Microsoft Breaks Earnings Records, Again
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UPDATED: The go-go days of Microsoft's double-digit growth may not be over after all.
Microsoft reported Thursday that it brought in $16.37 billion in revenues and $6.48 billion in operating income, yielding diluted earnings per share of $0.50, for its second fiscal quarter of 2008, ending Dec. 31.
That comes on the heels of its best first fiscal quarter in years, which it reported in October.
"Revenue of over $16 billion this quarter exceeds our previous record by $2 billion," Chris Liddell, chief financial officer, said in a company statement.
Financial analysts had expected a strong quarterly showing, but Microsoft's second quarter results even topped its own aggressive guidance from last quarter. Further, as the company has gotten bigger, its pace of growth has slowed. As the company gets ever larger, every percentage point gain in sales becomes a much larger number for Microsoft to reach.
"It's a huge quarter. This has been the strongest two-quarter performance for Microsoft this decade," Matt Rosoff, lead analyst for corporate news at researcher Directions on Microsoft, told InternetNews.com in an e-mail interview.
"For the second quarter in a row, they significantly beat their most optimistic expectations and raised full year guidance," he added.
In comparison, second fiscal quarter 2007 revenue totaled only $12.54 billion, although that figure had been affected by a reserve of $1.63 billion the company set aside last year to cover "technology guarantees" for replacing the high number of defective XBox 360 consoles.
Those guarantees served as reserves to cover free upgrades to Windows Vista and Office 2007 for customers who bought PCs prior to official delivery of those products last January. Without the reserve deduction, Microsoft would have brought in $14.18 billion in fiscal 2007's second quarter.
"Compared to the year-ago period, these figures represent growth of 30 percent, 87 percent and 92 percent for revenue, operating income and diluted earnings per share, respectively," Liddell said.
Microsoft's latest sales and profit records came in part due to strong sales of Windows client software, including both Windows Vista and XP.
The company reiterated what chairman Bill Gates had said during his keynote speech at the 2008 International Consumer Electronics Show earlier this month -- that Microsoft has sold some 100 million units of Vista.
However, a spokesperson said at the time that figure did not include Christmas sales of shrink-wrapped Vista and new PC sales.
Other products contributing to Microsoft's latest record-setting performance include the company's flagship offerings in productivity and gaming.
For instance, Microsoft Business Division revenue grew 23 percent on strong sales of Office 2007, as well as Microsoft SharePoint and Exchange, officials said. "SharePoint is over a billion dollar business now," Liddell said on a conference call with analysts after the results were released.
Continuing aggressive sales of Microsoft's Xbox 360 gaming consoles -- which are now up to a total of 17.7 million sold -- also helped.
Executives are not as bullish on the third fiscal quarter, which ends March 31. They're projecting revenues of $14.3 to $14.6 billion, operating income of $5.6 billion to $5.7 billion, and diluted earnings per share of $0.43 to $0.45.
For the full fiscal year, ending June 30, however, the company is expecting what some might term spectacular results. On the heels of breaking the $50 billion barrier in fiscal 2007, officials said Microsoft is on track to bring in revenue in the range of $59.9 billion to $60.5 billion.
Executives also said Microsoft's full-year operating income should total $24.2 billion to $24.4 billion, with diluted earnings of $1.85 to $1.88 per share.
While that doesn't directly translate into smooth sailing, it certainly bodes well for the company's near-term prospects.
"The companys massive scale and breadth in geographies, markets, and product segments should help it weather any impending economic downturns," Rosoff said.