Microsoft has just announced its second quarter earnings, and it's touting a record $20.89 billion in revenue, up five percent year-over-year. Net income came in at $6.62 billion, which isn't far off at all from the $6.63 billion it netted in the same quarter a year ago. Breaking things down further, the company's Business Division saw a 3 percent increase in revenue to $6.28 billion, its Server & Tools business jumped 11 percent to $4.77 billion, its Windows and Windows Live Division dropped 6 percent to $4.74 billion, its Online Services business was up 10 percent to $784 million and, last but not least, its Entertainment & Devices Division jumped a full 15 percent to $4.24 billion. On that last bit, the company also reminded folks that it's now sold 66 million Xbox 360 consoles and 18 million Kinect sensors, and that its Xbox Live user base now stands at 40 million worldwide. As for Windows, while the division saw a dip in revenue, Microsoft continues to move plenty of Windows 7 licenses -- those now stand at 525 million, up from 400 million in July of last year.
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Microsoft Reports Record Revenue of $20.9 Billion in Second Quarter

Strong business demand and holiday sales drive record revenue and EPS.


REDMOND, Wash. - Jan. 19, 2012 - Microsoft Corp. today announced quarterly revenue of $20.89 billion for the quarter ended Dec. 31, 2011, a 5% increase from the prior year period. Operating income, net income, and diluted earnings per share for the quarter were $7.99 billion, $6.62 billion, and $0.78 per share, compared with $8.17 billion, $6.63 billion and $0.77 per share, respectively, in the prior year period. Prior year results include recognition of $224 million of deferred revenue related to the Office 2010 technology guarantee program.

"We delivered solid financial results, even as we prepare for a launch year that will accelerate many of our key products and services," said Steve Ballmer, chief executive officer at Microsoft. "Coming out of the Consumer Electronics Show, we're seeing very positive reviews for our new phones and PCs, and a strong response to our new Metro style design that will unify consumer experiences across our phones, PCs, tablets, and television in 2012."

The Microsoft Business Division reported $6.28 billion in second quarter revenue, a 3% increase from the prior year period, and a 7% increase excluding the prior year recognition of deferred revenue for the Office 2010 technology guarantee program. Nearly 200 million licenses of Office 2010 have been sold in the 18 months since launch. Revenue from Exchange and SharePoint grew by 10% or more over the prior year period, and revenue from Lync and Dynamics CRM grew by more than 30%.

The Server & Tools business posted $4.77 billion in second quarter revenue, an 11% increase from the prior year period, reflecting double-digit revenue growth in Windows Server and SQL Server premium editions and more than 20% growth in System Center revenue.

"We saw strong demand for our business products and services, despite the soft PC market and continuing economic uncertainty in key parts of the world," said Peter Klein, chief financial officer at Microsoft. "We delivered record earnings per share by continuing to manage our costs while investing for future growth."

The Windows and Windows Live Division posted revenue of $4.74 billion, a 6% decline from the prior period. Microsoft has sold over 525 million Windows 7 licenses since launch.

The Online Services Division reported revenue of $784 million, a 10% increase from the prior year period. Bing organic US market share grew to 15.1% while Bing-powered US market share, including Yahoo! properties, was approximately 27%.

The Entertainment & Devices Division posted revenue of $4.24 billion, an increase of 15% from the prior period. The Xbox 360 installed base now totals approximately 66 million consoles and 18 million Kinect sensors. Xbox LIVE now has 40 million members worldwide, an increase of 33% from the prior year period.

"In addition to the continued strength of our commercial business, this holiday season was the strongest in Microsoft history, thanks to good sales execution and compelling products like Xbox 360 and Kinect," said Kevin Turner, chief operating officer at Microsoft. "We are seeing a lot of excitement for new devices, from Windows 7 Ultrabooks to new Windows Phones, as well as growing anticipation for Windows 8."

Business Outlook

Microsoft is revising operating expense guidance downward to $28.5 billion to $28.9 billion for the full year ending June 30, 2012.

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. PST (5:30 p.m. EST) 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 Jan. 19, 2013.

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 that 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, joint ventures and strategic alliances 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 January 19, 2012. 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.

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Microsoft announces Q2 earnings: record $20.89 billion in revenue, $6.62 billion net income