01—Abstract
Summary
Summary of the 10-K filed July 30, 2010. Cited figures are marked; the original filing is the authoritative source.
Microsoft Corporation's 2010 10-K filing highlights a year of significant revenue growth, primarily driven by the successful launch of Windows 7 and a recovering PC market.
The company's strategic focus on "software plus services" and cloud computing is evident across its business segments, including the development of Azure and Office Web Apps. Despite facing intense competition and ongoing regulatory scrutiny, Microsoft demonstrated strong financial performance, with increased operating income and diluted earnings per share compared to the previous year. The company continues to invest heavily in research and development, emphasizing innovation in areas like cloud computing, natural user interfaces, and intelligent computing.
While the Entertainment and Devices Division saw steady revenue, the Online Services Division continued to operate at a loss, albeit with revenue growth, partially attributed to the new Yahoo! search agreement. Microsoft's robust cash position and ongoing share repurchase programs underscore its financial strength and commitment to shareholder returns.
02—Key points
Key Highlights
- Revenue increased by 7% in FY2010 compared to FY2009, reaching $62.48 billion, driven by strong Windows 7 sales and PC market recovery.
- Operating income grew by 18% to $24.10 billion, and diluted EPS rose by 30% to $2.10, reflecting improved profitability.
- The company is actively pursuing its "software plus services" strategy, with significant investments in cloud computing initiatives like Windows Azure and Office Web Apps.
- The Windows & Windows Live Division saw substantial revenue growth (23%) due to the successful launch of Windows 7 and market recovery.
- The Server and Tools division experienced a 5% revenue increase, indicating continued demand for its enterprise software and cloud offerings.
- Microsoft continues its aggressive share repurchase program, with $10.8 billion repurchased in FY2010, demonstrating a commitment to returning capital to shareholders.
- The company maintains a strong financial position with $36.8 billion in cash, cash equivalents, and short-term investments as of June 30, 2010.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Microsoft Corp kept $0.30.
- Revenue$62.48B100.0%
- Cost of revenue−$12.39B19.8%
- Gross profit$50.09B80.2%
- Operating costs−$25.99B41.6%
- Operating income$24.10B38.6%
- Interest, other & tax−$5.34B8.5%
- Net income$18.76B30.0%
Where FY2010 revenue went
$62.48B- Net income: $18.76B, 30% of revenue
- Other operating costs: $17.28B, 28% of revenue
- Cost of revenue: $12.39B, 20% of revenue
- R&D: $8.71B, 14% of revenue
- Interest, other & tax: $5.34B, 8.5% of revenue
Kept 30% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed July 30, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $62.48B$58.44B | +6.9% |
| Cost of Revenue | $12.39B$12.15B | +2.0% |
| Gross Profit | $50.09B$46.28B | +8.2% |
| R&D Expenses | $8.71B$9.01B | −3.3% |
| Operating Expenses | $38.39B$38.07B | +0.8% |
| Operating Income | $24.10B$20.36B | +18.3% |
| Interest Expense | $151.00M$38.00M | +297.4% |
| Net Income | $18.76B$14.57B | +28.8% |
| EPS (Basic) | $2.13$1.63 | +30.7% |
| EPS (Diluted) | $2.10$1.62 | +29.6% |
| Shares Outstanding (Basic) | 8.81B8.95B | −1.5% |
| Shares Outstanding (Diluted) | 8.93B9.00B | −0.8% |
05—Questions
Frequently Asked Questions
What were the main drivers of Microsoft's revenue growth in FY2010?
The primary drivers for Microsoft's revenue growth in fiscal year 2010 were the strong sales performance of the newly launched Windows 7 operating system and a general improvement in the global PC market. The Server and Tools division also contributed with increased revenue from Windows Server and SQL Server.
How is Microsoft addressing the shift towards cloud computing?
Microsoft is heavily investing in its "software plus services" strategy, with a strong focus on cloud computing. This includes developing and expanding services like Windows Azure (for cloud infrastructure), SQL Azure (cloud database), Microsoft Office Web Apps, and other cloud-based business solutions, aiming to provide scalable and accessible services to both consumers and businesses.
What is the financial performance of the Online Services Division?
The Online Services Division, which includes Bing and MSN, saw a 4% increase in revenue in FY2010, largely due to growth in online advertising. However, the division's operating loss increased to $2.36 billion, driven by higher operating expenses, including traffic acquisition costs and costs associated with the Yahoo! commercial agreement. Microsoft continues to invest in this segment to compete in the online advertising market.
How is Microsoft managing its capital and returning value to shareholders?
Microsoft maintained a strong cash position, with $36.8 billion in cash, cash equivalents, and short-term investments as of June 30, 2010. The company continued its share repurchase program, buying back $10.8 billion worth of stock in FY2010, and also paid out $4.6 billion in dividends, demonstrating a consistent focus on shareholder returns.
06—Continue