10-QPeriod: Q1 FY2009

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2008

Filed October 23, 2008For Securities:MSFT

Summary

Microsoft Corporation's (MSFT) 10-Q filing for the quarter ended September 30, 2008, reveals a company demonstrating resilience amidst evolving market conditions. Revenue saw a healthy 9% year-over-year increase to $15.06 billion, driven primarily by strong performance in the Microsoft Business Division and Server and Tools segments, reflecting continued demand for its enterprise and productivity software. Despite a 3% rise in operating income to $5.99 billion, investors should note the increased operating expenses, particularly in Research and Development (up 24%) and Sales and Marketing (up 13%), indicating continued investment in future growth and product development. The company maintained a strong liquidity position, though cash and cash equivalents saw a decrease, partly due to significant share repurchases and a large tax payment to the IRS. The filing also highlights ongoing legal proceedings and risk factors, particularly concerning competition from open-source models and evolving online business strategies.

Financial Highlights

32 data points
Beta

Revenue

$15.06B

81.1% Gross Margin

Net Income

$4.37B

29.0% Net Margin

EPS (Diluted)

$0.48

Cash & Equivalents

$9.00B

Free Cash Flow

$2.59B

Financial Statements
Beta
Revenue$15.06B
Cost of Revenue$2.85B
Gross Profit$12.21B
R&D Expenses$2.28B
Operating Expenses$9.06B
Operating Income$6.00B
Net Income$4.37B
EPS (Basic)$0.48
EPS (Diluted)$0.48
Shares Outstanding (Basic)9.08B
Shares Outstanding (Diluted)9.18B

Key Highlights

  • 1Revenue increased by 9% to $15.06 billion, driven by strong licensing of the 2007 Microsoft Office system and growth in Windows Server and SQL Server.
  • 2Operating income grew by 3% to $5.99 billion, despite a 24% increase in R&D and a 13% increase in Sales and Marketing expenses.
  • 3Net income rose to $4.37 billion, with diluted EPS increasing to $0.48.
  • 4The company repurchased $6.0 billion of its common stock during the quarter as part of its expanded $40 billion share repurchase program.
  • 5Cash and cash equivalents decreased to $9.00 billion from $10.34 billion, influenced by share repurchases and a $3.1 billion tax payment to the IRS.
  • 6The Online Services Business segment experienced a significant increase in operating loss, reflecting continued investment in this strategic area.
  • 7The company provided extensive disclosures on various legal proceedings and risk factors, including antitrust investigations and patent disputes.

Frequently Asked Questions

Microsoft reported a 9% increase in revenue, reaching $15.06 billion for the quarter ended September 30, 2008, up from $13.76 billion in the same period of 2007. This growth was primarily attributed to increased licensing of the 2007 Microsoft Office system and strong performance in Windows Server and SQL Server.

Microsoft continued its aggressive share repurchase program, buying back $6.0 billion worth of common stock during the quarter. The company also declared a quarterly dividend of $0.13 per share, demonstrating a commitment to returning value to shareholders.

Yes, the filing details ongoing legal proceedings, including government competition law matters in Europe and the US, antitrust class action lawsuits, and numerous patent infringement cases. While the company believes these will not have a material adverse impact, they represent significant ongoing risks and potential future costs.

Microsoft stated it expects the economic conditions experienced in the first quarter to continue for the remainder of fiscal year 2009. Their focus areas include providing high-value products at a low total cost of ownership, increasing expense management, and prioritizing investments in key strategic opportunities for long-term stability.