Microsoft Announces Q4 Earnings; $4.97 Billion Profit On $19.90 Billion Revenue

Microsoft released its Q4 earning today (MS starts its fiscal year in July, think Q2 2013) with revenue of 4.97 on $19.90 in revenue giving an EPS (earning per share) of $0.59.  Microsoft took a $900 million (nearly $1 billion) charge on SurfaceRT due to a price reduction on the tablet and inventory adjustment on associated accessories.  If you exclude that charge MS would have had a $0.07 EPS increase ($0.65 EPS overall).

Regardless, Wall Street was extremely disappointed with the number and Microsoft’s stock tumbled nearly 7% (quite significant in terms of stock) in after hours trading.  The consensus among analysts was an EPS of $0.75 with almost $21 billion in revenue.  Unrealistic, yes, but expectations are expectations.

No GAAP (generally accepted accounting principles) numbers are:

Q4 Results

“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, CFO”

Office 365 has in fact grown to a $1.5 billion annual business from $1 billion a few months back.  Microsoft Business Division revenue grew 14% for the fourth quarter and 3% for the full year. 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.

Windows Division revenue decreased 6% for the fourth quarter and 1% for the full year. 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, revenue within Xbox LIVE grew nearly 20%.

Overall for fiscal year 2013, earnings per share were $77.85 billion, $26.76 billion, and $2.58 per share. These numbers include the $733 million European Commission fine regarding browser ballot choice.

While the numbers for the year are decent, Wall Street looks for growth, and there is not significant growth in these numbers.  We’re still in the transitional phase in Microsoft becoming a devices and services company, and combined with a sluggish economy I see the next fiscal year being similar to this one.

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