Sign in or join
With Google
or
Join us
Didn't receive confirmation?
Resend
Thanks for registering. Please click on the confirm link in the email we just sent you.
Continue
Reset password
Resend confirmation
Post as Guest
+
Be part of the collaborative process!

Add a note by highlighting text or Replying to an existing note.

Okay
+
Be part of the collaborative process!

Add a note by highlighting text or Replying to an existing note.

Okay
Exhibit 99.1

Exhibit 99.1

Strength in Microsoft Cloud Highlights Q3 Results

Increasing usage of Microsoft Azure, Office 365, Bing and Xbox Live contributes to Q3 growth

REDMOND, Wash. — April 23, 2015 — Microsoft Corp. today announced that revenues for the quarter ended March 31, 2015 grew to $21.7 billion. Gross margin, operating income, and diluted earnings per share (“EPS”) for the quarter were $14.6 billion, $6.6 billion, and $0.61 per share, respectively.

These financial results include $190 million of integration and restructuring expenses, or a $0.01 per share negative impact, related to Microsoft’s restructuring plan announced in July 2014 and the ongoing integration of the Nokia Devices and Services (“NDS”) business.

During the quarter, Microsoft returned $7.5 billion to shareholders in the form of share repurchases and dividends.

The following table notes the impact of the integration and restructuring expenses on the company’s financial performance (“Noted Items”). This financial information is provided to aid investors in better understanding the company’s performance. All growth comparisons relate to the corresponding period in the last fiscal year.

 

     Three Months Ended March 31,
($ in millions, except per share amounts)    2014 As
Reported
(GAAP)		      2015 As
Reported
(GAAP)		      % Y/Y
(GAAP)		      2015 Impact
of Noted
Items

 

Revenue

 

   

 

$

 

 

20,403

 

 

  

 

   

 

$

 

 

21,729

 

 

  

 

     

 

 6%

 

   

 

   

-

 

 

Gross Margin

 

    $

 

 14,425

 

   

 

    $

 

 14,568

 

   

 

     

 

 1%

 

   

 

   

-

 

 

Operating Income

 

    $

 

 6,974

 

   

 

    $

 

 6,594

 

   

 

     

 

 (5)%

 

   

 

   

$(190)

 

 

Diluted EPS

 

    $

 

 0.68

 

   

 

    $

 

 0.61

 

   

 

     

 

 (10)%

 

   

 

   

$(0.01)

 

The strengthening of the U.S. dollar compared to foreign currencies had a significant impact on results in the quarter. Excluding the effect of foreign exchange rate changes on the GAAP amounts, on a constant currency basis, revenue and gross margin would have grown 9% and 4%, respectively, and operating income and EPS would have declined 4% and 7%, respectively.

“Customers continue to choose Microsoft to transform their business and as a result we saw incredible growth across our cloud services this quarter,” said Satya Nadella, chief executive officer at Microsoft. “Next week at Build we’re excited to share more about how we’re empowering every individual and organization on the planet to achieve more with the next generation of our platforms.”

“We executed with strong operational and financial discipline again this quarter, and are seeing positive impact from our investments in key growth areas,” said Amy Hood, chief financial officer at Microsoft. “We remain focused on maximizing shareholder value and again increased our overall return of capital to shareholders.”

Devices and Consumer revenue grew 8% (up 11% in constant currency) to $9.0 billion, with the following business highlights:

 

  •   Office 365 Consumer subscribers increased to over 12.4 million, up 35% sequentially

 

  •   Windows OEM Pro revenue declined 19%, as Pro mix returned to pre-Windows XP end-of-support levels and the business PC market declined

 

  •   Windows OEM non-Pro revenue declined 26%, primarily due to channel inventory drawdown and ongoing mix shift to opening price point devices

 

  •   Search advertising revenue grew 21% (up 24% in constant currency), with Bing U.S. market share at 20.1%, up 150 basis points over prior year

  •   Xbox Live usage grew over 30%, driven by increased users and deeper user engagement

 

  •   Surface revenue of $713 million, up 44% (up 53% in constant currency) driven by Surface Pro 3

 

  •   Phone Hardware revenue of $1.4 billion, with 8.6 million Lumia units sold

Commercial revenue grew 5% (up 7% in constant currency) to $12.8 billion, with the following business highlights:

 

  •   Commercial cloud revenue grew 106% (up 111% in constant currency) driven by Office 365, Azure and Dynamics CRM Online, and is now on an annualized revenue run rate of $6.3 billion

 

  •   Server products and services revenue grew 12% (up 16% in constant currency), with premium versions of Windows Server, System Center Server and SQL Server together growing 25%

 

  •   Office Commercial products and services revenue declined 2% (up 1% in constant currency); transactional revenue was impacted by the continued transition to Office 365 and declines in business PC sales following the XP refresh cycle

 

  •   Windows volume licensing revenue declined 2% (up 1% in constant currency), with transactional revenue declining following the XP refresh cycle partially offset by annuity revenue growth

“We remain focused on strong execution from our sales teams. Around the world we’re seeing high interest in deployment of our cloud and server products, as well as participation in the enterprise early adopter program for Windows 10,” said Kevin Turner, chief operating officer at Microsoft.

Business Outlook

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast.

Webcast Details

Satya Nadella, chief executive officer, Amy Hood, executive vice president and chief financial officer, Frank Brod, chief accounting officer, John Seethoff, deputy general counsel, and Chris Suh, general manager of Investor Relations, will host a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) 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 April 23, 2016.

Constant Currency

We present constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. To present this information, current and comparative prior period results for entities reporting in currencies other than United States dollars are converted into United States dollars using the average exchange rates from the comparative period rather than the actual exchange rates in effect during the respective periods. The non-GAAP financial measures presented below should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP. All growth comparisons relate to the corresponding period in the last fiscal year.

Financial Performance Constant Currency Reconciliation

 

     Three Months Ended March 31,
($ in millions, except per share amounts)    2014 As
Reported
(GAAP)		      2015 As
Reported
(GAAP)		      Constant
Currency
Impact		      %Y/Y
(GAAP)		      % Y/Y
Constant
Currency

 

Revenue

 

   

 

 

 

 

$20,403

 

 

  

 

   

 

 

 

 

$21,729

 

 

  

 

     

 

 $(534)

 

   

 

     

 

 6%

 

   

 

   

9%

 

 

Gross Margin

 

     

 

 $14,425

 

   

 

     

 

 $14,568

 

   

 

     

 

 $(396)

 

   

 

     

 

 1%

 

   

 

   

4%

 

 

Operating Income

 

     

 

 $6,974

 

   

 

     

 

 $6,594

 

   

 

     

 

 $(87)

 

   

 

     

 

 (5)%

 

   

 

   

(4)%

 

 

Diluted EPS

 

     

 

 $0.68

 

   

 

     

 

 $0.61

 

   

 

     

 

 $(0.02)

 

   

 

     

 

 (10)%

 

   

 

   

(7)%

 

        Segment Revenue Constant Currency Reconciliation

 

     Three Months Ended March 31,
($ in millions)    2014 As
Reported
(GAAP)		      2015 As
Reported
(GAAP)		      Constant
Currency
Impact		      %Y/Y
(GAAP)		      % Y/Y
Constant
Currency

 

Licensing

 

   

 

 

 

 

$4,597

 

 

  

 

   

 

 

 

 

$3,476

 

 

  

 

     

 

 $(96)

 

   

 

     

 

 (24)%

 

   

 

   

(22)%

 

 

Computing & Gaming Hardware

 

     

 

 1,872

 

   

 

     

 

 1,800

 

   

 

     

 

 (79)

 

   

 

     

 

 (4)%

 

   

 

   

0%

 

 

Phone Hardware

 

     

 

 0

 

   

 

     

 

 1,397

 

   

 

     

 

 N/A

 

   

 

     

 

 N/A

 

   

 

   

N/A

 

 

Other

 

     

 

 1,824

 

   

 

     

 

 2,280

 

   

 

     

 

 (59)

 

   

 

     

 

 25%

 

   

 

   

28%

 

 

Total Devices and Consumer

 

     

 

 $8,293

 

   

 

     

 

 $8,953

 

   

 

     

 

 $(234)

 

   

 

     

 

 8%

 

   

 

   

11%

 

 

Licensing

 

     

 

 10,335

 

   

 

     

 

 10,036

 

   

 

     

 

 (222)

 

   

 

     

 

 (3)%

 

   

 

   

(1)%

 

Other

 

     

 

 1,902

 

   

 

     

 

 2,760

 

   

 

     

 

 (78)

 

   

 

     

 

 45%

 

   

 

   

49%

 

 

Total Commercial

 

     

 

 $12,237

 

   

 

     

 

 $12,796

 

   

 

     

 

 $(300)

 

   

 

     

 

 5%

 

   

 

   

7%

 

Noted Items Definition

Integration and restructuring expenses were $190 million during the three months ended March 31, 2015. Integration and restructuring expenses include employee severance expenses and costs associated with the consolidation of facilities and manufacturing operations, including asset write-downs and contract termination costs, resulting from Microsoft’s restructuring plan. Integration and restructuring expenses also include systems consolidation and other business integration expenses, as well as transaction fees and direct acquisition costs, associated with the acquisition of NDS.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services, devices, 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:

 

  •   intense competition in all of Microsoft’s markets;

 

  •   increasing focus on services presents execution and competitive risks;

 

  •   significant investments in new products and services that may not be profitable;

 

  •   acquisitions, joint ventures, and strategic alliances may have an adverse effect on our business;

 

  •   impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

 

  •   Microsoft’s continued ability to protect and earn revenues from 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;

 

  •   cyber-attacks and security vulnerabilities in Microsoft products and services that could reduce revenue or lead to liability;

 

  •   disclosure of personal data that could cause liability and harm to Microsoft’s reputation;

 

  •   outages, data losses, and disruptions of our online services if we fail to maintain an adequate operations infrastructure;

 

  •   government litigation and regulation that may limit how Microsoft designs and markets its products;

  •   potential liability under trade protection and anti-corruption laws resulting from our international operations;

 

  •   Microsoft’s ability to attract and retain talented employees;

 

  •   adverse results in legal disputes;

 

  •   unanticipated tax liabilities;

 

  •   Microsoft’s hardware and software products may experience quality or supply problems;

 

  •   exposure to increased economic and operational uncertainties from operating a global business;

 

  •   catastrophic events or geo-political conditions may disrupt our business; and

 

  •   adverse economic or market conditions may harm our business.

For more information about 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 April 23, 2015. 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.

For more information, press only:

Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070, rrt@waggeneredstrom.com

For more information, financial analysts and investors only:

Chris Suh, general manager, Investor Relations, (425) 706-4400

Note to editors: For more information, news and perspectives from Microsoft, please visit the Microsoft News Center at http://www.microsoft.com/news/. Web links, telephone numbers, and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. PDT conference call with investors and analysts, is available at http://www.microsoft.com/investor.

MICROSOFT CORPORATION

INCOME STATEMENTS

(In millions, except per share amounts)(Unaudited)

 

  Three Months Ended
March 31,		   Nine Months Ended
March 31,		  
  2015   2014   2015   2014  

 

  

Revenue

     $ 21,729        $ 20,403        $ 71,400        $ 63,451   

Cost of revenue

   7,161      5,978      25,570      19,445   

 

     

 

 

     

 

 

     

 

 

  

Gross margin

   14,568      14,425      45,830      44,006   

Research and development

   2,984      2,743      8,952      8,258   

Sales and marketing

   3,709      3,542      11,752      11,129   

General and administrative

   1,091      1,166      3,339      3,342   

Integration and restructuring

   190      0      1,573      0   

 

     

 

 

     

 

 

     

 

 

  

Operating income

   6,594      6,974      20,214      21,277   

Other income (expense), net

   (77)      (17)      49      (34)   

 

     

 

 

     

 

 

     

 

 

  

Income before income taxes

   6,517      6,957      20,263      21,243   

Provision for income taxes

   1,532      1,297      4,875      3,781   

 

     

 

 

     

 

 

     

 

 

  

Net income

     $         4,985        $         5,660        $         15,388        $         17,462   
  

 

 

     

 

 

     

 

 

     

 

 

  

Earnings per share:

Basic

     $ 0.61        $ 0.68        $ 1.87        $ 2.10   

Diluted

     $ 0.61        $ 0.68        $ 1.86        $ 2.08   

Weighted average shares outstanding:

Basic

   8,167      8,284      8,215      8,317   

Diluted

   8,237      8,367      8,293      8,411   

Cash dividends declared per common share

     $ 0.31        $ 0.28        $ 0.93        $ 0.84   

 

  

MICROSOFT CORPORATION

COMPREHENSIVE INCOME STATEMENTS

(In millions)(Unaudited)

 

  Three Months Ended
March 31,		   Nine Months Ended
March 31,		  
  2015   2014   2015   2014  

 

  

Net income

     $ 4,985        $ 5,660        $ 15,388        $ 17,462   

Other comprehensive income (loss):

Net unrealized gains (losses) on derivatives (net of tax effects of $21, $1, $31, and $(1))

   401      (31)      967      (14)   

Net unrealized gains (losses) on investments (net of tax effects of $68, $37, $(158), and $774)

   125      68      (295)      1,502   

Translation adjustments and other (net of tax effects of $(174), $9, $(432), and $53)

   (438)      18      (909)      101   

 

     

 

 

     

 

 

     

 

 

  

  Other comprehensive income (loss)

   88      55      (237)      1,589   

 

     

 

 

     

 

 

     

 

 

  

Comprehensive income

     $         5,073        $     5,715        $         15,151        $     19,051   
  

 

 

     

 

 

     

 

 

     

 

 

  

MICROSOFT CORPORATION

BALANCE SHEETS

(In millions)(Unaudited)

 

  March 31,
2015		   June 30,
2014		  

 

  

Assets

Current assets:

Cash and cash equivalents

     $ 7,414        $ 8,669   

Short-term investments (including securities
loaned of $76 and $541)

   88,024      77,040   

 

     

 

 

  

Total cash, cash equivalents, and short-term
investments

   95,438      85,709   

Accounts receivable, net of allowance for doubtful
accounts of $268 and $301

   12,427      19,544   

Inventories

   2,469      2,660   

Deferred income taxes

   1,688      1,941   

Other

   6,376      4,392   

 

     

 

 

  

Total current assets

   118,398      114,246   

Property and equipment, net of accumulated
depreciation of $16,839 and $14,793

   14,375      13,011   

Equity and other investments

   12,019      14,597   

Goodwill

   21,728      20,127   

Intangible assets, net

   6,963      6,981   

Other long-term assets

   3,200      3,422   

 

     

 

 

  

Total assets

     $   176,683        $   172,384   
  

 

 

     

 

 

  

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

     $ 6,690        $ 7,432   

Short-term debt

   1,725      2,000   

Current portion of long-term debt

   2,499      0   

Accrued compensation

   3,902      4,797   

Income taxes

   758      782   

Short-term unearned revenue

   18,232      23,150   

Securities lending payable

   96      558   

Other

   6,846      6,906   

 

     

 

 

  

Total current liabilities

   40,748      45,625   

Long-term debt

   27,644      20,645   

Long-term unearned revenue

   1,966      2,008   

Deferred income taxes

   2,919      2,728   

Other long-term liabilities

   13,274      11,594   

 

     

 

 

  

Total liabilities

   86,551      82,600   

 

     

 

 

  

Commitments and contingencies

Stockholders’ equity:

Common stock and paid-in capital—shares
authorized 24,000; outstanding 8,113 and 8,239

   68,475      68,366   

Retained earnings

   18,186      17,710   

Accumulated other comprehensive income

   3,471      3,708   

 

     

 

 

  

Total stockholders’ equity

   90,132      89,784   

 

     

 

 

  

Total liabilities and stockholders’ equity

     $ 176,683        $ 172,384   
  

 

 

     

 

 

  

MICROSOFT CORPORATION

CASH FLOWS STATEMENTS

(In millions)(Unaudited)

 

  Three Months Ended
March 31,		   Nine Months Ended
March 31,		  
  2015   2014   2015   2014  

 

  

Operations

Net income

     $ 4,985        $ 5,660        $ 15,388        $ 17,462   

Adjustments to reconcile net income
to net cash from operations:

Depreciation, amortization, and
other

   1,515      1,255      4,464      3,470   

Stock-based compensation
expense

   641      602      1,920      1,828   

Net recognized losses (gains) on
investments and derivatives

   (55)      (40)      (179)      100   

Excess tax benefits from
stock-based compensation

   (31)      (22)      (555)      (247)   

Deferred income taxes

   253      (190)      868      38   

Deferral of unearned revenue

   10,163      10,175      28,385      27,456   

Recognition of unearned revenue

   (11,209)      (10,139)      (33,347)      (30,394)   

Changes in operating assets and
liabilities:

Accounts receivable

   3,655      2,501      6,904      4,243   

Inventories

   (430)      (324)      157      38   

Other current assets

   (111)      340      (550)      (311)   

Other long-term assets

   (108)      (73)      341      (469)   

Accounts payable

   (390)      (716)      (912)      (390)   

Other current liabilities

   200      870      (1,952)      3   

Other long-term liabilities

   492      200      1,332      (110)   

 

     

 

 

     

 

 

     

 

 

  

Net cash from operations

   9,570      10,099      22,264      22,717   

 

     

 

 

     

 

 

     

 

 

  

Financing

(Repayments) proceeds from issuance of short-term debt, maturities of 90 days or less, net

   (6,575)      0      1,222      0   

Proceeds from issuance of debt

   10,680      0      10,680      8,850   

Repayments of debt

   0      (300)      (1,500)      (1,888)   

Common stock issued

   146      141      483      461   

Common stock repurchased

   (5,131)      (1,845)      (10,164)      (6,146)   

Common stock cash dividends paid

   (2,532)      (2,322)      (7,386)      (6,570)   

Excess tax benefits from
stock-based compensation

   31      22      555      247   

Other

   316      0      601      (39)   

 

     

 

 

     

 

 

     

 

 

  

Net cash used in financing

   (3,065)      (4,304)      (5,509)      (5,085)   

 

     

 

 

     

 

 

     

 

 

  

Investing

Additions to property and equipment

   (1,391)      (1,192)      (4,163)      (4,155)   

Acquisition of companies, net of cash acquired, and purchases of intangible and other assets

   (162)      (157)      (3,097)      (311)   

Purchases of investments

   (30,218)      (21,323)      (73,470)      (49,217)   

Maturities of investments

   5,561      2,336      9,643      4,134   

Sales of investments

   21,063      16,006      53,616      39,477   

Securities lending payable

   (334)      46      (463)      149   

 

     

 

 

     

 

 

     

 

 

  

Net cash used in investing

   (5,481)      (4,284)      (17,934)      (9,923)   

 

     

 

 

     

 

 

     

 

 

  

Effect of exchange rates on
cash and cash equivalents

   (36)      2      (76)      59   

 

     

 

 

     

 

 

     

 

 

  

Net change in cash and cash
equivalents

   988      1,513      (1,255)      7,768   

Cash and cash equivalents,
beginning of period

   6,426      10,059      8,669      3,804   

 

     

 

 

     

 

 

     

 

 

  

Cash and cash equivalents, end of
period

     $         7,414        $     11,572        $         7,414        $     11,572   
  

 

 

     

 

 

     

 

 

     

 

 

  

MICROSOFT CORPORATION

SEGMENT REVENUE AND GROSS MARGIN

(In millions)(Unaudited)

 

  Three Months Ended
March 31,		   Nine Months Ended
March 31,		  
  2015   2014   2015   2014  

 

  

Revenue

Devices and Consumer Licensing

     $ 3,476        $ 4,597        $ 11,736        $ 14,625   

Computing and Gaming Hardware

   1,800      1,872      8,250      7,751   

Phone Hardware

   1,397      0      6,290      0   

Devices and Consumer Other

   2,280      1,824      6,525      5,252   

Commercial Licensing

   10,036      10,335      30,588      30,852   

Commercial Other

   2,760      1,902      7,760      5,284   

Corporate and Other

   (20)      (127)      251      (313)   

 

     

 

 

     

 

 

     

 

 

  

Total revenue

     $ 21,729        $ 20,403        $ 71,400        $ 63,451   
  

 

 

     

 

 

     

 

 

     

 

 

  

Gross Margin

Devices and Consumer Licensing

     $ 3,210        $ 4,017        $ 10,904        $ 12,918   

Computing and Gaming Hardware

   414      258      1,353      874   

Phone Hardware

   (4)      0      805      0   

Devices and Consumer Other

   566      391      1,428      1,102   

Commercial Licensing

   9,275      9,432      28,301      28,317   

Commercial Other

   1,144      475      2,849      1,164   

Corporate and Other

   (37)      (148)      190      (369)   

 

     

 

 

     

 

 

     

 

 

  

Total gross margin

     $         14,568        $     14,425        $         45,830        $     44,006   
  

 

 

     

 

 

     

 

 

     

 

 

  
Embed by copying and pasting the code into your site
Close
The content provided on Two Margins is for information purposes only and does not constitute investment and/or legal advice. Crypto currencies are highly volatile, risky assets and no information on this site, whether generated by Two Margins or external contributors, is a substitute for your own research. Full Risk Disclosure and Disclaimer here.