  and cash equivalents

            30

         28

          (60)

           83

Net change in cash and cash
  equivalents

     (4,222)

     2,998

     (3,222)

      1,516

Cash and cash equivalents,
  beginning of period

     10,610

     4,023

       9,610

      5,505

Cash and cash equivalents, end of
  period

 $    6,388

 $  7,021

 $    6,388

 $    7,021



 

 

 

MICROSOFT CORPORATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT REVENUE AND OPERATING INCOME (LOSS)

(In millions) (Unaudited)

 

 

 

 

 

 

 

 

 

Three Months Ended
March 31,

 

Nine Months Ended
March 31,

 

 

 

2012

 

2011

 

2012

 

2011

Revenue

 

 

 

 

 

 

 

Windows & Windows Live Division

 $    4,624

 

 $  4,447

 

 $  14,228

 

 $  14,290

Server and Tools

       4,572

 

     4,007

 

     13,594

 

     12,156

Online Services Division

          707

 

       667

 

       2,132

 

      1,927

Microsoft Business Division

       5,814

 

     5,329

 

     17,700

 

     16,641

Entertainment and Devices Division

       1,616

 

     1,935

 

       7,814

 

      7,428

Unallocated and other

            74

 

         43

 

          196

 

         134

  Consolidated

 $  17,407

 

 $16,428

 

 $  55,664

 

 $  52,576

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

 

Windows & Windows Live Division

 $    2,952

 

 $  2,792

 

 $    9,063

 

 $    9,303

Server and Tools

       1,738

 

     1,352

 

       5,336

 

      4,604

Online Services Division

        (479)

 

      (776)

 

     (1,449)

 

     (1,912)

Microsoft Business Division

       3,770

 

     3,313

 

     11,619

 

     10,896

Entertainment and Devices Division

        (229)

 

       210

 

          627

 

      1,244

Corporate-level activity

     (1,378)

 

   (1,182)

 

     (3,625)

 

     (3,145)

  Consolidated

 $    6,374

 

 $  5,709

 

 $  21,571

 

 $  20,990

IMPORTANT NOTICE TO USERS (summary only, click here  for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our  Forms 10-Q and 10-K.
Related Information
FY12 Earnings Release Schedule
Q4-Thursday, July 19
Microsoft Corp (MSFT)
Microsoft Corp (MSFT)
IMPORTANT NOTICE TO USERS (summary only, click here  for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings. We do not endorse third-party information. All information speaks as of the last fiscal quarter or year for which we have filed a Form 10-K or 10-Q, or for historical information the date or period expressly indicated in or with such information. We undertake no duty to update the information. Forward-looking statements are subject to risks and uncertainties described in our  Forms 10-Q and 10-K.