10-QPeriod: Q2 FY2009

MICROSOFT CORP Quarterly Report for Q2 Ended Dec 31, 2008

Filed January 22, 2009For Securities:MSFT

Summary

Microsoft Corporation (MSFT) reported its financial results for the quarter ended December 31, 2008. The company demonstrated resilience amidst a challenging economic environment, with revenue showing a modest increase year-over-year, driven by strong performance in Server and Tools and Entertainment and Devices segments. However, operating income and diluted earnings per share experienced a decline compared to the prior year's period, primarily due to increased operating expenses, particularly in headcount-related costs and research and development, as well as a significant decrease in other income (expense). The company continues to actively manage its capital through substantial share repurchases and dividend payouts, reflecting confidence in its financial stability. Microsoft also announced a resource management program in January 2009, including a reduction in operating expenses, employee headcount, and capital expenditures, signaling a proactive approach to navigating the ongoing economic downturn.

Financial Highlights

32 data points
Beta

Revenue

$16.63B

76.5% Gross Margin

Net Income

$4.17B

25.1% Net Margin

EPS (Diluted)

$0.47

Cash & Equivalents

$8.35B

Free Cash Flow

$4.94B

Financial Statements
Beta
Revenue$16.63B
Cost of Revenue$3.91B
Gross Profit$12.72B
R&D Expenses$2.29B
Operating Expenses$10.69B
Operating Income$5.94B
Net Income$4.17B
EPS (Basic)$0.47
EPS (Diluted)$0.47
Shares Outstanding (Basic)8.90B
Shares Outstanding (Diluted)8.91B

Key Highlights

  • 1Revenue increased by 2% to $16.63 billion for the quarter ended December 31, 2008, compared to the same period in 2007, primarily driven by growth in Server and Tools and Entertainment and Devices.
  • 2Operating income decreased by 8% to $5.94 billion, reflecting higher operating expenses, including increased headcount-related costs and cost of revenue.
  • 3Diluted earnings per share (EPS) declined by 6% to $0.47, influenced by lower operating income and a decrease in other income (expense).
  • 4The company repurchased approximately 94 million shares for $2.2 billion during the quarter under its new $40 billion share repurchase program.
  • 5Microsoft declared a quarterly dividend of $0.13 per share, a 18% increase from the prior year's dividend.
  • 6A resource management program was announced in January 2009, including a reduction of up to 5,000 jobs, to lower operating expenses by an estimated $1.5 billion annually.
  • 7The company ended the quarter with a strong cash and cash equivalents position of $8.35 billion, though down from the previous quarter.

Frequently Asked Questions

For the quarter ended December 31, 2008, Microsoft reported revenue of $16.63 billion, a 2% increase from $16.37 billion in the same period of 2007. Net income was $4.17 billion, a decrease from $4.71 billion in the prior year's quarter.

The Server and Tools segment showed strong revenue growth of 15%, while the Entertainment and Devices segment grew by 3%. However, the Client segment revenue decreased by 8% due to PC market weakness and the shift to lower-priced netbook PCs. The Online Services Business revenue was flat year-over-year.

Microsoft expects the economic conditions experienced in the first six months of fiscal year 2009 to further deteriorate for the remainder of the fiscal year. The company is focused on managing expenses and announced a resource management program to reduce operating expenses, employee headcount, and capital expenditures.

Microsoft continues to return capital to shareholders through share repurchases and dividends. The company announced a new $40 billion share repurchase program and declared a quarterly dividend of $0.13 per share, an increase from the previous year.