Thursday, July 18, 2013

Microsoft Stock Price Falls Following Earnings Report

REDMOND, Wash.  Microsoft Corporation's stock price fell more than 5% in after-hours trading following the tech giant's announcement its 4th Quarter and Final Year results. 


Microsoft's revenue was $19.90 billion for the quarter ending June 30, 2013. Operating income, net income, and diluted earnings per share for the quarter were $6.07 billion, $4.97 billion, and $0.59 per share. 

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE,” said Amy Hood, chief financial officer at Microsoft. “While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.”
 
“We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new Windows 8.1 tablets and PCs,” said Steve Ballmer, chief executive officer at Microsoft. “Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most.”

For Microsoft’s fiscal year 2013, the company’s revenue, operating income, and diluted earnings per share were $77.85 billion, $26.76 billion, and $2.58 per share. These financial results include a $900 million charge, or a $0.07 per share impact, related to Surface RT inventory adjustments. In addition, these financial results reflect the recognition of $540 million of previously deferred revenue related to the Windows Upgrade Offer, and a $733 million expense related to the European Commission fine.


Twelve Months Ended
June 30,
Percentage Change
(In millions, except per share amounts and percentages)
Revenue
Operating income
Diluted EPS
Revenue
Operating income
Diluted EPS
2012 As reported (GAAP)
$73,723
$21,763
$2.00



Goodwill impairment

$6,193
$0.73



Windows Upgrade Offer
$540
$540
$0.06



2012 As adjusted (non-GAAP)
$74,263
$28,496
$2.78



2013 As reported (GAAP)
$77,849
$26,764
$2.58
6%
23%
29%
Windows Upgrade Offer
($540)
($540)
($0.05)



European Commission fine

$733
$0.09



2013 As adjusted (non-GAAP)
$77,309
$26,957
$2.62
4%
(5)%
(6)%
*Totals do not foot due to rounding

Microsoft Business Division revenue grew 14% for the fourth quarter and 3% for the full year. Adjusting for the recognition of previously deferred revenue related to the Office Upgrade Offer, Microsoft Business Division non-GAAP revenue increased 2% for the fourth quarter. Office 365 is now on a $1.5 billion annual revenue run rate.

Server & Tools revenue grew 9% for the fourth quarter and 9% for the full year, driven by double-digit percentage revenue growth in SQL Server and System Center.

Windows Division revenue grew 6% for the fourth quarter and 5% for the full year. Excluding the impact of the prior year Windows Upgrade Offer revenue deferral, Windows Division non-GAAP revenue decreased 6% for the fourth quarter and 1% for the full year. In June, Microsoft released the public preview of Windows 8.1 which will be made available to OEMs in August.

Online Services Division revenue grew 9% for the fourth quarter and 12% for the full year, driven by an increase in revenue per search and volume. Bing organic U.S. search market share was 17.9% for the month of June 2013, up 230 basis points from the prior year period.

Entertainment and Devices Division grew 8% for the fourth quarter and 6% for the full year. During the quarter, transactional revenue within Xbox LIVE grew nearly 20%, and we unveiled our next-generation gaming and entertainment console, Xbox One.

“We continue to see strong demand for our enterprise products and services, with more and more customers making long-term commitments to the Microsoft platform,” said Kevin Turner, chief operating officer at Microsoft. “The growing adoption of our cloud services, including Office 365, Windows Azure and Dynamics CRM, continues to demonstrate our leadership position in the cloud.”