Thursday, January 19, 2012

Microsoft Reports Very Strong Quarter: All-Time High Revenues and EPS

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Microsoft Reports Strong Quarter: All-Time High Revenues and EPS

Microsoft Summary Calendar Q4 2011 Microsoft's financial performance was very strong as Q4 is the best quarter on the annual cycle. Record total revenues and earnings per share were reported. However, a negative trend is emerging. Operating income and net income peaked in Q4 2009 with the 2nd and 3rd best quarters all-time in Q4 2010 and Q4 2011, respectively. Windows & Windows Live segment revenues dropped to 3rd, behind the Business and Servers & Tools segments. Financial position continues very strong, very liquid with $59 billion in cash and investments, and total assets are at a record high of above $112.24 billion. Return on assets is an excellent +22.55%. Calendar Q4 is the annual cyclical peak for Microsoft and should be all-time highs across the board, followed by a dip in calendar Q1 2012. This has not occurred for 2 consecutive Q4's, although EPS has managed to continue upwards. Whether the Microsoft business model has peaked and newer ventures (e.g cloud-based services, smartphones, entertainment) can offset the decline should become evident in 2012.

Microsoft Income Statement Calendar Q4 2011 Microsoft reported record total revenues of $20.89 billion, near-record net income of $6.62 billion, and record earnings per share of $0.78. From the prior calendar quarter Q3 2011, total revenues were up +20.22%, net income up +15.44%, and earnings per share up +14.71%. Compared to the prior calendar year Q4 2010, these were up +4.67%, down -0.15%, and up +1.30%, respectively. Gross margin decreased significantly QoQ and YoY to 73.00%. Operating margin dipped QoQ and YoY to 38.28%. Net margin dipped QoQ and YoY to 31.72%. Cash flow from operations per share dropped cyclically to $0.69.

Microsoft Balance Sheet Calendar Q4 2011 Total assets increased QoQ +4.49% to a record $112.24 billion. The capital to assets ratio increased QoQ and YoY to 57.13%. The current ratio is a very liquid 64.60%. Microsoft is very liquid with strong capital and has $51.74 billion in cash reserves (cash, cash equivalents, and marketable securities). Add noncurrent investments and the reserves are $59.29 billion. Return on assets decreased slightly QoQ to 22.55%. The debt ratio decreased slightly QoQ to a reasonable 10.63% of total assets.

Microsoft 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.

Microsoft Financial Performance by the Quarters

Microsoft Cash Flow per Share and Earnings per Share Current Cash flow per Share of $0.69 is -30.77% QoQ, +41.78% YoY, and a 4-quarter low. Earnings per Share of $0.78 are +14.71% QoQ, +1.30% YoY, and an all-time high. The chart averages for CFS and EPS are $0.69 and $0.56, respectively.


Microsoft Total Revenues, Operating Income, and Net Income Current Total Revenues of $20.89 billion are +20.22% QoQ, +4.67% YoY, and an all-time high. Current Operating Income of $7.99 billion is an increase QoQ, a decrease YoY, and a 4-quarter high. Current Net Income of $6.62 billion is +15.44% QoQ, -0.15% YoY increase, and a 4-quarter high. The chart averages for TR, OI, and NI are $16.37 billion, $6.20 billion, and $4.92 billion, respectively.


Microsoft Gross Margin, Operating Margin, and Net Margin Current Gross Margin of 73.00% is down QoQ and YoY plus a multi-year low. Current Operating Margin of 38.28% is down QoQ and YoY plus a 2-quarter low. Current Net Margin of 31.72% is down QoQ and YoY plus a 6-quarter low. The chart averages for GM, OM, and NM are 78.57%, 41.03%, and 29.62%, respectively.


Microsoft Return on Assets Current Return on Assets of 22.55% is down QoQ and YoY plus a 7-quarter low. The ROA chart average is 23.02%.


Microsoft Growth Rates YoY Current Total Revenues Growth YoY of +4.67% is a 9-quarter low. The TRG chart average is +5.49%. Current Earnings per Share Growth YoY of +1.30% is a 9-quarter low. The EPSG chart average is +15.86%.


Microsoft Segment Revenues Business increased QoQ, leads segments at $6.28 billion, is 30.06% of sales, and is at an all-time high. Server and Tools increased QoQ, is $4.77 billion, is 22.85% of sales, and is at an all-time high. Windows and Windows Live decreased QoQ, fell to 3rd place, is $4.74 billion, is 22.68% of sales, and at a 3-quarter low. Entertainment and Devices increased significantly QoQ to $4.24 billion, 20.29% of sales, and an all-time high. Online Services at $784 million and Other at $77 million comprise 4.12% of sales.


Microsoft Operating Expense Ratio The current Operating Expense Ratio of 34.73% is a multi-year low. The OER chart average of 39.58%.


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