Microsoft announces record full year financials, Wall Street unmoved
Microsoft is in the black. No surprise there, for the software giant’s fourth quarter financial results, but a 37 per cent increase in profit will have pleased company accountants.
Wall Street, however, wasn’t over enthused with results that broadly met expectations for sales, but not quite the expectations for profit.
The headline figures are that it recorded a nine per cent increase in revenues from the same three months in 2004, up to $10.16bn. This translated into profits of $3.70 billion ($0.34 per share), which compares with the $2.69 billion ($0.25 per share) of 2004.
Microsoft had outlined revenues in the range of $10.1 to $10.2 billion and operating income in the range of $4.1 to $4.2 billion.
Its Server and Tools business was highlighted by Microsoft as driving the latest revenue gains. For the third consecutive year it delivered double digit revenue growth and improved profitability. SQL Server, in particular, saw revenue growth of 16 per cent over the same period a year ago.
The Xbox was also credited with driving ‘strong results’ – a record number of Xbox consoles shifted and a doubling of Xbox Live membership saw a 22 per cent revenue growth for Microsoft’s Home and Entertainment division.
Intel, in its recent results, cited the the Xbox as a strong driver of chip shipments.
Being the fourth quarter, yearly results were also completed. With record revenues of $39.79 billion for the year ended June 30, 2005, net income was $12.25 billion ($1.12 per share). This compares with 2004’s net income of $8.17 billion, generated from sales of $36.84 billion.
‘We closed out a record fiscal year with strong revenue growth in the fourth quarter driven by healthy, broad-based demand across all customer segments and channels,’ said Chris Liddell, chief financial officer at Microsoft.
Looking ahead to the big product launches of SQL Server 2005, Visual Studio 2005 and a new Office suite, he also commented: ‘These results provide solid momentum heading into fiscal 2006, which is shaping up to be a strong year for growth and investment. We expect double digit revenue growth next year, kicking off the strongest multi-year product pipeline in the company’s history.’
He also pointed out that the company returned $44 billion to investors through share repurchases and dividends over the fiscal year.
The results were complicated by including $0.05 per share of legal charges and $0.09 of tax benefits.
You can read the full figures on Microsoft’s Investor Relations website.
Such are the Wall Street expectations for Microsoft that the markets reacted in a luke-warm fashion to the results, with one analyst quoted by the New York Times as saying ‘It was flat enough that people are probably saying, “Wow, there wasn’t a whole lot of year over year growth”‘.
The earnings results were released after the New York markets closed on Thursday and after-hours trading saw the stock dip two per cent. Since the markets have re-opened Microsoft’s stock is still 2.08 per cent down on trading.
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