News

Microsoft Beats 4Q Consensus With $16B Revenue

• By Kurt Mackie
• July 22, 2010

Microsoft's had record earnings in its fourth quarter, according to the company's financial report issued today.

The fourth quarter, which ended on June 30, 2010 for Microsoft, brought revenue of $16 billion into the company's coffers, representing a 22% increase from the same period last year. That figure beat the general Wall Street consensus, which expected Microsoft to bring in around $15 billion in revenue for the quarter.

Net revenue for the quarter was $4.5 billion, up 48% compared with last's year's fourth-quarter result. Year over year, Microsoft is a $62 billion revenue company.

Financial results for the quarter were positive across all of Microsoft's five divisions. Peter Klein, Microsoft's chief financial officer, said that "every business had double-digit growth." He cited a "tremendous market response" to Windows 7, which launched in October of 2009 and now runs "15 percent of PCs worldwide." Microsoft has sold "more than 175 million licenses" of Windows 7 since its launch.

Klein expected Windows 7 sales to be tied with PC shipments. Microsoft estimates that total worldwide PC shipments grew quarter over quarter at about 22% to 24%. Klein was less specific about enterprise adoption of Windows 7, saying that the corporate PC refresh cycle is ongoing and expected to continue though 2011.

Consumers apparently are snapping up Office 2010, which launched to retail markets last month. According to Microsoft's 4Q financial report, "consumer revenue increased $357 million or 51% due to sales of the 2010 Microsoft Office system and growth in the PC market." The revenue increase was 8% from business users of Office 2010 in the fourth quarter.

The leading division in terms of revenue was the Microsoft Business Division, garnering $5.2 billion in fourth-quarter revenue, compared with $4.6 billion in the previous year's fourth quarter. Next up was the Windows and Windows Live Division, which brought in $4.5 billion this quarter, compared with $3.2 billion in the previous year's fourth quarter. Server and Tools placed third, with $4 billion fourth-quarter revenue vs. $3.5 billion in the same period last year.

Office was the cash cow for the Microsoft Business Division. It brought in more than 90% of the division's revenue, according to Microsoft's report.

Microsoft continues to show operating-income losses for its Online Services Division, which represents the Bing search and online advertising business, online offerings and MSN Web portals. The operating income loss for this quarter was $696 million vs. $585 million in the same period last year. Some of the cost derives from Microsoft's search-advertising deal with Yahoo in which Microsoft is working to integrate its Bing search technology into Yahoo's portals. Microsoft is partnering with Yahoo to challenge Google's No. 1 search-advertising position.

Still, Klein touted Bing's success, saying in a conference call that this month marks its 13th consecutive month of growth. Bing is up four percentage points from its initial launch, he said. He expected that the integration with Yahoo would happen by "this holiday season."

Also happening around the holiday season, in November, will be the launch of Microsoft Kinect-based games, Klein said. Kinect is a natural user interface that allows users to interact with Xbox 360 games using body movements.

Year over year, Microsoft cut its headcount by "four percent," Klein said. Microsoft had already decreased its number of employees by the start of fiscal-year 2010 by 5,300 positions.

Microsoft's 4Q report and a recording of the earnings presentation can be accessed at the Microsoft investor relations page here.