If you’ve been following live Microsoft’s earnings conference call for the fourth quarter of the fiscal year 2013, then you already know by now the main data; if not, we will do our best to provide and decipher for you the most important tidbits you need to know. The financial report comes in a very important moment for Microsoft, one week after Ballmer has announced a major reorganization inside the company.
Financial analysts (Thomson Reuters) were expecting Microsoft to report earnings of 75 cents per share, on a $20.7 billion revenue, which should have represented a 15 percent increase. On the latest financial report which dates from March 31 and marks the end of the third fiscal quarter, Microsoft has had revenue of $20.49 billion, operating income of $7.61 billion and a net income of $6.06 billion; diluted earnings per share represented $0.72 per share. The financial results for Q4 are slightly lower, which, obviously, was enough Microsoft’s stock to slightly decline.
Global PC shipments don’t seem to help Microsoft, either, and actually, according to research firm Gartner, in the third quarter ending on June 30 they have declined by almost 11%, reaching only 76 million units. Maybe Microsoft needs to wait for Windows XP to die first and then hope from rejuvenation from the PC shipments sector?
Microsoft misses Q4 earnings, but is strong on business divisions
Without further ado, for the fourth quarter of the 2013 fiscal year, here are the main highlights from Microsoft’s earnings conference call:
- Quarterly revenue of $19.90 billion
- Operating income of $6.07 billion
- Net income of $4.97 billion
- Diluted earnings per share at $0.59 per share
If you compare the results to last quarter, they are slower, indeed, but $19.90 billion actually represents a 10 percent increase from the same quarter in 2012. Even if the results aren’t very disappointing, investors definitely felt like that as Microsoft’s stock went down more than 4 percent in after-hours trading.
And here are the earning results for the main business units at Microsoft
- Windows Division: 1.09 billion profit on $4.411 billion in revenue
- Servers and Tools: $2.33 billion profit on $5.502 billion in revenue
- Online Services: $372 million loss on $800 million in revenue
- Business Division: $4.87 billion profit on $7.231 billion in revenue
- Entertainment and Devices: $110 million loss on $1.915 billion in revenue
Here are some other important things that were share during the earnings conference call by Microsoft:
- Increasing consumer demand for cloud services such as Office 365, Outlook.com and Skype (that’s why they have 1 million servers)
- Office 365 on an annual revenue run rate of $1.5 billion (and now has expanded to even more countries)
- SQL Server and System Center both had double-digit revenue growth
- Expense guidance decreased to $31.3 billion from $31.9 billion for FQ4
- Microsoft spent $10.41 billion on research and development, up from $9.81 billion for fiscal 2012
- Total cash, cash equivalents and short-term investments – $77.02 billion as of June 30.
Amy Hood, the new chief financial officer at Microsoft, acknowledges the issue with PC sales and puts focus on the cloud possibilities:
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. While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.
Steve Ballmer, on the other hand, talked about new devices and the future represented by Windows 8.1:
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. 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.
As the fiscal year of 2013 has ended, we now also have the total financial results:
- Revenue – $77.85 billion
- Operating income – $26.76 billion
- Diluted earnings per share – $2.58
Microsoft also had to take a serious financial hit of $900 million caused by “inventory adjustments” of its Surface RT tablet which obviously relates to weak sales and the discounted price, as well.