10-QPeriod: Q3 FY2013

MICROSOFT CORP Quarterly Report for Q3 Ended Mar 31, 2013

Filed April 18, 2013For Securities:MSFT

Summary

Microsoft Corporation's Q3 FY2013 filing for the period ending March 31, 2013, demonstrates robust revenue growth of 18% year-over-year, reaching $20.5 billion. This increase was primarily driven by new product launches like Windows 8 and Surface, alongside strong performance in Server and Tools and Entertainment and Devices segments. Operating income also saw a significant rise of 19% to $7.6 billion, reflecting improved operational efficiency and revenue growth. Diluted Earnings Per Share (EPS) improved by 20% to $0.72. The company continues to invest heavily in future growth areas, particularly cloud services and devices. While the PC market experienced a decline, Microsoft's diversified product portfolio and strategic investments in new technologies, such as Windows 8 and the Surface tablet, positioned it for continued market relevance. The company also maintained a strong cash position, with cash, cash equivalents, and short-term investments totaling $74.5 billion.

Financial Highlights

54 data points
Beta

Revenue

$20.49B

76.6% Gross Margin

Net Income

$6.05B

29.6% Net Margin

EPS (Diluted)

$0.72

Total Assets

$134.10B

Cash & Equivalents

$5.24B

Free Cash Flow

$8.74B

Financial Statements
Beta
Revenue$20.49B
Cost of Revenue$4.79B
Gross Profit$15.70B
R&D Expenses$2.64B
Operating Expenses$8.09B
Operating Income$7.61B
Interest Expense$109.00M
Net Income$6.05B
EPS (Basic)$0.72
EPS (Diluted)$0.72
Shares Outstanding (Basic)8.36B
Shares Outstanding (Diluted)8.43B

Key Highlights

  • 1Total revenue for the third quarter of fiscal year 2013 increased by 18% to $20.49 billion compared to $17.41 billion in the same period of the prior year.
  • 2Operating income grew by 19% to $7.61 billion from $6.37 billion in the prior year's third quarter.
  • 3Diluted earnings per share (EPS) rose by 20% to $0.72 from $0.60 in the prior year's third quarter.
  • 4The company recognized substantial revenue from the Windows Upgrade Offer ($1.1 billion) and the Video Game Deferral ($380 million) in the current quarter.
  • 5Cash, cash equivalents, and short-term investments increased to $74.48 billion as of March 31, 2013, up from $63.04 billion as of June 30, 2012.
  • 6Investments in Research and Development (R&D) increased by 5% to $2.64 billion, reflecting ongoing commitment to innovation.
  • 7The company continued its share repurchase program, buying back 36 million shares for $1.0 billion during the quarter.

Frequently Asked Questions

The primary drivers for the 18% revenue increase were new product launches, including Windows 8 and Surface, strong performance in the Server and Tools division, and growth in the Entertainment and Devices segment. The recognition of deferred revenue from the Windows Upgrade Offer and Video Game Deferral also significantly contributed.

Microsoft is navigating the PC market decline by focusing on new product innovations like Windows 8 and the Surface tablet, which aim to redefine the PC and tablet experience. They are also emphasizing growth in other segments like Server and Tools and the Entertainment and Devices division, and investing in cloud services to diversify revenue streams.

Microsoft maintained a very strong liquidity position, with cash, cash equivalents, and short-term investments totaling $74.5 billion as of March 31, 2013. The company continued to return capital to shareholders through dividends and share repurchases, while also investing in R&D and strategic acquisitions.

Microsoft faced a €561 million fine from the European Commission for failing to comply with a 2009 agreement regarding the 'Browser Choice Screen.' The company also continues to be involved in various patent and intellectual property litigations, as well as antitrust and competition law matters globally. While management believes these will not have a material adverse impact individually, they represent ongoing risks.