EX-99.1 2 dex991.htm PRESS RELEASE, DATED APRIL 28, 2011, ISSUED BY MICROSOFT CORPORATION Press release, dated April 28, 2011, issued by Microsoft Corporation

Exhibit 99.1

Microsoft Reports Record Third-Quarter Results

Strong enterprise and Xbox momentum drive revenue growth of 13% and

earnings per share of $0.61.

REDMOND, Wash. — Apr. 28, 2011 — Microsoft Corp. today announced third-quarter revenue of $16.43 billion for the quarter ended Mar. 31, 2011, a 13% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $5.71 billion, $5.23 billion, and $0.61 per share, which represented increases of 10%, 31%, and 36%, respectively, when compared with the prior year period. Diluted earnings per share included a $0.05 tax benefit primarily related to an agreement with the U.S. Internal Revenue Service to settle a portion of their audit of tax years 2004 to 2006.

“We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses,” said Peter Klein, chief financial officer at Microsoft. “Consumers are purchasing Office 2010, Xbox and Kinect at tremendous rates, and businesses of all sizes are purchasing Microsoft platforms and applications.”

Microsoft Business Division revenue grew 21% year-over-year. Since its release last spring, Office 2010 has become the fastest-selling version of Office in history, and the integrated innovation with SharePoint, Exchange, Lync and Dynamics CRM is driving significant growth for the division.

Server & Tools revenue grew 11% year-over-year, the fourth consecutive quarter of double-digit growth. Strong business adoption of Windows Server 2008 R2, SQL Server 2008 R2, and System Center are driving record revenue and margin expansion.

Windows 7 remains the fastest selling operating system in history with 350 million licenses sold. Revenue for the segment was down 4% in the third quarter, in line with the PC trends, excluding prior year launch impact.

Online Services Division revenue grew 14% year-over-year primarily driven by increases in search revenue. Bing’s US search share increased to 13.9% this quarter.


Entertainment & Devices Division grew 60% year-over-year, fueled by Kinect for Xbox 360, the fastest-selling consumer electronics device in history, continued strong Xbox 360 console sales and growth of Xbox Live.

“We delivered strong third quarter revenue from our business customers, driven by outstanding performance from Windows Server, SQL database, SharePoint, Exchange, Lync and increasingly our cloud services,” said Kevin Turner, chief operating officer at Microsoft. “Office had another huge quarter, again exceeding everyone’s expectations, and the addition of Office 365 will make our cloud productivity solutions even more compelling. We continue to see strong adoption of our cloud-based services among the Fortune 500.”

Business Outlook

Microsoft reaffirms operating expense guidance of $26.9 billion to $27.3 billion for the full year ending June 30, 2011. Microsoft also offers preliminary fiscal year 2012 operating expense guidance of 3% to 5% growth from the mid-point of fiscal year 2011 guidance, or $28.0 billion to $28.6 billion.

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. PDT (5:30 p.m. EDT) 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/investor. The webcast will be available for replay through the close of business on Apr. 28, 2012.

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:

 

   

execution and competitive risks in transitioning to cloud-based computing;

 

   

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;

 

   

improper disclosure of personal data could result in liability and harm to Microsoft’s reputation;

 

   

outages and disruptions of services provided to customers directly or through third parties if Microsoft fails to maintain an adequate operations infrastructure;

 

   

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; and

 

   

acquisitions and joint ventures that adversely affect the business.

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 website at http://www.microsoft.com/investor.

All information in this release is as of Apr. 28, 2011. 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, press only:

Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070,

rrt@waggeneredstrom.com

For more information, financial analysts and investors only:

Bill Koefoed, general manager, Investor Relations, (425) 706-3703

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news. 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/investor.


MICROSOFT CORPORATION

INCOME STATEMENTS

 

(In millions, except per share amounts) (Unaudited)    Three Months Ended
March 31,
     Nine Months Ended
March 31,
 
    

 

2011

    

 

2010

    

 

2011

    

 

2010

 

Revenue

   $ 16,428       $ 14,503       $ 52,576       $ 46,445   

Operating expenses:

           

Cost of revenue

     3,897         2,755         11,869         9,225   

Research and development

     2,269         2,220         6,650         6,364   

Sales and marketing

     3,393         3,203         10,024         9,612   

General and administrative

     1,160         1,152         3,043         3,076   
                              

Total operating expenses

     10,719         9,330         31,586         28,277   
                              

Operating income

     5,709         5,173         20,990         18,168   

Other income

     316         168         762         821   
                              

Income before income taxes

     6,025         5,341         21,752         18,989   

Provision for income taxes

     793         1,335         4,476         4,747   
                              

Net income

   $ 5,232       $ 4,006       $ 17,276       $ 14,242   
                                   

Earnings per share:

           

Basic

   $ 0.62       $ 0.46       $ 2.03       $ 1.61   

Diluted

   $ 0.61       $ 0.45       $ 2.01       $ 1.59   

Weighted average shares outstanding:

           

Basic

     8,420         8,767         8,511         8,846   

Diluted

     8,510         8,876         8,609         8,955   

Cash dividends declared per common share

   $ 0.16       $ 0.13       $ 0.48       $ 0.39   


MICROSOFT CORPORATION

BALANCE SHEETS

 

(In millions)               
    

 

March 31,

2011

   

 

June 30,
2010 (1)

 
     (Unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 7,021      $ 5,505   

Short-term investments (including securities loaned of $1,171 and $62)

     43,129        31,283   
       
           

Total cash, cash equivalents, and short-term investments

     50,150        36,788   

Accounts receivable, net of allowance for doubtful accounts of $304 and $375

     10,033        13,014   

Inventories

     1,056        740   

Deferred income taxes

     2,586        2,184   

Other

     2,438        2,950   
       
           

Total current assets

     66,263        55,676   

Property and equipment, net of accumulated depreciation of $9,564 and $8,629

     7,969        7,630   

Equity and other investments

     10,748        7,754   

Goodwill

     12,554        12,394   

Intangible assets, net

     840        1,158   

Other long-term assets

     1,353        1,501   
       
           

Total assets

   $ 99,727      $ 86,113   
                

Liabilities and stockholders’ equity

    

Current liabilities:

    

Accounts payable

   $ 3,829      $ 4,025   

Short-term debt

     0        1,000   

Accrued compensation

     2,917        3,283   

Income taxes

     839        1,074   

Short-term unearned revenue

     11,887        13,652   

Securities lending payable

     1,245        182   

Other

     3,325        2,931   
       
           

Total current liabilities

     24,042        26,147   

Long-term debt

     11,915        4,939   

Long-term unearned revenue

     1,132        1,178   

Deferred income taxes

     1,185        229   

Other long-term liabilities

     8,001        7,445   
       
           

Total liabilities

     46,275        39,938   

Commitments and contingencies

    

Stockholders’ equity:

    

Common stock and paid-in capital—shares authorized 24,000; outstanding 8,431 and 8,668

     63,234        62,856   

Retained deficit, including accumulated other comprehensive income of $1,810 and $1,055

     (9,782     (16,681
       
           

Total stockholders’ equity

     53,452        46,175   
       
           

Total liabilities and stockholders’ equity

   $ 99,727      $ 86,113   
                

 

(1) Derived from audited financial statements.


MICROSOFT CORPORATION

CASH FLOWS STATEMENTS

 

(In millions) (Unaudited)    Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
    

 

2011

   

 

2010

   

 

2011

   

 

2010

 

Operations

        

Net income

   $ 5,232      $ 4,006      $ 17,276      $ 14,242   

Adjustments to reconcile net income to net cash from operations:

        

Depreciation, amortization, and other

     720        694        2,077        1,955   

Stock-based compensation expense

     541        481        1,622        1,409   

Net recognized gains on investments and derivatives

     (122     (68     (377     (322

Excess tax benefits from stock-based compensation

     (5     (14     (14     (38

Deferred income taxes

     (59     (241     (324     263   

Deferral of unearned revenue

     6,616        6,087        19,331        19,692   

Recognition of unearned revenue

     (7,026     (6,395     (21,189     (21,758

Changes in operating assets and liabilities:

        

Accounts receivable

     3,031        1,947        3,435        1,906   

Inventories

     (170 )     77        (258     216   

Other current assets

     (618     (361     (487 )     90   

Other long-term assets

     (8 )     (81     172        (143

Accounts payable

     (51 )     122        (235     89   

Other current liabilities

     237        775        (1,174     (146

Other long-term liabilities

     354        364        1,197        1,014   
                       
                           

Net cash from operations

     8,672        7,393        21,052        18,469   
                       
                           

Financing

        

Short-term debt repayments, maturities of 90 days or less, net

     0        (349     (186     (446

Proceeds from issuance of debt, maturities longer than 90 days

     2,239        851        6,960        2,592   

Repayments of debt, maturities longer than 90 days

     0        (502     (814     (1,898

Common stock issued

     1,405        422        2,242        1,399   

Common stock repurchased

     (848     (2,023     (10,299     (7,430

Common stock cash dividends paid

     (1,349     (1,139     (3,830     (3,448

Excess tax benefits from stock-based compensation

     5        14        14        38   

Other

     (15 )     0        (40     0   
                       
                           

Net cash from (used in) financing

     1,437        (2,726     (5,953     (9,193
                       
                           

Investing

        

Additions to property and equipment

     (658     (408     (1,713     (1,219

Acquisition of companies, net of cash acquired

     0        (143     (69     (245

Purchases of investments

     (14,394     (11,217     (27,707     (25,994

Maturities of investments

     2,286        1,054        4,992        6,448   

Sales of investments

     5,738        4,927        9,768        12,705   

Securities lending payable

     (111 )     (117     1,063        1,110   
                       
                           

Net cash used in investing

     (7,139     (5,904     (13,666     (7,195
                       
                           

Effect of exchange rates on cash and cash equivalents

     28        (30     83        (2
                       
                           

Net change in cash and cash equivalents

     2,998        (1,267     1,516        2,079   

Cash and cash equivalents, beginning of period

     4,023        9,422        5,505        6,076   
                       
                           

Cash and cash equivalents, end of period

   $ 7,021      $ 8,155      $ 7,021      $ 8,155   
                                


MICROSOFT CORPORATION

SEGMENT REVENUE AND OPERATING INCOME (LOSS)

 

(In millions) (Unaudited)    Three Months Ended
March 31,
    Nine Months Ended
March 31,
 
    

 

2011

   

 

2010

   

 

2011

   

 

2010

 

Revenue

        

Windows & Windows Live Division

   $ 4,445      $ 4,650      $ 14,284      $ 14,713   

Server and Tools

     4,104        3,706        12,453        11,229   

Online Services Division

     648        566        1,866        1,633   

Microsoft Business Division

     5,252        4,341        16,409        13,701   

Entertainment and Devices Division

     1,935        1,210        7,428        5,024   

Unallocated and other

     44        30        136        145   
                       
                           

Consolidated

   $ 16,428      $ 14,503      $ 52,576      $ 46,445   
                                

Operating income (loss)

        

Windows & Windows Live Division

   $ 2,764      $ 3,073      $ 9,338      $ 9,968   

Server and Tools

     1,419        1,270        4,834        3,979   

Online Services Division

     (726     (709     (1,829     (1,649

Microsoft Business Division

     3,165        2,542        10,506        8,285   

Entertainment and Devices Division

     225        150        1,292        790   

Corporate-level activity

     (1,138     (1,153     (3,151     (3,205
                       
                           

Consolidated

   $ 5,709      $ 5,173      $ 20,990      $ 18,168