MICROSOFT CORPORATION 
By REDMOND, Wash., Jan. 28 /PRNewswire-FirstCall/ -- Microsoft Corp. today announced record revenue of $19.02 billion for the second quarter ended Dec. 31, 2009, a 14% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $8.51 billion, $6.66 billion and $0.74 per share, which represented increases of 43%, 60% and 57%, respectively, when compared with the prior year period.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000822/MSFTLOGO)
These financial results include the recognition of $1.71 billion of deferred revenue, an impact of $0.14 of diluted earnings per share, relating to the Windows 7 Upgrade Option Program and pre-sales of Windows 7 to OEMs and retailers before general availability. Adjusting for the deferred revenue recognition, second-quarter revenue totaled $17.31 billion, and diluted earnings per share totaled $0.60 per share.
"Exceptional demand for Windows 7 led to the positive top-line growth for the company," said Peter Klein, chief financial officer at Microsoft. "Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth."
Windows 7 and Windows Server 2008 R2 launched globally on October 22 as anticipated. Through the second quarter, Microsoft has sold over 60 million Windows 7 licenses making it the fastest selling operating system in history.
"This is a record quarter for Windows units," said Kevin Turner, chief operating officer at Microsoft. "We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7."
Business Outlook
Management will discuss second-quarter results and the company's business outlook on a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today.
In addition, Microsoft offers operating expense guidance of $26.2 billion to $26.5 billion, for the full year ending June 30, 2010.
Webcast Details
Peter Klein, chief financial officer, Frank Brod, chief accounting officer, and Bill Koefoed, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PST (5:30 p.m. EST) today to discuss details of the company's performance for the quarter and certain forward-looking information. The session may be accessed at http://www.microsoft.com/msft. The webcast will be available for replay through the close of business on Jan. 28, 2011.
Adjusted Financial Results - Reconciliation of Non-GAAP Measures
3 Months Ended
December 31, 2009 Year-over-Year Growth
----------------- ---------------------
($in billions,
except per share amounts) Diluted Diluted
Earnings Earnings
Revenue Per Share Revenue Per Share
------- --------- ------- ---------
As Reported (GAAP) $19.02 $0.74 14% 57%
------ ----- --- ---
Deferred Revenue
Recognition for Windows
7 Upgrade Option Program
and Pre-sales $1.71 $0.14
----- -----
As Adjusted (Non-GAAP) $17.31 $0.60 4% 28%
------ ----- --- ---
This information has been provided to aid readers of the financial statements in further understanding the company's financial performance. The impact of certain items and events on the financial results may not be indicative of trends affecting the company's business. For comparability of reporting, management considers this information in conjunction with GAAP amounts in evaluating business performance. The non-GAAP financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
About Microsoft
Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.
Forward-Looking Statements
Statements in this release that are "forward-looking statements" are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially because of factors such as:
-- challenges to Microsoft's business model;
-- intense competition in all of Microsoft's markets;
-- Microsoft's continued ability to protect its intellectual property
rights;
-- claims that Microsoft has infringed the intellectual property rights of
others;
-- the possibility of unauthorized disclosure of significant portions of
Microsoft's source code;
-- actual or perceived security vulnerabilities in Microsoft products that
could reduce revenue or lead to liability;
-- government litigation and regulation affecting how Microsoft designs and
markets its products;
-- Microsoft's ability to attract and retain talented employees;
-- delays in product development and related product release schedules;
-- significant business investments that may not gain customer acceptance
and produce offsetting increases in revenue;
-- unfavorable changes in general economic conditions, disruption of our
partner networks or sales channels, or the availability of credit that
affect demand for Microsoft's products and services or the value of our
investment portfolio;
-- adverse results in legal disputes;
-- unanticipated tax liabilities;
-- quality or supply problems in Microsoft's consumer hardware or other
vertically integrated hardware and software products;
-- impairment of goodwill or amortizable intangible assets causing a charge
to earnings;
-- exposure to increased economic and regulatory uncertainties from
operating a global business;
-- geopolitical conditions, natural disaster, cyberattack or other
catastrophic events disrupting Microsoft's business;
-- acquisitions and joint ventures that adversely affect the business;
-- improper disclosure of personal data could result in liability and harm
to Microsoft's reputation; and
-- outages and disruptions of services provided to customers directly or
through third parties if Microsoft fails to maintain an adequate
operations infrastructure.
For further information regarding risks and uncertainties associated with Microsoft's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of Microsoft's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft's Investor Relations department at (800) 285-7772 or at Microsoft's Investor Relations Web site at http://www.microsoft.com/msft.
All information in this release is as of Jan. 28, 2010. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
Microsoft Corporation
Income Statements
(In millions, except per share amounts) (Unaudited)
Three Months Six Months
Ended December 31, Ended December 31,
------------------ ------------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue $19,022 $16,629 $31,942 $31,690
Operating expenses:
Cost of revenue 3,628 3,907 6,470 6,755
Research and development 2,079 2,290 4,144 4,573
Sales and marketing 3,619 3,662 6,409 6,706
General and administrative 1,124 831 1,865 1,718
Employee severance 59 - 59 -
--- --- --- ---
Total operating expenses 10,509 10,690 18,947 19,752
------ ------ ------ ------
Operating income 8,513 5,939 12,995 11,938
Other income (expense) 370 (301) 653 (309)
--- ---- --- ----
Income before income taxes 8,883 5,638 13,648 11,629
Provision for income taxes 2,221 1,464 3,412 3,082
----- ----- ----- -----
Net income $6,662 $4,174 $10,236 $8,547
====== ====== ======= ======
Earnings per share:
Basic $0.75 $0.47 $1.15 $0.95
===== ===== ===== =====
Diluted $0.74 $0.47 $1.14 $0.94
===== ===== ===== =====
Weighted average shares outstanding:
Basic 8,856 8,903 8,885 8,994
===== ===== ===== =====
Diluted 8,951 8,914 8,975 9,052
===== ===== ===== =====
Cash dividends declared per common
share $0.13 $0.13 $0.26 $0.26
===== ===== ===== =====
Microsoft Corporation
Balance Sheets
(In millions)
December 31, June 30,
2009 2009 (1)
------------ --------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $9,422 $6,076
Short-term investments (including securities
loaned of $2,654 and $1,540) 26,677 25,371
------ ------
Total cash, cash equivalents, and short-term
investments 36,099 31,447
Accounts receivable, net of allowance for
doubtful accounts of $506 and $451 11,196 11,192
Inventories 589 717
Deferred income taxes 2,056 2,213
Other 2,547 3,711
----- -----
Total current assets 52,487 49,280
Property and equipment, net of accumulated
depreciation of $8,170 and $7,547 7,402 7,535
Equity and other investments 6,976 4,933
Goodwill 12,368 12,503
Intangible assets, net 1,346 1,759
Deferred income taxes - 279
Other long-term assets 1,517 1,599
----- -----
Total assets $82,096 $77,888
======= =======
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $3,171 $3,324
Short-term debt 2,249 2,000
Accrued compensation 2,417 3,156
Income taxes 721 725
Short-term unearned revenue 11,361 13,003
Securities lending payable 2,911 1,684
Other 2,885 3,142
----- -----
Total current liabilities 25,715 27,034
Long-term debt 3,746 3,746
Long-term unearned revenue 1,167 1,281
Deferred income taxes 377 -
Other long-term liabilities 6,808 6,269
Commitments and contingencies
Stockholders' equity:
Common stock and paid-in capital - shares
authorized 24,000;
outstanding 8,811 and 8,908 62,566 62,382
Retained deficit, including accumulated other
comprehensive income
of $1,322 and $969 (18,283) (22,824)
------- -------
Total stockholders' equity 44,283 39,558
------ ------
Total liabilities and stockholders' equity $82,096 $77,888
======= =======
(1) Derived from audited financial statements
Microsoft Corporation
Cash Flows Statements
(In millions) (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
-------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
Operations
Net income $6,662 $4,174 $10,236 $8,547
Adjustments to reconcile net
income to net
cash from operations:
Depreciation, amortization, and
other noncash items 615 632 1,261 1,217
Stock-based compensation 485 417 928 860
Net recognized losses (gains) on
investments and derivatives (188) 139 (254) 175
Excess tax benefits from stock-
based compensation (15) (2) (24) (46)
Deferred income taxes 550 454 504 830
Deferral of unearned revenue 6,926 5,969 13,605 10,155
Recognition of unearned revenue (9,126) (6,364) (15,363) (12,408)
Changes in operating assets
and liabilities:
Accounts receivable (2,789) (1,647) (41) 2,338
Other current assets 1,244 797 590 239
Other long-term assets 16 (69) (62) (185)
Other current liabilities 285 614 (954) (3,938)
Other long-term liabilities 304 668 650 1,368
--- --- --- -----
Net cash from
operations 4,969 5,782 11,076 9,152
----- ----- ------ -----
Financing
Short-term borrowings (repayments),
maturities
of 90 days or less, net (475) 21 (97) 1,996
Proceeds from issuance of debt,
maturities
longer than 90 days 1,046 - 1,741 -
Repayments of debt, maturities
longer than 90 days (573) - (1,396) -
Common stock issued 729 96 977 324
Common stock repurchased (3,867) (2,820) (5,407) (9,313)
Common stock cash dividends (1,152) (1,157) (2,309) (2,155)
Excess tax benefits from stock-
based compensation 15 2 24 46
--- --- --- ---
Net cash used in
financing (4,277) (3,858) (6,467) (9,102)
------ ------ ------ ------
Investing
Additions to property and equipment (376) (842) (811) (1,620)
Acquisition of companies, net of
cash acquired (63) (450) (102) (827)
Purchases of investments (4,287) (6,596) (14,777) (10,842)
Maturities of investments 1,896 290 5,394 754
Sales of investments 3,361 5,700 7,778 12,775
Securities lending payable (623) (601) 1,227 (2,144)
---- ---- ----- ------
Net cash used in
investing (92) (2,499) (1,291) (1,904)
Effect of exchange rates on cash and
cash equivalents (1) (83) 28 (139)
--- --- --- ----
Net change in cash and
cash equivalents 599 (658) 3,346 (1,993)
Cash and cash equivalents,
beginning of period 8,823 9,004 6,076 10,339
----- ----- ----- ------
Cash and cash equivalents,
end of period $9,422 $8,346 $9,422 $8,346
====== ====== ====== ======
Microsoft Corporation
Segment Revenue and Operating Income (Loss)
(In millions) (Unaudited)
Three Months Ended Six Months Ended
December 31, December 31,
------------- ---------------
2009 2008 2009 2008
---- ---- ---- ----
Revenue
-------
Windows & Windows Live Division $6,904 $4,064 $9,528 $8,337
Server and Tools 3,844 3,755 7,278 7,172
Online Services Division 581 609 1,067 1,132
Microsoft Business Division 4,745 4,881 9,149 9,835
Entertainment and Devices Division 2,902 3,256 4,793 5,149
Unallocated and other 46 64 127 65
--- --- --- ---
Consolidated $19,022 $16,629 $31,942 $31,690
======= ======= ======= =======
Operating Income (Loss)
-----------------------
Windows & Windows Live Division $5,394 $2,712 $6,854 $5,761
Server and Tools 1,491 1,375 2,767 2,409
Online Services Division (466) (320) (950) (635)
Microsoft Business Division 3,010 3,021 5,867 6,199
Entertainment and Devices Division 375 130 686 290
Corporate-level activity (1,291) (979) (2,229) (2,086)
------ ---- ------ ------
Consolidated $8,513 $5,939 $12,995 $11,938
====== ====== ======= =======
SOURCE Microsoft Corp.
