What were the main drivers of Microsoft's revenue growth in this quarter?

Microsoft's revenue growth was primarily driven by increased licensing of Windows Server operating systems and other server applications, growth in Windows Client operating systems through OEMs, and increased licensing of Office and other Information Worker products. Favorable fluctuations in foreign currency exchange rates also contributed to the revenue increase.

How is Microsoft managing its share repurchase program?

Microsoft repurchased $3.12 billion of its common stock during the quarter. The company's Board of Directors approved a modification to its share repurchase plan, accelerating the completion of the $30 billion approved repurchase amount to no later than December 2006, from the previously planned four years.

What is the company's outlook for the upcoming fiscal year, particularly concerning new product launches?

Microsoft expects revenue to grow at a higher rate in the remainder of fiscal year 2006 compared to fiscal year 2005, mainly due to the anticipated launch of Xbox 360. The company also anticipates operating income growth to exceed revenue growth, supported by expected lower legal settlement costs and reduced headcount-related expenses.

How did the adoption of SFAS No. 123(R) affect Microsoft's financial reporting?

Microsoft adopted SFAS No. 123(R) for stock-based compensation effective July 1, 2005. The company stated that due to the material consistency of its accounting principles with the new standard, the adoption did not have a significant impact on its financial position or results of operations. However, it did change how excess tax benefits from stock-based payments are reported, moving them from operating cash flows to financing cash inflows.

MSFT 10-Q Quarterly Report Q1 FY2006 — Revenue, Net Income, EPS

Summary

Microsoft Corporation reported strong financial results for the quarter ended September 30, 2005. Revenue increased by 6% year-over-year to $9.74 billion, driven by growth in Windows Server, Windows Client licensing, and Office products, with a positive contribution from foreign currency exchange rates. Operating income saw a significant increase of 16% to $4.05 billion, reflecting improved revenue in high-margin segments and a reduction in certain operating expenses like stock-based compensation and legal costs. The company's balance sheet remains robust, with cash and short-term investments totaling over $40 billion. Microsoft also continued its aggressive share repurchase program, repurchasing $3.12 billion in common stock during the quarter, and announced an acceleration of its $30 billion repurchase plan, aiming to complete it by December 2006. The company is preparing for the launch of the next-generation Xbox 360, which is expected to boost revenue in the upcoming quarters, although the current generation Xbox saw a decline in revenue. Key operational highlights include strong performance in Server and Tools, and Information Worker segments, while Home and Entertainment faced headwinds due to the upcoming Xbox 360 launch. The company reaffirmed its positive outlook for PC and server shipment growth for the fiscal year, anticipating higher revenue and operating income growth compared to the previous year.

Key Highlights

1Revenue grew 6% to $9.74 billion, driven by strong performance in Server and Tools and Client segments, and favorable foreign currency fluctuations.
2Operating income increased by 16% to $4.05 billion, benefiting from higher revenue and a reduction in expenses such as stock-based compensation and legal settlements.
3Cash and short-term investments remained strong, totaling $40.06 billion as of September 30, 2005.
4Microsoft accelerated its share repurchase program, with plans to complete its $30 billion buyback by December 2006, repurchasing $3.12 billion in the quarter.
5The company is strategically preparing for the launch of the Xbox 360, anticipating it will drive future revenue growth, despite a revenue decline in the current generation Xbox.
6Segment performance was mixed, with Client and Server & Tools showing robust growth, while Home & Entertainment declined due to anticipation of the new Xbox.
7Effective July 1, 2005, Microsoft adopted SFAS No. 123(R) for stock-based compensation, which did not materially impact financial position or results of operations due to consistent accounting principles.

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2005

Summary

Key Highlights

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