Microsoft first-quarter income down 18 percent, still beats expectations
By Nilay Patel 
posted October 23rd 2009 11:17AM
posted October 23rd 2009 11:17AM
Microsoft just turned in its first quarter financial report card, and while the good vibes around Windows 7 launch haven't yet begun to fade, the numbers here aren't exactly cheery: revenue is down 14 percent from last year at $12.92b, operating income is down 25 percent at $4.48b, net income is down 18 percent at $3.57b, and earnings per share are down 17 percent at $0.40. Not wonderful, but it's better than analysts were expecting, and the stock is actually way up on the news. Adding in the deferred revenue from early sales of Windows 7 makes things look a little better still, with only a four percent decline in revenue and an eight percent increase in earnings per share, and the Entertainment and Devices Division -- home of the Xbox 360 and Zune HD -- is also a bright spot, increasing income from $159m to $312m on essentially unchanged revenue. Of course, the big test will actually be next quarter, after Windows 7 has really had a chance to make an impact -- we'll see if all these warm fuzzies translate into cold hard cash.
Zune HD numbers pl0x!
I'm as curious as the guy next to me on how much that thing really sold...
What is "pl0x"? Thank you
It's Korean for "I'm useless, please do this for me".
The general welcoming response is "kthxbai".
Neal: Pull your head out of Ballmer's ass for just one second and read this:
"Revenue is down 14 percent from last year at $12.92b, operating income is down 25 percent at $4.48b, net income is down 18 percent at $3.57b, and earnings per share are down 17 percent at $0.40. "
Notice that all those things are DOWN, not up. That's why it's not cheery. Hi, welcome to reality.
I would also like the know the ZuneHd numbers. I mean its the iPod killer. I want to know if the HD killed more iPods then their last "ipod killer"... what was that called again. oh yeah the zune... 3 million sales.... damn apple better watch their backs.
lol @ no one refuting my comment, just downranking out of pure frustration of the truth
iPod killer? The Zune is just an MP3 player. It's the people who decide to blow it out of proportion and call it "iPod killer", just like they call whatever touchscreen phone that comes out, "iPhone killer".
and paranoia gets the best of us sometime.
@ Jack
You not only don't understand the comment system enough to reply to where I posted, you also have a weak grasp of how earnings works, it seems.
The definition of a recession is what you have described. Not making as much profit as you did comapered to last year at this time. Still beating every market analysts expectations (proof in that the stock which has a 52 week low of 14.87 in March compared with the high today of 29.35 - an improvement of over 197% show me a stock which has had this comeback in 8 months time please), and still being extremely profitable - just not AS profitable compared to last year - you know before an economic meltdown.
Hi and welcome to how business and the market operate.
No Zune HD numbers from Microsoft = very very VERY bad news.
Another iPod killer bites the dust lol
I beat my "expectation" every night using windows 7 and the Internets. I am a PC!
@ Neal
Good analysis on what the numbers mean except for the part about "show me another stock that has had this comback in 8 months." The market was beaten down 8 months ago. I could show you dozens of stocks that have had that kind of comeback in the last 8 months. I can think of a few off the top of my head that have had a 10x increase since March. You'd probably have almost as much trouble finding stocks that haven't increased 2-300% since March. Even (arguably) worthless companies like Fannie (FNM) and Freddie (FRE) are up 300% since their March lows. GGWPQ, CDL for 10x increases. Sorry, I'm a stock junkie.
312m sales for both XBox and ZuneHD? How many people think this
covers their development, sales, and marketing efforts? HAHAHAHA!!!
@Albert
How many people are stupid enough to think they need to do that in one quarter?
MSFT is doing good today, currently up $2/share :)
Agreed, I love the sudden massive jump from market close yesterday to opening today.
MSFT stays static around 25-30, it has for 10 years now.
Hilarious, Engadget says the results aren't cheery, though they beat the hell out of market expectations.
The stock was up over 10% increase at the height of morning trading, and is still up over 7% as of this post. They still made BOATLOADS of profit, just a decrease in the *amount* of proft made when compared to this quarter last year.
I'd expect this stock to trade well over $30 a share come Q2 fiscal earnings report arouns mid Jan with the holiday and Win 7 sales to boost things. Engadget, please stick to stories about the tech itself unless you want to hire someone who understands numbers better.
Oh noes! Revenues down in the last quarter of stale products before 2 major product launches! They'll have to act fast to release some kind of new products this quarter so that... wait... what?
@ Neal
You my friend must be a student of the market like myself...you have my vote...Please Engadget, stick to journalism not market analysis. Leave that to the pros.
SP
MSFT didn't hemorrhage as much as in previous quarters or as much as analysts predicted. C:\NGRTLNS.Q1$
@ jtsnyc47
Hhemorrhaging would sugged bleeding out, aka losing money. Microsoft didn't make as much profit as they did this quarter last year. They still were incredibly profitable. I'll draw you an analogy.
If you made $20 profit last week, and only $15 the next week, you had a profit loss. You still made money, not lost money, just not as much as you made LAST week. In fact this shows a -25% income loss. Microsoft had a *FOUR* percent decline in revenue compared to last year this quarter, and had an 8% INCREASE in earnings per share. Why an increase? They trimmed the fat, and are doing the same job with less money being paid in overhead.
They still had a phenominal quarter considering the market and recession. They beat every market expectation - by a LOT. They also deferred almost 1.5 BILLION in profit till Q4 calendar year (Microsoft's Q2 fiscal), which will be reflected come January's earnings report.
If earning $12.92 billion is bleeding out money, someone cut me please.
They didn't do that on purpose, Ike. It was a reporting mistake between operating expenses and yearly revenue.
No wonder, I just bought a box of Windows 7! That's a life changer for Microsoft right there! ;)
Just imaging how many copies people and companies are buying. Especially in those 100 volume licenses. That number is going to be funny when it shows some insane percentage increase in income next quarter.
You must be high! Companies buying 100's of copies? What companies besides PC manufacturers because they really have no choice anyhow.
@Fernando, a lot of IT people have had time to test Windows 7 for quite a while now and will just be doing upgrades to their Windows Vista machines.
(funny thing I'm still a little high, but it still makes sense after re-reading it).
Wow! Yeah what ever you are smoking please stop. I am in the IT department (Network Admin/SQL DBA) and we have 600+ machines and guess how many of those are Vista? 4. We have tested 7 and guess how many copies we are planning to purchase within the next year? 0. Get with reality man, IT departments are not going to go out in droves and upgrade to 7 that's just crazy talk there.
When there is a will, there is a way. Nothing is impossible!
(But, I still know of companies running Widows 2003 lol)
(I guess better evil known than unknown good)
@Fernando.
I am IT guy and been testing windows 7 for the last few months and I can tell you that the company I work for is upgrading over 100 computers to windows 7 within the next year. Of course not at once but in phases.
Windows 7 IS ROCK SOLID.
"Windows 7 IS ROCK SOLID."
Reality distortion field what?
Here, have some more kool-aid, your plastic cup is looking a little empty.
I diffently for Windows 7 but for an IT department to upgrade machines it would have to be the machines are open to consumers or there are programs that you need to use that were made specifically for Win 7. As long as your current infrastructure is working fast and efficient its a waste of money, rarely does your employee need a faster/stronger machine to do their task. That being said if you were planning to buy new PCs i would say buy Win 7.
Real numbers-
Employees: About 30
Machines: Just under 800
Copies of Windows 7:1 (my personal laptop)
Fernando, I'm in IT, and we've deployed Vista to about 800 machines. Very few issues, usually related to hardware. It's been stable for us, but I'm looking forward to deploying Windows 7 next year.
Ouch
Earnings down? I wonder if the GFC has anything to do with that.
Or the EU?
Finally, well done ;)
What is a DVD? Is that a fossil found in Central China? :P
FWIW, some detail on the deferred revenue: these numbers reflect deferred revenue related to machines sold with Vista with a free upgrade to Windows 7. MSFT recorded 50% of the revenue from sales of PCs with Vista that were eligible and will record the additional 50% between now and when the free upgrade expires (end of January 2010, I believe). As noted (though kind of buried), had Microsoft recognized all of the revenue as earned during this period, profit would be up 8%, aided partially by aggressive cost cutting - sales were down 4%.
This deferral sets Microsoft for a huge next quarter. Bigtime. Between the 7 launch, Zune HD likely picking up with holiday sales, probably a similar jump in Xbox between holidays and the COD launch plus the recognition of the rest of the deferral...
Glad someone pointed this out !
The numbers are going to be unreal
-_-
@Detox/Paul Chapel
So how much of Apple's huge profits do you get ? .... oh yeah none you give all your money to them Well Done!
Hence the year end audit that /should/ be performed by qualified and independent auditors.
If you're a shareholder, you have the right to inspect the books and records of the corporation if you so choose. So dig in there and let us know what you find :)
We do not care about your engineer's journal: an online travelogue.
Pretty impressive :O , are we looking at 5 Billion USD profit next quarter?
@timmy, who told u to care for it in the first place? i just commented on the post and affixed that as a signature. crap
$4.5 billion....wow.
Yeah, I wish my income was this down!
MS FTW