01—Abstract
Summary
Summary of the 10-K filed July 31, 2014. Cited figures are marked; the original filing is the authoritative source.
Microsoft's fiscal year 2014 report highlights a significant year of transformation, marked by the strategic acquisition of Nokia's Devices and Services business, which bolstered its mobile presence.
The company reported a robust revenue increase of 12% to $86.8 billiona, driven by strong performance in its Commercial segments, particularly server products and cloud offerings, as well as growth in the Devices and Consumer segment, notably from Xbox and Surface. Despite increased costs associated with cloud infrastructure and the Nokia acquisition, operating income saw a modest 4% increase to $27.8 billion. Microsoft is actively pivoting towards a "mobile-first, cloud-first" strategy, emphasizing continued investment in cloud services like Azure and Office 365, and in developing its devices ecosystem.
The company is navigating an intensely competitive landscape, with ongoing investments in research and development aimed at driving future growth in productivity, platforms, and cloud computing. Investors should monitor the integration of Nokia and the company's progress in expanding its cloud and device offerings as key drivers of future performance.
02—Key points
Key Highlights
- Revenue grew 12% to $86.8 billion in FY14, driven by strong commercial performance and the Nokia acquisition.
- Operating income increased by 4% to $27.8 billion, despite increased investments in cloud infrastructure and R&D.
- Completed the acquisition of Nokia's Devices and Services business for $9.5 billion to accelerate its mobile strategy.
- Commercial Cloud revenue doubled, indicating strong adoption of Office 365 Commercial and Microsoft Azure.
- Research and Development expenses increased by 9% to $11.4 billion, reflecting continued investment in new products and services.
- The company repurchased $6.4 billion of its common stock in FY14 and declared $4.6 billion in dividends, demonstrating a commitment to returning capital to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Microsoft Corp kept $0.25.
- Revenue$86.83B100.0%
- Cost of revenue−$27.08B31.2%
- Gross profit$59.76B68.8%
- Operating costs−$32.00B36.8%
- Operating income$27.76B32.0%
- Interest, other & tax−$5.68B6.5%
- Net income$22.07B25.4%
Where FY2014 revenue went
$86.83B- Cost of revenue: $27.08B, 31% of revenue
- Net income: $22.07B, 25% of revenue
- Other operating costs: $20.61B, 24% of revenue
- R&D: $11.38B, 13% of revenue
- Interest, other & tax: $5.68B, 6.5% of revenue
Kept 25% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed July 31, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $86.83B$77.85B | +11.5% |
| Cost of Revenue | $27.08B$20.39B | +32.8% |
| Gross Profit | $59.76B$57.46B | +4.0% |
| R&D Expenses | $11.38B$10.41B | +9.3% |
| Operating Expenses | $32.00B$30.70B | +4.2% |
| Operating Income | $27.76B$26.76B | +3.7% |
| Interest Expense | $597.00M$429.00M | +39.2% |
| Net Income | $22.07B$21.86B | +1.0% |
| EPS (Basic) | $2.66$2.61 | +1.9% |
| EPS (Diluted) | $2.63$2.58 | +1.9% |
| Shares Outstanding (Basic) | 8.30B8.38B | −0.9% |
| Shares Outstanding (Diluted) | 8.40B8.47B | −0.8% |
05—Questions
Frequently Asked Questions
What was Microsoft's revenue and profit performance in fiscal year 2014?
Microsoft reported a 12% increase in revenue to $86.8 billion and a 4% increase in operating income to $27.8 billion for fiscal year 2014 compared to the previous year.
What are the key strategic shifts Microsoft is undertaking?
Microsoft is strategically shifting towards a 'mobile-first, cloud-first' world. This involves significant investment in cloud services such as Microsoft Azure and Office 365, and strengthening its devices portfolio through innovation and strategic acquisitions like Nokia's Devices and Services business.
How did the acquisition of Nokia's Devices and Services business impact Microsoft?
The acquisition of Nokia's Devices and Services business for $9.5 billion was a major event in FY14, aimed at accelerating Microsoft's mobile strategy and enhancing its devices ecosystem. It contributed $2.0 billion in revenue and $5.4 billion in goodwill to Microsoft's results in FY14.
What is Microsoft's stance on returning capital to shareholders?
Microsoft continues to demonstrate a commitment to returning capital to shareholders through share repurchases and dividends. In FY14, the company repurchased $6.4 billion of its stock and declared $4.6 billion in dividends.
06—Continue