10-QPeriod: Q1 FY2011

MICROSOFT CORP Quarterly Report for Q1 Ended Sep 30, 2010

Filed October 28, 2010For Securities:MSFT

Summary

Microsoft Corporation reported strong financial results for the quarter ending September 30, 2010, demonstrating significant year-over-year growth. Revenue increased by 25% to $16.195 billion, driven by robust sales of Windows 7, the 2010 Microsoft Office system, and growth in the Server and Tools, and Entertainment and Devices divisions. Operating income saw a substantial increase of 59% to $7.116 billion. Diluted earnings per share rose to $0.62, a 55% increase from the previous year, largely due to higher net income and continued share repurchases. The company maintained a strong liquidity position with cash, cash equivalents, and short-term investments totaling $44.2 billion. Microsoft continues to invest in its cloud offerings and expand its product lines, positioning itself for continued growth amidst a dynamic global economic landscape.

Financial Highlights

54 data points
Beta

Revenue

$16.20B

80.6% Gross Margin

Net Income

$5.41B

33.4% Net Margin

EPS (Diluted)

$0.62

Total Assets

$91.54B

Cash & Equivalents

$8.16B

Free Cash Flow

$7.63B

Financial Statements
Beta
Revenue$16.20B
Cost of Revenue$3.14B
Gross Profit$13.06B
R&D Expenses$2.20B
Operating Expenses$9.08B
Operating Income$7.12B
Interest Expense$45.00M
Net Income$5.41B
EPS (Basic)$0.63
EPS (Diluted)$0.62
Shares Outstanding (Basic)8.61B
Shares Outstanding (Diluted)8.70B

Key Highlights

  • 1Revenue surged 25% year-over-year to $16.195 billion, driven by strong performance in Windows 7, Office 2010, Server and Tools, and Entertainment and Devices segments.
  • 2Operating income saw a significant increase of 59% to $7.116 billion, indicating improved profitability.
  • 3Diluted earnings per share (EPS) grew by 55% to $0.62, reflecting higher net income and a reduction in outstanding shares due to buybacks.
  • 4The company's liquidity remains robust, with cash, cash equivalents, and short-term investments totaling $44.2 billion.
  • 5The Windows & Windows Live Division experienced a notable 66% revenue increase, primarily due to strong Windows 7 sales and PC market growth.
  • 6The Server and Tools division showed consistent growth with a 12% increase in revenue, supported by strong adoption of Windows Server and SQL Server.
  • 7Microsoft repurchased approximately 163 million shares for $4.0 billion during the quarter, continuing its capital return program.

Frequently Asked Questions

Revenue growth was primarily driven by strong sales of Windows 7, the 2010 Microsoft Office system, and growth in the Server and Tools, and Entertainment and Devices divisions. The company also benefited from the prior year's revenue deferral related to Windows 7.

Microsoft's financial health is strong. The company reported a significant increase in operating income and maintained a substantial cash position, with cash, cash equivalents, and short-term investments totaling $44.2 billion as of September 30, 2010.

Microsoft is actively investing in its cloud-based services and online offerings, including Windows Azure and Bing. While these segments, particularly the Online Services Division, are currently operating at a loss, the company sees them as key areas for future growth and is focused on executing its strategy in this evolving market.

Microsoft continues to return capital to shareholders through share repurchases and dividends. In this quarter, the company repurchased approximately 163 million shares for $4.0 billion and declared a quarterly dividend of $0.16 per share.