Microsoft sees uptick in Q4 revenue

Microsoft Corp. Thursday said fourth-quarter sales grew from a year ago thanks to increased sales of its Windows and Office software products, but the company wrote off loses due to sour investments, which cut into profits.

For its fiscal fourth quarter ended June 30, Microsoft reported revenue of US$7.25 billion, a 10 percent increase over reported revenue of $6.58 billion for the fourth quarter of fiscal 2001, the company said in a statement.

Net income was $1.53 billion, or $0.28 diluted earnings per share, after accounting for an $806 million charge from investment losses that hacked $0.15 from the company's earnings per share. For the same quarter in 2001, net income totaled $65 million, or $0.01 per share. Those figures were reduced by a $2.63 billion investment charge that cut $0.47 per share from its earnings, Microsoft said.

Financial analysts had expected Microsoft to earn $0.42 per share on revenue of $7.08 billion for the quarter, according to an estimate compiled by Thomson Financial/First Call. That estimate didn't take into account charges for investment write-downs.

Microsoft in April offered guidance that it would report revenue in the range of $7 billion to $7.1 billion for the quarter, with diluted earnings per share of $0.41 or $0.42.

"The biggest disappointment was charges we took from investments," John Connors, Microsoft's chief financial officer, said in a conference call Thursday with reporters and analysts. "Just like spending on research and development, some of these investments will pay off, some won't."

In the past two years, Microsoft has been forced to write down $9 billion from investments gone bad, largely in cable and telecommunication companies, he said.

Revenue from the sale of desktop software came in at $4.97 billion, compared to $4.55 billion in the fourth quarter of 2001. That gain was driven by increased sales of both its Windows operating system and Office software, the company said.

Analysts had been expecting Microsoft to report increased sales of both desktop software and operating system licenses due to a change in policy being introduced. Microsoft set a deadline of July 31 for customers to switch to its new License 6.0 bulk licensing plan and still receive discounts for the move. Customers who do not switch to the new plan by the deadline date will have to pay the full price of their next Windows and Office upgrades, rather than receiving discounted upgrade prices.

The new license programs also require customers to pay a subscription fee for the life of a software contract, called an annuity license.

"We saw many corporate customers take advantage of our annuity licensing programs," said Scott Boggs, Microsoft's corporate controller, confirming that the new bulk licensing program helped drive sales.

Much of the revenue that comes from those subscription license agreements is accounted for as unearned revenue, which is recognized in later quarters. At the end of the fourth quarter, Microsoft had $7.7 billion in unearned revenue on its books. About $6 billion of that will be recognized during fiscal year 2003, Boggs said.

Sales of its enterprise servers and services in the fourth quarter increased 4 percent from a year ago, to $1.35 billion, Microsoft said. The company highlighted database software as a particularly strong growth area.

"During a time when the overall database market is flat, SQL Server had another great quarter with over 20 percent revenue growth year over year," the company said in a separate statement.

Microsoft sold 3.9 million of its Xbox video game consoles during the quarter, lower than the expectations it outlined at the beginning of the year. Revenue from its MSN properties, which include Microsoft's Internet access service, Web portal and other online properties, was up 24 percent, Connors said.

Revenue from software sold through original equipment manufacturers grew 17 percent over the fourth quarter 2001, primarily due to sales of Windows XP, he said.

For the full fiscal year 2002, Microsoft reported revenue of $28.37 billion, a 12 percent increase over $25.30 billion reported for fiscal 2001. Net income for the year was $7.83 billion, or $1.41 per share, up from $7.35 billion, or $1.32 per share in the fiscal year 2001.

The 2001 earnings figure included after-tax charges for investment losses that reduced the total by $0.53 per share. Additionally, Microsoft recorded an estimated expense of $0.08 in connection with consumer class action lawsuits recorded in the December 2001 quarter, and a one-time gain of $0.15 per share on the sale of Expedia recorded in the March 2002 quarter, the company said.

Looking ahead, revenue is expected to be in the range of $7.0 billion and $7.1 billion for the fiscal first quarter 2003. Diluted earnings per share is expected to be about $0.42 or $0.43, Microsoft said.

For the full fiscal year 2003 revenue is expected to equal about $32.4 billion, and diluted earnings per share should be in the range of $1.85 to $1.91, according to Microsoft.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Matt Berger

Computerworld
Show Comments

Cool Tech

Breitling Superocean Heritage Chronographe 44

Learn more >

SanDisk MicroSDXC™ for Nintendo® Switch™

Learn more >

Toys for Boys

Family Friendly

Panasonic 4K UHD Blu-Ray Player and Full HD Recorder with Netflix - UBT1GL-K

Learn more >

Stocking Stuffer

Razer DeathAdder Expert Ergonomic Gaming Mouse

Learn more >

Christmas Gift Guide

Click for more ›

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Walid Mikhael

Brother QL-820NWB Professional Label Printer

It’s easy to set up, it’s compact and quiet when printing and to top if off, the print quality is excellent. This is hands down the best printer I’ve used for printing labels.

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?