Microsoft Earnings Report Fiscal Q2 2011

[RobertR1]

Making grips of cash again:

- Microsoft Corp. today announced second-quarter revenue of $19.95 billion for the quarter ended Dec. 31, 2010.

- Operating income, net income and diluted earnings per share for the quarter were $8.17 billion, $6.63 billion and $0.77 per share.

- Microsoft reported 55% growth in revenue for the Entertainment & Devices Division, as the success of the Kinect sensor boosted sales of Xbox 360 consoles, Xbox Live subscriptions and Xbox games.

- Entertainment and Devices Division posted operating income of $679 million

- Microsoft sold 8 million units of Kinect sensors in just 60 days

- Xbox 360 console units up 21%

- Xbox Live memberships grew 30%

Xbox 360 Worldwide Hardware Unit Sales (Unit:Million)

Code:
Hardware Sales   Jl-Sp    Oc-Dc    Ja-Mr    Ap-Jn     FY       LTD

FY 2005/06        -        1.5      1.7      1.8      5.0      5.0

FY 2006/07        1.0      4.4      0.5      0.7      6.6      11.6    

FY 2007/08        1.8      4.3      1.3      1.3      8.7      20.3    

FY 2008/09        2.2      6.0      1.7      1.2      11.1     31.4     

FY 2009/10        2.1      5.2      1.5      1.5      10.3     41.7

FY 2010/11        2.8      6.3         -        -     9.1      50.8

http://www.microsoft.com/investor/E...s/PressReleaseAndWebcast/fy11/Q2/default.aspx

I'll update as more info becomes available.

 

[AlphaWolf]

Over $1 billion profit for E&D so far in this fiscal year. (2 quarters)

 

[Rangers]

Nice E&D profit, really nice.

Overall for MS as a company, despite record this record that, weak results, pretty stagnant. Apple now way ahead in revenue and closing in on profit.

Funny to all those who always claim MS shareholders will demand the Xbox be shut off, it's pretty much the (only) brightest spot in the company these days.

6.3m Xboxs shipped, record also but a good deal less than I would have projected. As always Sony's number will be "interesting"

 

[NavNucST3]

Nice E&D profit, really nice.

Overall for MS as a company, despite record this record that, weak results, pretty stagnant. Apple now way ahead in revenue and closing in on profit.

Funny to all those who always claim MS shareholders will demand the Xbox be shut off, it's pretty much the (only) brightest spot in the company these days.

6.3m Xboxs shipped, record also but a good deal less than I would have projected. As always Sony's number will be "interesting"

As a shareholder the only thing I have asked for is a Ballmer replacement though he was pretty personable at CES.

 

[MrFloopy]

Overall for MS as a company, despite record this record that, weak results, pretty stagnant. Apple now way ahead in revenue and closing in on profit.

But I still can't help the feeling that msft is undervalued and appl over valued.

 

[AlphaWolf]

But I still can't help the feeling that msft is undervalued and appl over valued.

A lot of people look at growth rather than profit. MS really doesn't have a lot of room to grow in their software business, but their E&D growth over last year is impressive. Larger shareholders generally hate that MS is paying out dividends which also affects their share value.

 

[Rangers]

According to some analysis on GAF, the Xbox division is at a net -$613m since 360 launched. So basically within a year at this rate the whole 360 project should finally be in black.

Of course that's the entire division, actual Xbox losses could be more or less (I suspect less or even profitable already).

 

[Rotmm]

As always Sony's number will be "interesting"

I'd expect that they'd sell more than last years quarter of 6.5 million, with things such as Move bringing in some extra sales, along with much heavier co-advertising in Europe with hits such as AssCreedBro and FIFA11.

Probably 7 or 7.5 million which would bring them within fairly easy reach of the 15 million year they are confident of hitting.

That said, I'm also slightly surprised at the 360 number given the amount of Kinect units shipped. I guess that it just goes to show that current 360 owners were more than happy to try something a little more casual.

 

[Rangers]

I'd expect that they'd sell more than last years quarter of 6.5 million, with things such as Move bringing in some extra sales, along with much heavier co-advertising in Europe with hits such as AssCreedBro and FIFA11.
l.

Theyve sold much less in Japan and America (the two places we get reliable sales) than Dec Q 09. Not exactly sure why they'd be expected to report they shipped more worldwide, but somehow I have a feeling they will anyway

 

[Gubbi]

A lot of people look at growth rather than profit. MS really doesn't have a lot of room to grow in their software business, but their E&D growth over last year is impressive.

There is a lot of market share to re-capture in the mobile sector. There is a whole new market in tablets they need to be a part of. Windows for ARM was recently announced, I'm sure it's because of tablets

There is also the continued convergence of the livingroom. Tablets might play a part here, imagine integration between your android tablet and your Google TV, iPad/Apple TV. Microsoft needs to have a presence here.

Larger shareholders generally hate that MS is paying out dividends which also affects their share value.

For tax reasons I suppose ? Capital gains taxed lower than dividends ? IMHO, that is just plain wrong. Money sits best with shareholders, not in some company vault.

Cheers

 

[Squilliam]

I suppose bkillian will get the golden office chair he always wanted, like what the boys in the Windows division get to sit in!

Seriously though, everything looks on the up and up. When can we expect they might consider a price cut, also how steep a price cut could we expect if they do? I can't see them sitting on a wad of cash and let their competitors get ahead of them.

Edit: They only shipped 2.3M IIRC fewer 360's than Nintendo Wiis

 

[Silent_Buddha]

Interesting, they also bought back 5 billion USD in shares.

As well considering how Xbox performance is shared with other products in EDD (Microsoft Kin for example) I wouldn't be suprised if X360 has been net profitable (including R&D and launch costs) for a few quarters now.

That -161 million USD in that GAF list for example coincides with the Kin launch and failure. Turn that around for a profit for that quarter and things look a bit different. And that's just one example, albeit it a very large example of a failed or underperforming EDD product.

Regards,
SB

 

[assen]

Interesting, they also bought back 5 billion USD in shares.

There was a recent article in some kind of investment blog making the argument that Microsoft's management should buy out the company, and take it private; that would allow them to focus on their strengths and stop chasing the fashion of the day (at which they don't seem to be very good). It would take something like 3-5 years if they take a loan now, buy all the "public" shares, and use the profits to repay it.

Made some sense to me (a total n00b in finance).

 

[dobwal]

Larger shareholders generally hate that MS is paying out dividends which also affects their share value.

I would think that the only thing attractive about owning MS shares is its dividend. Some look at dividends as funds that could have been reinvested back into company to further revenue and profit growth, but MS is sitting on 44 billion in cash and short term investment.

Paying out dividends isn't MS's problem, its the inability to take that huge amount of liquid assets and turn it into new sources of revenue and profit streams. Removing the dividend won't change that issue.

 

[Silent_Buddha]

Aye, it would allow them to be a nimbler company, IMO. There's a lot of baggage and dead weight associated with being a publicly traded company.

And as long as they remain hugely profitable, 6.63 billion net income on 19.95 billion revenue is hugely impressive (far more than Apples, 6.00 billion net income on 26.74 billion revenue, IMO) there isn't a lot of drawbacks to going private.

It restricts somewhat how quickly they can raise funds for new ventures, but at this point point how many multi-10's of billions of USD ventures will MS be embarking on? It isn't like they need funds to invest in fabs or manufacturing facilities and they're already sitting on a large cash pile.

Regards,
SB

 

[corduroygt]

As well considering how Xbox performance is shared with other products in EDD (Microsoft Kin for example) I wouldn't be suprised if X360 has been net profitable (including R&D and launch costs) for a few quarters now.

That -161 million USD in that GAF list for example coincides with the Kin launch and failure. Turn that around for a profit for that quarter and things look a bit different. And that's just one example, albeit it a very large example of a failed or underperforming EDD product.

Regards,
SB

For each failure like Kin, there's Sync, WP7, Keyboards/Mice, and Mac Business Unit, so I think they'd all balance out. All of that combined is probably less than the 360 profit/loss though.

 

[dobwal]

Aye, it would allow them to be a nimbler company, IMO. There's a lot of baggage and dead weight associated with being a publicly traded company.

And as long as they remain hugely profitable, 6.63 billion net income on 19.95 billion revenue is hugely impressive (far more than Apples, 6.00 billion net income on 26.74 billion revenue, IMO) there isn't a lot of drawbacks to going private.

It restricts somewhat how quickly they can raise funds for new ventures, but at this point point how many multi-10's of billions of USD ventures will MS be embarking on? It isn't like they need funds to invest in fabs or manufacturing facilities and they're already sitting on a large cash pile.

Regards,
SB

If MS has a problem with being nimble it has nothing to do with paying dividends. Their war chest is bigger than either Apple's or Google's. Even if they needed it, who wouldn't loan MS capital at the lowest rates.

You could loan MS $50 billion dollars and they could use all of it as toiletries for their employees and still pay you back in under 3 years while barely touching their savings.

 

[AlphaWolf]

For each failure like Kin, there's Sync, WP7, Keyboards/Mice, and Mac Business Unit, so I think they'd all balance out. All of that combined is probably less than the 360 profit/loss though.

There's no way WP7 made money, I expect it lost bucket loads. It might become profitable, but they are going to need an order of magnitude more units before that happens. There's also Zune in that division which has been a perennial drain, perhaps its getting better, but I remain skeptical.

 

[TheChefO]

Best thing MS Could do is bring in a new CEO.

Balmer is good at keeping things on track I suppose, but he is hardly a visionary and has the company playing defense in almost every division. In fact, we would not have the xbox at all under his watch. That was a Gates dream that started it and I suppose also helped protect it during the first gen losses.

The company needs a forward thinking and aggressive CEO. Not someone that will simply react to market trends which put them years behind the competition.

Sad especially when you think of how many things MS has in RD which have come to market in a drip and later made successful by other companies or which haven't hit the market yet and are still kept behind closed doors.

WP7 is the latest example of where the company has the ability to knock a product out of the park, but has slipped due to time/lack of leadership.

The current lack of features in wp7 currently would not be an issue had it launched with iphone or even android.

They aren't using the huge cash advantage they have (had) to be more aggressive in entering and competing in markets. Instead they wait for the market to prove itself and by then, they decide to start developing products to compete and by then, they are (lately) out of the game.

At the very least, they should have been major share holders in emerging disruptive technology companies such as citrix, vmware, f5, salesforce, etc.

On the other end, keeping their agnostic software approach, they could have bought (stakes in) agnostic hardware manufacturers such as jabil or flextronics.

Using their warchest to hedge against gains which may prove disruptive to their bottom line is perhaps the greatest failure of Balmers "defense strategy".

 

[corduroygt]

There's no way WP7 made money, I expect it lost bucket loads. It might become profitable, but they are going to need an order of magnitude more units before that happens. There's also Zune in that division which has been a perennial drain, perhaps its getting better, but I remain skeptical.

Wlll I'm sure wm6 and its clones made lots of money in the past, and I expect WP7 to make money, even though I don't think it'll be able to surpass the iphone or android, it should be profitable.