10-QPeriod: Q1 FY2004

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2003

Filed November 13, 2003For Securities:MSFT

Summary

Microsoft Corporation reported its first-quarter fiscal year 2004 results, ending September 30, 2003. The company demonstrated robust top-line growth, with revenue reaching $8.215 billion, a 6% increase compared to the prior year's first quarter. This growth was primarily fueled by strong performance in Server and Tools, a significant increase in Home and Entertainment revenue, and robust growth from MSN. Profitability also saw an improvement, with net income rising to $2.614 billion, a substantial increase from $2.041 billion in the same period last year. Diluted earnings per share improved to $0.24 from $0.19. The company maintained a strong liquidity position with cash and short-term investments totaling $51.62 billion. While overall revenue grew, the company continues to face significant legal challenges and investigations, particularly concerning antitrust matters in the U.S. and Europe, which represent ongoing risks.

Key Highlights

  • 1Revenue increased by 6% year-over-year to $8.215 billion for the quarter ended September 30, 2003.
  • 2Net income rose significantly to $2.614 billion from $2.041 billion in the prior year's comparable quarter.
  • 3Diluted earnings per share increased to $0.24 from $0.19 year-over-year.
  • 4The company held substantial cash and short-term investments totaling $51.62 billion as of September 30, 2003.
  • 5Server and Tools revenue grew by 15%, driven by increased server shipments and growth in SQL Server and Exchange.
  • 6MSN showed strong revenue growth (51% in network services) and turned profitable, reporting $58 million in operating income compared to a loss in the prior year.
  • 7Home and Entertainment revenue increased by 20%, primarily driven by Xbox console sales and consumer hardware/software.

Frequently Asked Questions

For the quarter ended September 30, 2003, Microsoft reported revenue of $8.215 billion, a 6% increase from the prior year. Net income also saw a substantial increase, reaching $2.614 billion, up from $2.041 billion in the same period last year. Diluted earnings per share grew to $0.24 from $0.19.

Microsoft maintained a very strong liquidity position, with cash and short-term investments totaling $51.62 billion as of September 30, 2003. The company stated its existing cash reserves and operating cash flows are sufficient to meet its operating requirements.

The Server and Tools segment showed strong growth with a 15% revenue increase. The Home and Entertainment segment also saw a 20% revenue boost. MSN experienced significant growth, especially in network services, and turned profitable this quarter.

Microsoft continues to be involved in significant legal proceedings, including antitrust investigations and lawsuits in the U.S. and Europe. The company has recorded contingent liabilities for certain settlements and is facing ongoing litigation that could potentially result in material adverse impacts on its financial position or results of operations, though management currently believes the aggregate impact will not be material.