10-QPeriod: Q1 FY2010

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2009

Filed October 23, 2009For Securities:MSFT

Summary

Microsoft Corporation's (MSFT) 10-Q filing for the quarter ended September 30, 2009, indicates a revenue decline of 14% to $12.92 billion compared to the same period in the prior year, totaling $15.06 billion. This decrease was primarily attributed to the deferral of approximately $1.5 billion in revenue related to the Windows 7 Upgrade Option and pre-release sales of Windows 7. The company also saw a 25% decrease in operating income, falling to $4.48 billion from $5.99 billion year-over-year. Diluted earnings per share also declined by 17% to $0.40 from $0.48. Despite the revenue challenges, Microsoft demonstrated a strong balance sheet with cash, cash equivalents, and short-term investments increasing to $36.7 billion. The company continued its share repurchase program, buying back $1.4 billion in the quarter, and maintained its quarterly dividend of $0.13 per share. Operating expenses were managed effectively, with decreases in research and development, sales and marketing, and general and administrative expenses, partly due to headcount reductions under a resource management program.

Financial Highlights

54 data points
Beta

Revenue

$12.92B

78.0% Gross Margin

Net Income

$3.57B

27.7% Net Margin

EPS (Diluted)

$0.40

Total Assets

$81.61B

Cash & Equivalents

$8.82B

Free Cash Flow

$5.67B

Financial Statements
Beta
Revenue$12.92B
Cost of Revenue$2.84B
Gross Profit$10.08B
R&D Expenses$2.06B
Operating Expenses$8.44B
Operating Income$4.48B
Interest Expense$38.00M
Net Income$3.57B
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)8.91B
Shares Outstanding (Diluted)8.98B

Key Highlights

  • 1Revenue for the quarter decreased by 14% to $12.92 billion compared to $15.06 billion in the prior year's quarter, impacted by a significant revenue deferral for Windows 7.
  • 2Operating income declined by 25% to $4.48 billion from $5.99 billion year-over-year.
  • 3Diluted earnings per share decreased by 17% to $0.40 from $0.48 in the same period last year.
  • 4Cash, cash equivalents, and short-term investments increased to $36.7 billion, indicating strong liquidity.
  • 5Operating expenses were reduced across R&D, sales & marketing, and G&A, partially due to headcount reductions.
  • 6Microsoft continued its share repurchase program, buying back approximately $1.4 billion of stock during the quarter.
  • 7The company declared a quarterly dividend of $0.13 per share.

Frequently Asked Questions

The primary reason for the revenue decline was the deferral of approximately $1.5 billion in revenue related to the Windows 7 Upgrade Option and sales of Windows 7 to OEMs and retailers before its general availability in the second quarter of fiscal year 2010. This means revenue that would have been recognized in this quarter will be recognized in future periods.

Microsoft has implemented a resource management program that has led to reductions in operating expenses across research and development, sales and marketing, and general and administrative categories. This includes a decrease in headcount-related expenses.

Microsoft maintained a strong liquidity position, with cash, cash equivalents, and short-term investments totaling $36.7 billion as of September 30, 2009, an increase from $31.4 billion at the end of the prior quarter.

Yes, Microsoft continued to return capital to shareholders by repurchasing approximately $1.4 billion of its common stock during the quarter under its existing repurchase program and by declaring a quarterly dividend of $0.13 per share.