Thursday, July 18th 2013
Microsoft Reports Fourth-Quarter and Full-Year Results
Microsoft Corp. today announced quarterly revenue of $19.90 billion for the quarter ended June 30, 2013. Operating income, net income, and diluted earnings per share for the quarter were $6.07 billion, $4.97 billion, and $0.59 per share. These financial results include a $900 million charge, or a $0.07 per share impact, related to Surface RT inventory adjustments. In addition, these financial results reflect the recognition of $782 million of previously deferred revenue related to the Office Upgrade Offer. All growth comparisons relate to the corresponding period in the last fiscal year.
The following table reconciles these financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. We have provided this non-GAAP financial information to aid investors in better understanding the company's performance.
"While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE," said Amy Hood, chief financial officer at Microsoft. "While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services."
"We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new Windows 8.1 tablets and PCs," said Steve Ballmer, chief executive officer at Microsoft. "Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most."
For Microsoft's fiscal year 2013, the company's revenue, operating income, and diluted earnings per share were $77.85 billion, $26.76 billion, and $2.58 per share. These financial results include a $900 million charge, or a $0.07 per share impact, related to Surface RT inventory adjustments. In addition, these financial results reflect the recognition of $540 million of previously deferred revenue related to the Windows Upgrade Offer, and a $733 million expense related to the European Commission fine.
Microsoft Business Division revenue grew 14% for the fourth quarter and 3% for the full year. Adjusting for the recognition of previously deferred revenue related to the Office Upgrade Offer, Microsoft Business Division non-GAAP revenue increased 2% for the fourth quarter. Office 365 is now on a $1.5 billion annual revenue run rate.
Server & Tools revenue grew 9% for the fourth quarter and 9% for the full year, driven by double-digit percentage revenue growth in SQL Server and System Center.
Windows Division revenue grew 6% for the fourth quarter and 5% for the full year. Excluding the impact of the prior year Windows Upgrade Offer revenue deferral, Windows Division non-GAAP revenue decreased 6% for the fourth quarter and 1% for the full year. In June, Microsoft released the public preview of Windows 8.1 which will be made available to OEMs in August.
Online Services Division revenue grew 9% for the fourth quarter and 12% for the full year, driven by an increase in revenue per search and volume. Bing organic U.S. search market share was 17.9% for the month of June 2013, up 230 basis points from the prior year period.
Entertainment and Devices Division grew 8% for the fourth quarter and 6% for the full year. During the quarter, transactional revenue within Xbox LIVE grew nearly 20%, and we unveiled our next-generation gaming and entertainment console, Xbox One.
"We continue to see strong demand for our enterprise products and services, with more and more customers making long-term commitments to the Microsoft platform," said Kevin Turner, chief operating officer at Microsoft. "The growing adoption of our cloud services, including Office 365, Windows Azure and Dynamics CRM, continues to demonstrate our leadership position in the cloud."
Operating Expense Outlook
Microsoft is revising operating expense guidance downward to $31.3 billion to $31.9 billion for the full fiscal year ending June 30, 2014.
The following table reconciles these financial results reported in accordance with generally accepted accounting principles (GAAP) to non-GAAP financial results. We have provided this non-GAAP financial information to aid investors in better understanding the company's performance.
"We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new Windows 8.1 tablets and PCs," said Steve Ballmer, chief executive officer at Microsoft. "Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most."
For Microsoft's fiscal year 2013, the company's revenue, operating income, and diluted earnings per share were $77.85 billion, $26.76 billion, and $2.58 per share. These financial results include a $900 million charge, or a $0.07 per share impact, related to Surface RT inventory adjustments. In addition, these financial results reflect the recognition of $540 million of previously deferred revenue related to the Windows Upgrade Offer, and a $733 million expense related to the European Commission fine.
Microsoft Business Division revenue grew 14% for the fourth quarter and 3% for the full year. Adjusting for the recognition of previously deferred revenue related to the Office Upgrade Offer, Microsoft Business Division non-GAAP revenue increased 2% for the fourth quarter. Office 365 is now on a $1.5 billion annual revenue run rate.
Server & Tools revenue grew 9% for the fourth quarter and 9% for the full year, driven by double-digit percentage revenue growth in SQL Server and System Center.
Windows Division revenue grew 6% for the fourth quarter and 5% for the full year. Excluding the impact of the prior year Windows Upgrade Offer revenue deferral, Windows Division non-GAAP revenue decreased 6% for the fourth quarter and 1% for the full year. In June, Microsoft released the public preview of Windows 8.1 which will be made available to OEMs in August.
Online Services Division revenue grew 9% for the fourth quarter and 12% for the full year, driven by an increase in revenue per search and volume. Bing organic U.S. search market share was 17.9% for the month of June 2013, up 230 basis points from the prior year period.
Entertainment and Devices Division grew 8% for the fourth quarter and 6% for the full year. During the quarter, transactional revenue within Xbox LIVE grew nearly 20%, and we unveiled our next-generation gaming and entertainment console, Xbox One.
"We continue to see strong demand for our enterprise products and services, with more and more customers making long-term commitments to the Microsoft platform," said Kevin Turner, chief operating officer at Microsoft. "The growing adoption of our cloud services, including Office 365, Windows Azure and Dynamics CRM, continues to demonstrate our leadership position in the cloud."
Operating Expense Outlook
Microsoft is revising operating expense guidance downward to $31.3 billion to $31.9 billion for the full fiscal year ending June 30, 2014.
13 Comments on Microsoft Reports Fourth-Quarter and Full-Year Results
Because $5 Billion net profit just ain't cutting it anymore?
Yes the RT thing wasn't exactly great, but they still had solid figures even after that. Now sell them at $100 a pop!
hint: Still looking for a way to make my desktop PC 100% windows 8/8.1 compatible!!! :banghead:
Google doesn't make money out of a Desktop OS, Office Suite, Server Software or a Gaming console which is where MS makes almost ALL of its money.
Also people blame the decline of PC sales to the fact that their age old PC can run Windows 8 smoothly.
Quod Erat Demonstrandum.
The decline of PC sales is due to portable and handheld sales increasing. Tablets, laptops, mobile phones. Also, desktop processors have become so fast that the upgrade cycle for most users have become less frequent.
Assuming I was able to purchase a 20"-30" capacitive touchscreen at a reasonable price in order to replace one of the 3 displays currently in my setup. Where would this new touchscreen go? At the edge of the desk next to the other 2? Perhaps at an angle closer to the keyboard? on an articulating vesa mount? Just how the hell would the ergonomics work?? There are other more serious issues too but this topic in particular has caused a lot of discussion at work.
Surface RT is another prime example. While this tablet is fully touch capable with great ergonomics and hardware it somehow still sports a desktop UI with an addon keyboard and touchpad!:confused: What for?? Where is Microsoft's commitment to their new Touch UI? Where is their vision?? Aren't they the same company who gave us tablet PCs and demoed the amazing Surface tabletop 8 years ago??? Shouldn't they have had all touch based user interaction scenarios figured out by now???
The XBOX ONE release also caused alot of negative reactions due to the product's shift from a games console to a media hub but I'm not gonna go into this as I haven't used one yet.
Microsoft appears to have lost focus of their core consumer product lines. Google is not a direct competitor in all these segments yet has somehow managed to drain revenue from Microsoft's product lines to their own. There are more Android Smartphones and Tablets being activated every single day than there are Windows desktops, laptops, Phones, Tablets and Xboxs. Google has managed to convince many consumers that Smartphones and Tablets are proper PC replacements and that Windows is not hype anymore. Obviously the folk at Redmont have made things very easy for them... :banghead:
What do you guys think?
I don't know of any negative reactions about Xbox One's media focus as it's not really a shift, the Xbox 360 could do a lot of that too and still be a console so I'm not sure what's negative about it. Just means that instead of needing 2 or 3 other devices I can just use the Xbox One. I think you might be referring to the DRM issue that caused quite a stir.
I'm honestly getting sick of people saying that Microsoft has lost focus, lost their way etc. They are adapting to a changing industry and are shifting from a software company to a services and devices company. They were stubborn for a long time about the direction that consumer products were taking and are now having to play catchup while still satisfying the legacy crowd. You all should be happy that they didn't do a complete overhaul of Windows and completely leave out backwards compatibility (see Apple going to Mac OS X from 9). If you don't like the direction that Microsoft is taking Windows then I very much doubt you like the way the entire industry is going, meaning you're quarrel isn't with MS, it's with the average consumer who dictates the trends.
Anyway no one is forcing anyone to upgrade to Windows 8, but that IS the way it is going no matter how we feel. That is a fact. We can stick to Windows 7 until 2020, move to *nix (including OSX), wait until arm gets quick enough and move to Android/iOS/whatever, use 3rd party programs that bring the start meny back or just adapt how we do things on a computer. Which we will have to do sooner or later anyway, be it in a year or ten years. It has always been like this, the difference is that computers are now everywhere and it's easier to voice your opinion to the masses.
EDIT: On topic, I really do believe they should sell those Surface RT's at like $150 just to get them out to people. As I understand it the app selection is the biggest problem. More users would make it more interesting.