EX-99.1 2 dex991.htm PRESS RELEASE, DATED APRIL 24, 2008, ISSUED BY MICROSOFT CORPORATION Press release, dated April 24, 2008, issued by Microsoft Corporation

Exhibit 99.1

Microsoft Reports Record Third-Quarter Revenue

Quarter marks the worldwide launch of Windows Server 2008, SQL Server 2008 and Visual Studio 2008.

REDMOND, Wash. — April 24, 2008 — Microsoft Corp. today announced third-quarter revenue, operating income and diluted earnings per share of $14.45 billion, $4.41 billion and $0.47, respectively. Operating income and earnings per share results included a charge of $1.42 billion, or $0.15 per share, for the European Commission fine. Income taxes were reduced by $0.15 per share for the resolution of a tax audit.

“Our third-quarter results demonstrate the benefit of our diversified business model,” said Chris Liddell, chief financial officer of Microsoft. “Our broad span across geographies, product categories and customer segments is a tremendous asset and supports our outlook for double-digit revenue, operating income and earnings per share growth for this fiscal year and also for fiscal year 2009.”

Entertainment and Devices revenue for the quarter grew 68% over the comparable period last year driven by robust demand for Xbox 360 consoles. Cumulative console sales surpassed 19 million during the quarter, up 74% from a year ago. Server and Tools revenue growth of 18% added to its string of consecutive double-digit revenue growth quarters, which now stands at 23.

“The breadth of our product offerings and our ability to provide solutions across a range of customer and partner needs paid off again this quarter. The third quarter also kicked off the largest enterprise platform launch in our company history, which highlights Windows Server 2008, SQL Server 2008 and Visual Studio 2008,” said Kevin Turner, chief operating officer of Microsoft. “These new products strengthen our ability to help business customers and partners save money, optimize their people, processes and technology, and position IT as a strategic asset for their businesses.”


Business Outlook

Microsoft management offers the following guidance for the quarter ending June 30, 2008:

 

   

Revenue is expected to be in the range of $15.5 billion to $15.8 billion.

 

   

Operating income is expected to be in the range of $5.8 billion to $6.2 billion.

 

   

Diluted earnings per share are expected to be in the range of $0.45 to $0.48.

Management offers the following preliminary guidance for the full fiscal year ending June 30, 2009:

 

   

Revenue is expected to be in the range of $66.9 billion to $68.0 billion.

 

   

Operating income is expected to be in the range of $26.7 billion to $27.4 billion.

 

   

Diluted earnings per share are expected to be in the range of $2.13 to $2.19.

Additional details on fiscal year 2009 guidance will be provided in the fourth-quarter earnings announcement and during the company’s Financial Analyst Meeting on July 24.

Webcast Details

Microsoft will hold an audio webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today with Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Colleen Healy, general manager of Investor Relations, 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 April 24, 2009.


Adjusted Financial Results – Reconciliation of Non-GAAP Measures

The financial results for the third quarter of fiscal year 2007 contained the recognition of $1.67 billion of revenue and operating income that had been deferred from the first half of the year related primarily to technology guarantee programs. Operating income also included $154 million of legal charges. Diluted earnings per share included $0.12 per share associated with the technology guarantee program, $0.01 for legal charges and $0.02 for tax benefits.

 

     Three Months Ended March 31, 2008     Three Months Ended March 31, 2007     Year-over-Year Growth  

($ in millions, except per

share amounts)

   Revenue    Operating
income
   Diluted
earnings
per share
    Revenue     Operating
income
    Diluted
earnings
per share
    Revenue     Operating
income
    Diluted
earnings
per share
 

As reported

   $ 14,454    $ 4,409    $ 0.47     $ 14,398     $ 6,589     $ 0.50     0 %   -33 %   -6 %

Technology guarantee & pre-shipment deferrals

             ($1,669 )     ($1,669 )     ($0.12 )      

Certain legal charges

      $ 1,417    $ 0.15       $ 154     $ 0.01        

Tax benefits

           ($0.15 )         ($0.02 )      

As adjusted

   $ 14,454    $ 5,826    $ 0.47     $ 12,729     $ 5,074     $ 0.37     14 %   15 %   27 %

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.

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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 produce offsetting increases in revenue;

 

   

changes in general economic conditions that affect demand for computer hardware or software;

 

   

adverse results in legal disputes;

 

   

unanticipated tax liabilities;

 

   

Microsoft’s consumer hardware products may experience quality or supply problems;

 

   

impairment of goodwill or amortizable intangible assets causing a charge to earnings;

 

   

exposure to increased economic and regulatory uncertainties from operating a global business;

 

   

geo-political conditions, natural disaster, cyber-attack 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;

 

   

sales channel disruption such as the bankruptcy of a major distributor; and

 

   

Microsoft’s ability to implement operating cost structures that align with revenue growth.

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 April 24, 2008. 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.

For more information, financial analysts and investors only:

Colleen Healy, general manager, Investor Relations, (425) 706-3703

For more information, press only:

Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070, rrt@waggeneredstrom.com

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass on Microsoft’s corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. PDT conference call with investors and analysts, is available at http://www.microsoft.com/msft.


Microsoft Corporation

Income Statements

(In millions, except per share amounts) (Unaudited)

 

     Three Months Ended
March 31,
   Nine Months Ended
March 31,
     2008    2007    2008    2007

Revenue

   $ 14,454    $ 14,398    $ 44,583    $ 37,751

Operating expenses:

           

Cost of revenue

     2,514      2,140      8,732      7,456

Research and development

     2,035      1,750      5,757      5,173

Sales and marketing

     3,155      2,936      9,161      8,126

General and administrative

     2,341      983      4,125      2,461
                           

Total operating expenses

     10,045      7,809      27,775      23,216
                           

Operating income

     4,409      6,589      16,808      14,535

Investment income and other

     401      382      1,038      1,282
                           

Income before income taxes

     4,810      6,971      17,846      15,817

Provision for income taxes

     422      2,045      4,462      4,787
                           

Net income

   $ 4,388    $ 4,926    $ 13,384    $ 11,030
                           

Earnings per share:

           

Basic

   $ 0.47    $ 0.51    $ 1.43    $ 1.12
                           

Diluted

   $ 0.47    $ 0.50    $ 1.41    $ 1.11
                           

Weighted average shares outstanding:

           

Basic

     9,307      9,725      9,349      9,821
                           

Diluted

     9,428      9,862      9,492      9,955
                           

Cash dividends declared per common share

   $ 0.11    $ 0.10    $ 0.33    $ 0.30
                           


Microsoft Corporation

Balance Sheets

(In millions)

 

     March 31,
2008
    June 30,
    2007 (1)
 
     (Unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 11,820     $ 6,111  

Short-term investments (including securities pledged as collateral of $2,318 and $2,356)

     14,521       17,300  
                

Total cash, cash equivalents, and short-term investments

     26,341       23,411  

Accounts receivable, net of allowance for doubtful accounts of $147 and $117

     9,871       11,338  

Inventories

     774       1,127  

Deferred income taxes

     1,721       1,899  

Other

     2,782       2,393  
                

Total current assets

     41,489       40,168  

Property and equipment, net

     5,516       4,350  

Equity and other investments

     8,659       10,117  

Goodwill

     10,346       4,760  

Intangible assets, net

     1,639       878  

Deferred income taxes

     1,367       1,389  

Other long-term assets

     1,731       1,509  
                

Total assets

   $ 70,747     $ 63,171  
                

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 3,600     $ 3,247  

Accrued compensation

     2,427       2,325  

Income taxes

     3,765       1,040  

Short-term unearned revenue

     10,385       10,779  

Securities lending payable

     2,476       2,741  

Other

     4,375       3,622  
                

Total current liabilities

     27,028       23,754  

Long-term unearned revenue

     1,754       1,867  

Other long-term liabilities

     4,411       6,453  

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock and paid-in capital—shares authorized 24,000; outstanding 9,310 and 9,380

     63,375       60,557  

Retained deficit, including accumulated other comprehensive income of $1,355 and $1,654

     (25,821 )     (29,460 )
                

Total stockholders’ equity

     37,554       31,097  
                

Total liabilities and stockholders’ equity

   $ 70,747     $ 63,171  
                

 

(1)

Derived from audited financial statements


Microsoft Corporation

Cash Flows Statements

(In millions) (Unaudited)

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2008     2007     2008     2007  

Operations

        

Net income

   $ 4,388     $ 4,926     $ 13,384     $ 11,030  

Depreciation, amortization, and other noncash items

     532       445       1,448       1,059  

Stock-based compensation expense

     373       321       1,066       1,214  

Net recognized gains on investments

     (179 )     (61 )     (500 )     (296 )

Excess tax benefits from stock-based payment arrangements

     (9 )     (7 )     (111 )     (55 )

Deferred income taxes

     103       981       783       630  

Unearned revenue

     5,228       4,551       15,044       13,797  

Recognition of unearned revenue

     (5,368 )     (6,121 )     (15,701 )     (14,436 )

Accounts receivable

     1,857       1,455       2,077       1,011  

Other current assets

     (69 )     7       141       (350 )

Other long-term assets

     (1 )     (32 )     (67 )     (431 )

Other current liabilities

     1,389       772       525       (424 )

Other long-term liabilities

     (1,162 )     54       (562 )     645  
                                

Net cash from operations

     7,082       7,291       17,527       13,394  

Financing

        

Common stock issued

     268       784       3,249       5,618  

Common stock repurchased

     (1,240 )     (6,878 )     (8,227 )     (20,358 )

Common stock cash dividends

     (1,023 )     (976 )     (2,995 )     (2,853 )

Excess tax benefits from stock-based payment arrangements

     9       7       111       55  

Other

     —         —         —         (23 )
                                

Net cash used in financing

     (1,986 )     (7,063 )     (7,862 )     (17,561 )

Investing

        

Additions to property and equipment

     (759 )     (461 )     (1,964 )     (1,444 )

Acquisition of companies, net of cash acquired

     (138 )     (41 )     (5,967 )     (502 )

Purchases of investments

     (3,481 )     (7,257 )     (15,795 )     (29,214 )

Maturities of investments

     462       1,688       1,262       3,847  

Sales of investments

     2,829       6,264       18,645       32,413  

Securities lending payable

     309       318       (265 )     (86 )
                                

Net cash from/(used in) investing

     (778 )     511       (4,084 )     5,014  

Effect of exchange rates on cash and cash equivalents

     42       13       128       50  
                                

Net change in cash and cash equivalents

     4,360       752       5,709       897  

Cash and cash equivalents, beginning of period

     7,460       6,859       6,111       6,714  
                                

Cash and cash equivalents, end of period

   $ 11,820     $ 7,611     $ 11,820     $ 7,611  
                                


Microsoft Corporation

Segment Revenue and Operating Income/(Loss)

(In millions) (Unaudited)

 

     Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
     2008     2007     2008     2007  

Revenue

        

Client

   $ 4,025     $ 5,274     $ 12,498     $ 11,167  

Server and Tools

     3,255       2,748       9,433       8,087  

Online Services Business

     843       603       2,377       1,764  

Microsoft Business Division

     4,745       4,827       13,668       11,768  

Entertainment and Devices Division

     1,576       936       6,565       4,916  

Unallocated and other

     10       10       42       49  
                                

Consolidated

   $ 14,454     $ 14,398     $ 44,583     $ 37,751  
                                

Operating Income/(Loss)

        

Client

   $ 3,097     $ 4,204     $ 9,824     $ 8,689  

Server and Tools

     1,092       911       3,220       2,656  

Online Services Business

     (228 )     (171 )     (745 )     (407 )

Microsoft Business Division

     3,138       3,399       9,017       7,794  

Entertainment and Devices Division

     89       (324 )     614       (746 )

Corporate-level activity

     (2,779 )     (1,430 )     (5,122 )     (3,451 )
                                

Consolidated

   $ 4,409     $ 6,589     $ 16,808     $ 14,535