01—Abstract
Summary
Summary of the 10-K filed July 31, 2015. Cited figures are marked; the original filing is the authoritative source.
Microsoft's 2015 10-K filing highlights a pivotal year of transformation driven by a "mobile-first, cloud-first" strategy.
The company focused on reinventing productivity, building an intelligent cloud platform, and creating more personal computing experiences. Revenue grew 8% year-over-year, reaching $93.6 billiona, largely due to strong performance in Commercial Cloud, Surface devices, and server products. However, operating income saw a significant 35% decline to $18.2 billion, primarily impacted by $10 billion in impairment, integration, and restructuring charges, notably a $7.5 billion goodwill and asset impairment charge related to the Phone Hardware business.
Despite the operational challenges and significant charges impacting profitability, Microsoft's strategic shift towards cloud services like Office 365 Commercial and Azure showed strong momentum, with Office 365 Commercial seats increasing by 74%b and Azure experiencing triple-digit growth in its Q4. The company also emphasized its commitment to innovation through substantial R&D investments, which remained consistent at 13% of revenue. Key developments included the impending launch of Windows 10 and the acquisition of Mojang, the developer of Minecraft, underscoring a continued focus on expanding its ecosystem and diversifying its product portfolio.
02—Key points
Key Highlights
- Revenue increased by 8% to $93.6 billion, driven by cloud services, Surface, and server products.
- Operating income decreased by 35% to $18.2 billion due to $10 billion in impairment, integration, and restructuring charges, including a significant goodwill impairment in the Phone Hardware segment.
- Commercial Cloud revenue doubled, and Office 365 Commercial seats grew by 74%, indicating strong adoption of cloud services.
- Azure demonstrated triple-digit revenue and compute usage growth in the fourth quarter.
- Research and Development expenses remained a significant focus, holding steady at 13% of revenue, underscoring investment in future technologies.
- The company prepared for the launch of Windows 10, positioning it as a crucial element in the 'more personal computing' ambition.
- Acquisition of Mojang, the developer of Minecraft, aimed to enhance the gaming portfolio and expand reach across ecosystems.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Microsoft Corp kept $0.13.
- Revenue$93.58B100.0%
- Cost of revenue−$33.04B35.3%
- Gross profit$60.54B64.7%
- Operating costs−$42.38B45.3%
- Operating income$18.16B19.4%
- Interest, other & tax−$5.97B6.4%
- Net income$12.19B13.0%
Where FY2015 revenue went
$93.58B- Cost of revenue: $33.04B, 35% of revenue
- Other operating costs: $30.34B, 32% of revenue
- Net income: $12.19B, 13% of revenue
- R&D: $12.05B, 13% of revenue
- Interest, other & tax: $5.97B, 6.4% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed July 31, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $93.58B$86.83B | +7.8% |
| Cost of Revenue | $33.04B$27.08B | +22.0% |
| Gross Profit | $60.54B$59.76B | +1.3% |
| R&D Expenses | $12.05B$11.38B | +5.8% |
| Operating Expenses | $42.38B$32.00B | +32.5% |
| Operating Income | $18.16B$27.76B | −34.6% |
| Interest Expense | $781.00M$597.00M | +30.8% |
| Net Income | $12.19B$22.07B | −44.8% |
| EPS (Basic) | $1.49$2.66 | −44.0% |
| EPS (Diluted) | $1.48$2.63 | −43.7% |
| Shares Outstanding (Basic) | 8.18B8.30B | −1.5% |
| Shares Outstanding (Diluted) | 8.25B8.40B | −1.7% |
05—Questions
Frequently Asked Questions
What was the main financial impact of the Nokia acquisition and the subsequent restructuring?
The acquisition of Nokia's Devices and Services business in April 2014 significantly impacted the Phone Hardware segment. In fiscal year 2015, Microsoft recorded a substantial goodwill and asset impairment charge of $7.5 billion related to this segment, along with $2.5 billion in integration and restructuring expenses, leading to a $10 billion reduction in operating income and a $1.15 decrease in diluted EPS for the year.
How is Microsoft's cloud business performing?
Microsoft's cloud business, particularly Commercial Cloud offerings like Office 365 Commercial and Azure, showed robust growth. Office 365 Commercial revenue doubled, and seat growth was 74%. Azure experienced triple-digit growth in revenue and compute usage in the fourth quarter of fiscal year 2015. The company highlighted a commercial cloud annualized run rate exceeding $8 billion by the end of the fiscal year.
What is Microsoft's strategy for future growth?
Microsoft's overarching strategy is centered around a 'mobile-first, cloud-first' world. Key ambitions include reinventing productivity and business processes through integrated services like Office 365, building the intelligent cloud platform with Azure, and creating more personal computing experiences driven by Windows 10. Significant investments in research and development support these strategic pillars.
How is Microsoft managing its cash and investments?
Microsoft maintained a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $96.5 billion at June 30, 2015. A significant portion of this cash ($94.4 billion) was held by foreign subsidiaries. The company continued its share repurchase program, buying back $13.2 billion in shares during the fiscal year, and also declared dividends totaling $10.1 billion.
06—Continue