Broad-based strength drives operating income and EPS growth each in excess of 25%
REDMOND, Wash.,
(Logo: http://www.newscom.com/cgi-bin/prnh/20000822/MSFTLOGO)
'This fiscal year is off to an outstanding start with the fastest revenue growth of any first quarter since 1999,' said
Microsoft's businesses of Client, Microsoft Business Division, and Server and Tools grew combined revenue in excess of 20%, and experienced robust demand for Windows Vista, the 2007 Microsoft Office system, Windows Server, and SQL Server.
'Customer demand for Windows Vista this quarter continued to build with double-digit growth in multi-year agreements by businesses and with the vast majority of consumers purchasing premium editions,' said
During the quarter, Microsoft's two consumer focused divisions passed milestones with the successful close of the company's largest ever acquisition, aQuantive, and Halo 3 achieving the biggest entertainment launch day in history.
'Backed by an amazing product line-up, our sales force, marketing teams, and partners delivered another excellent quarter,' said
Business Outlook
Microsoft management offers the following guidance for the quarter ending December 31, 2007:
-- Revenue is expected to be in the range of $15.6 billion to $16.1
billion.
-- Operating income is expected to be in the range of $5.9 billion to $6.1
billion.
-- Diluted earnings per share are expected to be in the range of $0.44 to
$0.46.
Management offers the following guidance for the full fiscal year ending June 30, 2008:
-- Revenue is expected to be in the range of $58.8 billion to $59.7
billion.
-- Operating income is expected to be in the range of $23.3 billion to
$23.7 billion.
-- Diluted earnings per share are expected to be in the range of $1.78 to
$1.81.
The foregoing full fiscal year guidance includes approximately
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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 event 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
-- implementation of 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
Microsoft Corporation
Income Statements
(In millions, except per share amount) (Unaudited)
Three Months Ended
September 30,
2007 2006
Revenue $13,762 $10,811
Operating expenses:
Cost of revenue 2,675 1,696
Research and development 1,837 1,786
Sales and marketing 2,614 2,191
General and administrative 718 664
Total operating expenses 7,844 6,337
Operating income 5,918 4,474
Investment income and other 298 567
Income before income taxes 6,216 5,041
Provision for income taxes 1,927 1,563
Net income $4,289 $3,478
Earnings per share:
Basic $0.46 $0.35
Diluted $0.45 $0.35
Weighted average shares outstanding:
Basic 9,380 9,929
Diluted 9,513 10,010
Cash dividends declared per common share $0.11 $0.10
Microsoft Corporation
Balance Sheets
(In millions)
September 30, June 30,
2007 2007 (1)
(Unaudited)
Assets
Current assets:
Cash and equivalents $6,637 $6,111
Short-term investments (including
securities pledged as
collateral of $2,696 and $2,356) 14,937 17,300
Total cash and short-term
investments 21,574 23,411
Accounts receivable, net of
allowance for doubtful
accounts of $133 and $117 8,982 11,338
Inventories, net 1,178 1,127
Deferred income taxes 1,571 1,899
Other current assets 2,548 2,393
Total current assets 35,853 40,168
Property and equipment, net 4,615 4,350
Equity and other investments 9,707 10,117
Goodwill 10,151 4,760
Intangible assets, net 1,718 878
Deferred income taxes 1,587 1,389
Other long-term assets 2,014 1,509
Total assets $65,645 $63,171
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $3,206 $3,247
Accrued compensation 1,796 2,325
Income taxes 1,410 1,040
Short-term unearned revenue 9,787 10,779
Securities lending payable 2,936 2,741
Other current liabilities 3,609 3,622
Total current liabilities 22,744 23,754
Long-term unearned revenue 1,785 1,867
Other long-term liabilities 8,981 6,453
Commitments and contingencies
Stockholders' equity:
Common stock and paid-in capital -
shares authorized 24,000;
outstanding 9,355 and 9,380 60,699 60,557
Retained deficit, including
accumulated other comprehensive
income of $1,530 and $1,654 (28,564) (29,460)
Total stockholders' equity 32,135 31,097
Total liabilities and stockholders' equity $65,645 $63,171
(1) Derived from audited financial statements
Microsoft Corporation
Cash Flows Statements
(In millions) (Unaudited)
Three Months Ended
September 30,
2007 2006
Operations
Net income $4,289 $3,478
Depreciation, amortization, and
other noncash items 435 249
Stock-based compensation 333 456
Net recognized gains on investments (187) (206)
Excess tax benefits from stock-based
payment arrangements (69) (40)
Deferred income taxes 357 166
Unearned revenue 3,821 3,217
Recognition of unearned revenue (4,965) (4,050)
Accounts receivable 2,806 2,501
Other current assets (235) (1,080)
Other long-term assets (11) (135)
Other current liabilities (1,189) (842)
Other long-term liabilities 493 347
Net cash from operations 5,878 4,061
Financing
Common stock issued 646 385
Common stock repurchased (2,930) (7,683)
Common stock cash dividends (938) (897)
Excess tax benefits from stock-based
payment arrangements 69 40
Other - (20)
Net cash used for financing (3,153) (8,175)
Investing
Additions to property and equipment (510) (411)
Acquisition of companies, net of
cash acquired (5,396) (336)
Purchases of investments (5,997) (12,855)
Maturities of investments 330 834
Sales of investments 9,120 18,701
Securities lending payable 196 528
Net cash from (used in) investing (2,257) 6,461
Net change in cash and equivalents 468 2,347
Effect of exchange rates on cash and
equivalents 58 15
Cash and equivalents, beginning of period 6,111 6,714
Cash and equivalents, end of period $6,637 $9,076
Microsoft Corp.
Segment Revenue and Operating Income / (Loss)
(In millions) (Unaudited)
Three Months Ended
September 30,
(in millions) 2007 2006
Revenue
Client $4,138 $3,316
Server and Tools 2,900 2,496
Online Services Business 671 536
Microsoft Business Division 4,111 3,419
Entertainment and Devices Division 1,929 1,011
Unallocated and Other 13 33
Total revenue $13,762 $10,811
Operating Income / (Loss)
Client $3,367 $2,660
Server and Tools 962 771
Online Services Business (264) (102)
Microsoft Business Division 2,694 2,227
Entertainment and Devices Division 165 (142)
Corporate-Level Activity (1,006) (940)
Total operating income $5,918 $4,474
SOURCE Microsoft Corporation