Osprey Flyer: Microsoft Reports Record Earnings per Share in Q4 (Financial Charts, Review) *Lower gross margin only negative* MSFT

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Microsoft reported Q4 2010 financial results on Thursday, January 27, 2011

Microsoft Reports Record Earnings per Share in Q4

Microsoft (MSFT) reported Q4 2010 financial results on Thursday, January 27 after the market closed. Microsoft financial performance charts for Q4 2010 and prior quarters have been posted, along with commentary, on the Microsoft Financial Performance page. The charts are:

Microsoft Performance by the Quarters

Earnings per Share, Operating Cash Flow per Share

Total Revenues, Operating Income, and Net Income

Gross Margin, Operating Margin, and Net Margin

Return on Assets

Total Revenues and Earnings per Share Growth Rates

Microsoft Summary Q4 2010 A lower gross margin prevented Microsoft from a total blowout quarter in Q4 December 2010. Even so, Microsoft reported record total revenues and record earnings per share. Operating expenses were reasonable. A higher Other Income amount and lower effective tax rate made up some of the lower gross profit to maintain a strong net income margin and impressive earnings per share.

Microsoft Income Statement Calendar Q4 2010 Microsoft reported record total revenues of $19.95B, near-record net income of $6.6B, and record earnings per share of $0.77. From the prior calendar quarter Q3 2010, total revenues were up +23.20%, net income up +22.62%, and earnings per share up +24.19%. Compared to the prior calendar year Q4 2009, these were +4.89%, -0.42%, and +4.05%, respectively. For Q4 2010, gross margin decreased to 75.78%, a multi-year low, from the historical 80%. Operating margin dipped QoQ to 40.92% from 43.94%, even though operating expenses were reasonable. Net margin of 33.25% was on pace with the prior Q3 2010 of 33.41% as a higher Other Income and lower effective tax rate made up for the lower gross profit margin. Cash flow from operations per share dropped to $0.49 from the prior Q3 2010 of $0.94. Most of the drop in cash flow was attributable to an increase in accounts receivable.

Microsoft Balance Sheet Calendar Q4 2010 Total assets increased QoQ +0.84% to a record $92.3B from the prior quarter of $91.5B. The capital to assets ratio (total stockholders' equity divided by total assets) increased QoQ to 52.52% from Q3 2010 of 51.28%. The current ratio (current assets divided by total assets) is a very liquid 64.66%, which is within historical levels. Microsoft is very liquid with strong capital and has $41B+ in cash reserves (cash, cash equivalents, and marketable securities).

Microsoft Business Outlook Microsoft reaffirms operating expense guidance of $26.9 billion to $27.3 billion for the full year ending June 30, 2011.

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