What was the primary driver for the significant decrease in net income?

The primary driver for the significant decrease in net income was a substantial loss from investments totaling $980 million in the current quarter, compared to an investment income of $1.127 billion in the prior year's quarter. This included write-downs for other-than-temporary impairments of $1.82 billion, mainly related to declines in the fair value of European cable and telecommunications holdings.

How did the different business segments perform?

The Desktop and Enterprise Software and Services segment showed strong performance with a 15% revenue increase. Desktop Platforms revenue also grew by 7%. The Consumer Software, Services, and Devices segment saw a modest 5% revenue increase, while Consumer Commerce Investments revenue grew significantly from $63 million to $94 million, largely due to Expedia. The 'Other' segment, which includes Hardware and Microsoft Press, experienced a revenue decline.

What are the implications of adopting SFAS 141 and SFAS 142?

The adoption of SFAS 141 and SFAS 142, effective July 1, 2001, means that goodwill and certain intangible assets are no longer amortized but will be tested for impairment annually. This change led to the elimination of goodwill amortization expense, which was $68 million pre-tax in the first quarter of fiscal 2001, impacting the year-over-year comparison of operating expenses. Microsoft reported no impairment of goodwill upon adoption.

What is the company's current financial position regarding cash and debt?

Microsoft maintains a very strong financial position. As of September 30, 2001, the company had $36.163 billion in cash and short-term investments. Microsoft has no material long-term debt. The company believes its existing cash, short-term investments, and funds generated from operations are sufficient to meet its operating requirements and strategic investments.

MSFT 10-Q Quarterly Report Q1 FY2002 — Revenue, Net Income, EPS

Summary

Microsoft Corporation reported its first quarter fiscal year 2002 results for the period ending September 29, 2001. While overall revenue saw a modest increase of 6% year-over-year to $6.126 billion, net income significantly declined by 41.7% to $1.283 billion, or $0.23 per diluted share. This decline was primarily impacted by a substantial $980 million loss from investments, largely due to write-downs in European cable and telecommunications holdings, compared to a strong $1.127 billion in investment income in the prior year's quarter. Despite this investment headwind, the core business demonstrated resilience, with strong growth in Enterprise Software and Services revenue (up 15%), driven by Windows 2000 Server and .NET Enterprise Servers, and a continued strong performance in Desktop Platforms revenue (up 7%). The company's financial position remains robust, with cash and short-term investments totaling $36.163 billion.

Key Highlights

1Revenue increased by 6% year-over-year to $6.126 billion for the first quarter of fiscal 2002.
2Net income saw a significant decrease of 41.7% to $1.283 billion, resulting in diluted EPS of $0.23.
3A substantial $980 million loss from investments, primarily due to write-downs of European cable and telecommunications holdings, significantly impacted profitability.
4Desktop and Enterprise Software and Services revenue grew by 15% to $5.433 billion, driven by server products.
5Desktop Platforms revenue increased by 7% to $2.016 billion, benefiting from a higher mix of Windows 2000 Professional licenses.
6Cash and short-term investments remained strong, totaling $36.163 billion as of September 30, 2001.
7The company adopted SFAS 141 and SFAS 142, which requires goodwill and certain intangibles to be tested for impairment rather than amortized, with no impairment noted upon adoption.

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2001

Summary

Key Highlights

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