Summary
Microsoft Corporation's third-quarter fiscal year 2002 report shows continued revenue growth, driven by the successful launch of the Xbox and strong performance from Windows XP. Total revenue increased by 13% year-over-year, reaching $7.25 billion for the quarter and $21.11 billion for the first nine months. This growth demonstrates resilience in a challenging economic environment, with key contributions from both the Desktop and Enterprise Software and Services segment and the rapidly expanding Consumer Software, Services, and Devices segment, largely fueled by Xbox sales. While revenue is strong, investors should note the increased cost of revenue, primarily due to Xbox manufacturing and distribution expenses. However, the company's financial position remains robust, with a significant increase in cash and short-term investments to $38.69 billion and a strong operational cash flow. Microsoft continues to manage its capital effectively through share repurchases rather than dividends, reflecting a focus on reinvestment and shareholder value enhancement through stock appreciation.
Key Highlights
- 1Total revenue for the third quarter of fiscal year 2002 increased by 13% to $7.25 billion, compared to $6.40 billion in the prior year quarter. Nine-month revenue also grew by 13% to $21.11 billion.
- 2The launch and global rollout of the Xbox video game system significantly contributed to revenue growth, particularly within the Consumer Software, Services, and Devices segment.
- 3Windows XP Home and Professional operating systems demonstrated strong licensing performance, driving growth in the Desktop Platforms revenue.
- 4Cost of revenue increased significantly (up 55% for the quarter) primarily due to the manufacturing and distribution costs associated with the new Xbox console.
- 5Cash and cash equivalents, along with short-term investments, reached $38.69 billion as of March 31, 2002, indicating a strong liquidity position.
- 6Microsoft repurchased approximately $2.0 billion of its common stock in the first nine months of fiscal year 2002, a decrease from $4.4 billion in the prior year period, reflecting a shift in capital allocation.
- 7The company is facing ongoing antitrust litigation and regulatory scrutiny, with significant details provided regarding settlements and ongoing proceedings.