Fastest annual revenue growth since 1999 fuels 32% increase in earnings per share.
(Logo: http://www.newscom.com/cgi-bin/prnh/20000822/MSFTLOGO)
For the fiscal year ended
The growth rates for operating income and diluted earnings per share were
impacted by a
'Delivering
This fiscal year marked the launch of Microsoft's flagship server products: Windows Server 2008, SQL Server 2008 and Visual Studio 2008. Revenue growth was primarily driven by continued customer demand for all products, including Windows Vista, which has sold over 180 million licenses since launch, the 2007 Microsoft Office system, server software, and Xbox 360 consoles and games.
'We had a strong finish in the fourth quarter, which capped off an
impressive year for the company. We grew revenue 18% for the year with
earnings per share significantly outpacing that,' said
Business Outlook
Microsoft management offers the following guidance for the quarter ending
-- Revenue is expected to be in the range of $14.7 billion to $14.9
billion.
-- Operating income is expected to be in the range of $5.9 billion to $6.0
billion.
-- Diluted earnings per share are expected to be $0.47 or $0.48.
Management offers the following guidance for the full fiscal year ending
-- Revenue is expected to be in the range of $67.3 billion to $68.1
billion.
-- Operating income is expected to be in the range of $26.3 billion to
$26.9 billion.
-- Diluted earnings per share are expected to be in the range of $2.12 to
$2.18.
Webcast Details
Microsoft will hold an audio webcast at
About Microsoft
Founded in 1975, Microsoft (Nasdaq: MSFT) is the worldwide leader in software, services 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:
-- challenges to Microsoft's business model;
-- intense competition in all of Microsoft's markets;
-- Microsoft's continued ability to protect 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;
-- actual or perceived security vulnerabilities in Microsoft products that
could reduce revenue or lead to liability;
-- government litigation and regulation affecting how Microsoft designs
and markets its products;
-- Microsoft's ability to attract and retain talented employees;
-- delays in product development and related product release schedules;
-- significant business investments that may not produce offsetting
increases in revenue;
-- changes in general economic conditions that affect demand for computer
hardware or software;
-- adverse results in legal disputes;
-- unanticipated tax liabilities;
-- Microsoft's consumer hardware or other vertically-integrated hardware
and software products may experience quality or supply problems;
-- impairment of goodwill or amortizable intangible assets causing a
charge to earnings;
-- exposure to increased economic and regulatory uncertainties from
operating a global business;
-- geo-political conditions, natural disaster, cyber-attack or other
catastrophic events disrupting Microsoft's business;
-- acquisitions and joint ventures that adversely affect the business;
-- improper disclosure of personal data could result in liability and harm
to Microsoft's reputation;
-- outages and disruptions of online services if Microsoft fails to
maintain an adequate operations infrastructure;
-- sales channel disruption such as the bankruptcy of a major distributor;
and
-- Microsoft's ability to implement operating cost structures that align
with revenue growth.
For further information regarding 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 Web site at http://www.microsoft.com/msft.
All information in this release is as of
Microsoft Corporation
Income Statements
(In millions, except per share amount)
Three Months Ended Year Ended
June 30, June 30,
2008 2007 2008 2007
(Audited)
Revenue $15,837 $13,371 $60,420 $51,122
Operating expenses:
Cost of revenue 2,866 3,237 11,598 10,693
Research and development 2,407 1,948 8,164 7,121
Sales and marketing 3,878 3,329 13,039 11,455
General and administrative 1,002 868 5,127 3,329
Total operating expenses 10,153 9,382 37,928 32,598
Operating income 5,684 3,989 22,492 18,524
Investment income and other 284 295 1,322 1,577
Income before income taxes 5,968 4,284 23,814 20,101
Provision for income taxes 1,671 1,249 6,133 6,036
Net income $4,297 $3,035 $17,681 $14,065
Earnings per share:
Basic $0.46 $0.32 $1.90 $1.44
Diluted $0.46 $0.31 $1.87 $1.42
Weighted average shares outstanding:
Basic 9,264 9,507 9,328 9,742
Diluted 9,380 9,657 9,470 9,886
Cash dividends declared per
common share $0.11 $0.10 $0.44 $0.40
Microsoft Corporation
Balance Sheets
(In millions)
June 30, June 30,
2008 2007
(Audited)
Assets
Current assets:
Cash and cash equivalents $10,339 $6,111
Short-term investments (including
securities pledged as collateral of
$2,491 and $2,356) 13,323 17,300
Total cash, cash equivalents, and
short-term investments 23,662 23,411
Accounts receivable, net of allowance
for doubtful accounts of $153 and $117 13,589 11,338
Inventories 985 1,127
Deferred income taxes 2,017 1,899
Other 2,989 2,393
Total current assets 43,242 40,168
Property and equipment, net of
accumulated depreciation of $6,302
and $5,016 6,242 4,350
Equity and other investments 6,588 10,117
Goodwill 12,108 4,760
Intangible assets, net 1,973 878
Deferred income taxes 949 1,389
Other long-term assets 1,691 1,509
Total assets $72,793 $63,171
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $4,034 $3,247
Accrued compensation 2,934 2,325
Income taxes 3,248 1,040
Short-term unearned revenue 13,397 10,779
Securities lending payable 2,614 2,741
Other 3,659 3,622
Total current liabilities 29,886 23,754
Long-term unearned revenue 1,900 1,867
Other long-term liabilities 4,721 6,453
Commitments and contingencies
Stockholders' equity:
Common stock and paid-in capital -
shares authorized 24,000;
outstanding 9,151 and 9,380 62,849 60,557
Retained deficit, including
accumulated other comprehensive
income of $1,140 and $1,654 (26,563) (29,460)
Total stockholders' equity 36,286 31,097
Total liabilities and
stockholders' equity $72,793 $63,171
Microsoft Corporation
Cash Flows Statements
(In millions)
Three Months Ended Year Ended
June 30, June 30,
2008 2007 2008 2007
Operations (Audited)
Net income $4,297 $3,035 $17,681 $14,065
Depreciation, amortization,
and other noncash items 608 381 2,056 1,440
Stock-based compensation expense 413 336 1,479 1,550
Net recognized losses (gains) on
investments (72) 4 (572) (292)
Excess tax benefits from
stock-based payment arrangements (9) (22) (120) (77)
Deferred income taxes 152 (209) 935 421
Unearned revenue 9,488 7,235 24,532 21,032
Recognition of unearned revenue (6,243) (4,946) (21,944) (19,382)
Accounts receivable (3,646) (2,775) (1,569) (1,764)
Other current assets 12 582 153 232
Other long-term assets (31) (4) (98) (435)
Other current liabilities (1,273) (128) (748) (552)
Other long-term liabilities 389 913 (173) 1,558
Net cash from operations 4,085 4,402 21,612 17,796
Financing
Common stock issued 245 1,164 3,494 6,782
Common stock repurchased (4,306) (7,217) (12,533) (27,575)
Common stock cash dividends (1,020) (952) (4,015) (3,805)
Excess tax benefits from
stock-based payment
arrangements 9 22 120 77
Other - - - (23)
Net cash used in financing (5,072) (6,983) (12,934) (24,544)
Investing
Additions to property
and equipment (1,218) (820) (3,182) (2,264)
Acquisition of companies,
net of cash acquired (2,086) (648) (8,053) (1,150)
Purchases of investments (5,159) (7,094) (20,954) (36,308)
Maturities of investments 1,335 889 2,597 4,736
Sales of investments 6,487 9,038 25,132 41,451
Securities lending payable 138 (290) (127) (376)
Net cash from (used in)
investing (503) 1,075 (4,587) 6,089
Effect of exchange rates on cash
and cash equivalents 9 6 137 56
Net change in cash and
cash equivalents (1,481) (1,500) 4,228 (603)
Cash and cash equivalents,
beginning of period 11,820 7,611 6,111 6,714
Cash and cash equivalents,
end of period $10,339 $6,111 $10,339 $6,111
Microsoft Corporation
Segment Revenue and Operating Income (Loss)
(In millions)
Three Months Ended Year Ended
June 30, June 30,
2008 2007 2008 2007
Revenue
Client $4,367 $3,809 $16,865 $14,976
Server and Tools 3,737 3,084 13,170 11,171
Online Services Business 838 677 3,214 2,441
Microsoft Business Division 5,263 4,634 18,932 16,402
Entertainment and Devices Division 1,575 1,153 8,140 6,069
Unallocated and other 57 14 99 63
Consolidated $15,837 $13,371 $60,420 $51,122
Operating Income (Loss)
Client $3,228 $2,778 $13,052 $11,467
Server and Tools 1,373 987 4,593 3,643
Online Services Business (488) (210) (1,233) (617)
Microsoft Business Division 3,341 2,983 12,358 10,777
Entertainment and Devices Division (188) (1,223) 426 (1,969)
Corporate-level activity (1,582) (1,326) (6,704) (4,777)
Consolidated $5,684 $3,989 $22,492 $18,524
Microsoft Corporation
Financial Highlights
Fourth Quarter and Fiscal Year 2008
(All growth percentages are comparisons to the fourth quarter
of fiscal year 2007 or full fiscal year 2007 unless otherwise noted)
This document contains statements that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements in this document. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
Summary
(In millions,
except per share Three Months Twelve Months
amounts and Ended June 30, Percentage Ended June 30, Percentage
percentages) 2008 2007 Change 2008 2007 Change
Revenue $15,837 $13,371 18% $60,420 $51,122 18%
Operating income $5,684 $3,989 42% $22,492 $18,524 21%
Diluted earnings
per share $0.46 $0.31 48% $1.87 $1.42 32%
Fourth Quarter
Revenue growth was primarily driven by increased Windows Server and SQL
Server revenue, increased licensing of the 2007 Microsoft Office system and
Windows Vista, and increased Xbox 360 platform sales. Foreign currency
exchange rates accounted for a
Operating income increased primarily reflecting increased revenue and
decreased cost of revenue, partially offset by increased headcount-related
expenses. Cost of revenue decreased
Full Fiscal Year
Revenue growth was driven primarily by increased licensing of the 2007
Microsoft Office system, increased Xbox 360 platform sales, increased revenue
associated with Windows Server and SQL Server, and increased licensing of
Windows Vista. Foreign currency exchange rates accounted for a
Operating income increased primarily reflecting increased revenue,
partially offset by increased headcount-related expenses, increased costs for
legal settlements and legal contingencies, and increased cost of revenue.
Headcount-related expenses increased 12%, reflecting an increase in headcount
during the year. We incurred
SEGMENT PRODUCT REVENUE/OPERATING INCOME (LOSS)
The revenue and operating income (loss) amounts in this section are presented on a basis consistent with U.S. GAAP and include certain reconciling items attributable to each of the segments. Certain corporate-level activity has been excluded from our segment operating results and is presented separately. Prior period amounts have been recast to conform to the way we internally manage and monitor performance at the segment level during the current period.
Client
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Revenue $4,367 $3,809 15% $16,865 $14,976 13%
Operating income $3,228 $2,778 16% $13,052 $11,467 14%
Client offerings consist of premium edition and standard Windows operating systems. Premium offerings are those that include additional functionality and are sold at a price above our standard versions. Premium offerings include Windows Vista Business, Windows Vista Home Premium, Windows Vista Ultimate, Windows Vista Enterprise, Windows XP Professional, Windows XP Media Center Edition, and Windows XP Tablet PC Edition. Standard Windows operating systems include Windows Vista Home Basic and Windows XP Home. Client revenue growth generally correlates with the growth of purchases of PCs from OEMs that pre- install versions of Windows operating systems because the OEM channel accounts for over 80% of total Client revenue. The differences between unit growth rates and revenue growth rates from year to year are affected by changes in the mix of OEM Windows operating systems licensed with premium edition operating systems as a percentage of total OEM Windows operating systems licensed ('OEM premium mix'), changes in the geographical mix, and changes in the channel mix of products sold by large multi-national OEMs versus those sold by local and regional system builders.
Fourth Quarter
Client revenue increased reflecting growth in licensing of Windows Vista.
OEM revenue increased
Client operating income increased reflecting increased revenue and
decreased cost of revenue, partially offset by increased sales and marketing
expenses and research and development expenses. Cost of revenue decreased
Full Fiscal Year
Client revenue increased reflecting growth in licensing of Windows Vista.
OEM revenue increased
Client operating income increased reflecting increased revenue, partially
offset by increased sales and marketing expenses and cost of revenue. Sales
and marketing expenses increased $149 million or 10%, primarily reflecting
increased expenses associated with our corporate sales force. Cost of revenue
increased $115 million or 13%, primarily driven by Windows Vista product
costs.
Server and Tools
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Revenue $3,737 $3,084 21% $13,170 $11,171 18%
Operating income $1,373 $987 39% $4,593 $3,643 26%
Server and Tools offerings consist of server software licenses and client access licenses ('CAL') for Windows Server, Microsoft SQL Server, and other server products. We also offer developer tools, training, certification, Microsoft Press, Premier and Professional product support services, and Microsoft Consulting Services. Server and Tools concentrates on licensing products, applications, tools, content, and services that make information technology professionals and developers more productive and efficient. Server products can be run on site, in a hosting environment, or in a web-based environment. We use multiple channels for licensing, including pre-installed OEM versions, licenses through partners, and licenses directly to end customers. We sell licenses both as one-time licenses and as multi-year volume licenses.
Fourth Quarter
Server and Tools revenue increased reflecting growth in product and
services revenue and included a favorable impact from foreign currency
exchange rates of
Server and Tools operating income increased primarily due to growth in
high-margin product revenue, partially offset by increased cost of revenue,
sales and marketing expenses, and research and development expenses. Cost of
revenue increased
Full Fiscal Year
Server and Tools revenue increased reflecting growth in product and
services revenue and included a favorable impact from foreign currency
exchange rates of
Server and Tools operating income increased primarily due to growth in
high-margin product revenue, partially offset by increased sales and marketing
expenses, cost of revenue, and research and development expenses. Sales and
marketing expenses increased
Online Services Business
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Revenue $838 $677 24% $3,214 $2,441 32%
Operating loss $(488) $(210) (132)% $(1,233) $(617) (100)%
Online Services Business ('OSB') consists of an on-line advertising platform with offerings for both publishers and advertisers, personal communications services such as e-mail and instant messaging, online information offerings such as Live Search, and the MSN portals and channels around the world. We earn revenue primarily from online advertising, including search, home page, and email and messaging services. Revenue is also generated through subscriptions and transactions generated from online paid services, from advertiser and publisher tools, digital marketing and advertising agency services, and from MSN narrowband Internet access subscribers. We continue to launch new online offerings and expect to do so in the future. During fiscal year 2008, we launched new releases of Windows Live Search, the Windows Live suite of applications and services, and updated our MSN Video Service. In addition, we launched a new release of adCenter and expanded our advertising platform portfolio.
During the first quarter of fiscal year 2008, we completed our acquisition
of aQuantive, Inc. ('aQuantive'), a digital marketing business which we expect
will play a key role in the development of our advertising business. aQuantive
earns revenue from online advertising and from digital marketing and
advertising agency services. We believe the acquisition will help us build and
support next-generation advertiser and publisher solutions in environments
such as cross-media planning, video-on-demand, and Internet protocol
television. aQuantive was consolidated into our results of operations starting
Fourth Quarter
OSB revenue increased driven by increased online advertising revenue and
the inclusion of aQuantive revenue, partially offset by decreased access
revenue. Online advertising revenue increased
OSB operating loss increased driven by increased cost of revenue and other
operating expenses, partially offset by increased revenue. Cost of revenue
increased
Full Fiscal Year
OSB revenue increased driven by increased online advertising revenue and
the inclusion of aQuantive revenue, partially offset by decreased access
revenue. Online advertising revenue increased
OSB operating loss increased driven by increased cost of revenue and other
operating expenses, partially offset by increased revenue. Cost of revenue
increased
Microsoft Business Division
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Revenue $5,263 $4,634 14% $18,932 $16,402 15%
Operating income $3,341 $2,983 12% $12,358 $10,777 15%
Microsoft Business Division ('MBD') offerings consist of the Microsoft
Office system and Microsoft Dynamics business solutions. Microsoft Office
system products are designed to increase personal, team, and organization
productivity through a range of programs, services, and software solutions.
Growth of revenue from the Microsoft Office system offerings, which generate
over 90% of MBD revenue, depends on our ability to add value to the core
Office product set and to continue to expand our product offerings in other
information worker areas such as enterprise content management, collaboration,
unified communications, and business intelligence. Microsoft Dynamics products
provide business solutions for financial management, customer relationship
management, supply chain management, and analytics applications for small and
mid-size businesses, large organizations, and divisions of global enterprises.
We evaluate our results based upon the nature of the end user in two primary
parts: business revenue, which includes Microsoft Office system revenue
generated through volume licensing agreements and Microsoft Dynamics revenue,
and consumer revenue, which includes revenue from retail packaged product
sales and OEM revenue. In
Fourth Quarter
MBD revenue increased reflecting growth in licensing of the 2007 Microsoft
Office system and included a favorable impact from foreign currency exchange
rates of
MBD operating income increased reflecting growth in revenue, partially
offset by increased research and development expenses, cost of revenue, and
sales and marketing expenses. Research and development expenses increased
Full Fiscal Year
MBD revenue increased reflecting growth in licensing of the 2007 Microsoft
Office system and included a favorable impact from foreign currency exchange
rates of
MBD operating income increased reflecting growth in revenue, partially
offset by increased sales and marketing expenses, research and development
expenses, and cost of revenue. Sales and marketing expenses increased
Entertainment and Devices Division
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Revenue $1,575 $1,153 37% $8,140 $6,069 34%
Operating income
(loss) $(188)$(1,223) 85% $426 $(1,969) *
* Not meaningful
Entertainment and Devices Division ('EDD') products include the Xbox 360
platform (which includes the Microsoft Xbox video game console system, Xbox
360 video games, Xbox Live, and Xbox 360 accessories), the Zune digital music
and entertainment platform, PC software games, online games and services,
Mediaroom (our Internet protocol television software), the Surface computing
platform, mobile and embedded device platforms, and other devices. EDD leads
the development efforts for our line of consumer software and hardware
products including application software for Macintosh computers and Microsoft
PC hardware products, and is responsible for all retail sales and marketing
for Microsoft Office and the Windows operating systems. In
Fourth Quarter
EDD revenue increased primarily due to increased Xbox 360 platform sales.
Xbox 360 platform and PC games revenue increased
EDD operating loss decreased primarily due to decreased cost of revenue
and increased revenue, partially offset by increased research and development
expenses and sales and marketing expenses. Cost of revenue decreased
Full Fiscal Year
EDD revenue increased primarily due to increased Xbox 360 platform sales.
Xbox 360 platform and PC game revenue increased
EDD operating income increased primarily due to increased revenue and
decreased cost of revenue, partially offset by increased research and
development expenses and sales and marketing expenses. Cost of revenue
decreased
Corporate-Level Activity
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Corporate-level
activity $(1,582) $(1,326) (19)% $(6,704) $(4,777) (40)%
Certain corporate-level activity including expenses related to corporate
operations associated with broad-based sales and marketing, product support
services, human resources, legal, finance, information technology, corporate
development and procurement activities, research and development and other
costs, and legal settlements and contingencies, is not allocated to our
segments. Corporate-level expenses increased during the three months ended
Operating Expenses
Cost of Revenue
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Cost of revenue $2,866 $3,237 (11)% $11,598 $10,693 8%
As a percent
of revenue 18% 24% (6)ppt 19% 21% (2)ppt
Cost of revenue includes manufacturing and distribution costs for products
sold and programs licensed, operating costs related to product support service
centers and product distribution centers, costs incurred to support and
maintain Internet-based products and services, warranty costs, inventory
valuation adjustments, and costs associated with the delivery of consulting
services. Cost of revenue decreased during the three months ended
Research and Development
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Research and
development $2,407 $1,948 24% $8,164 $7,121 15%
As a percent
of revenue 15% 15% - ppt 14% 14% - ppt
Research and development expenses include payroll, employee benefits,
stock-based compensation expense, and other headcount-related costs associated
with product development. Research and development expenses also include
third-party development and programming costs, localization costs incurred to
translate software for international markets, the amortization of purchased
software code and services content, and in-process research and development.
Research and development expenses increased during the three and twelve months
ended
Sales and Marketing
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Sales and
marketing $3,878 $3,329 16% $13,039 $11,455 14%
As a percent
of revenue 24% 25% (1)ppt 22% 22% - ppt
Sales and marketing expenses include payroll, employee benefits, stock-
based compensation expense, and other headcount-related costs associated with
sales and marketing personnel and advertising, promotions, trade shows,
seminars, and other programs. Sales and marketing expenses increased during
the three and twelve months ended
General and Administrative
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
General and
administrative $1,002 $868 15% $5,127 $3,329 54%
As a percent
of revenue 6% 6% - ppt 8% 7% 1 ppt
General and administrative costs include payroll, employee benefits,
stock-based compensation expense and other headcount-related costs associated
with finance, legal, facilities, certain human resources, other administrative
headcount, and legal and other administrative fees. General and administrative
expenses increased during the three months ended
Investment Income and Income Taxes
Investment Income
The components of investment income and other were as follows:
Three Months Twelve Months
(In millions, Ended June 30, Percentage Ended June 30, Percentage
except percentages) 2008 2007 Change 2008 2007 Change
Dividends and
interest $217 $301 (28)% $888 $1,319 (33)%
Net recognized
gains on
investments 121 145 (17)% 346 650 (47)%
Net gains (losses)
on derivatives (49) (149) 67% 226 (358) *
Other (5) (2) * (138) (34) *
Investment income
and other $284 $295 (4)% $1,322 $1,577 (16)%
* Not meaningful
Fourth Quarter
Dividends and interest income decreased reflecting lower interest rates on
our fixed-income investments and a reduction in the average balance of
interest-bearing investments. Net recognized gains on investments, which
included other-than-temporary impairments of
Full Fiscal Year
Dividends and interest income decreased reflecting lower interest rates on
our fixed-income investments and a reduction in the average balance of
interest-bearing investments. Net recognized gains on investments, which
included other-than-temporary impairments of
We lend certain fixed-income and equity securities to increase investment returns. The loaned securities continue to be carried as investments on our balance sheet. Collateral and/or security interest is determined based upon the underlying security and the creditworthiness of the borrower. Cash collateral is recorded as an asset with a corresponding liability.
Income Taxes
The effective tax rate was 28% and 29% for the three months ended
Financial Condition
Cash, cash equivalents, and short-term investments totaled
In general, and where applicable, we use quoted prices in active markets for identical assets or liabilities to price positions. This pricing methodology applies to exchange-traded mutual funds, domestic and international equities, U.S. treasuries, and agency securities. If quoted prices in active markets for identical assets or liabilities to price positions are not available, then we use inputs other than the quoted prices that are observable either directly or indirectly, predominately based on prices received from third-party vendors. Assets and liabilities measured using unobservable inputs are an immaterial portion of our portfolio.
While we own certain mortgage and asset-backed fixed-income securities,
our portfolio as of
Unearned Revenue
Unearned revenue from volume licensing programs represents customer billings, paid either upfront or annually at the beginning of each billing coverage period, that are accounted for as subscriptions with revenue recognized ratably over the billing coverage period. For certain other licensing arrangements, revenue attributable to undelivered elements, including free post-delivery telephone support and the right to receive unspecified upgrades/enhancements of Microsoft Internet Explorer on a when- and-if-available basis for Windows XP and prior versions, is based on the sales price of those elements when sold separately and is recognized ratably on a straight-line basis over the life cycle of the related product. Other unearned revenue includes services, Microsoft Dynamics business solution products, Xbox Live subscriptions, advertising, and Mediaroom for which we have been paid upfront and earn the revenue when we provide the service or software, or otherwise meet the revenue recognition criteria.
The components of unearned revenue were as follows:
June 30, March 31, June 30,
(In millions) 2008 2008 2007
Volume licensing programs $12,232 $9,080 $9,334
Undelivered elements 1,396 1,516 1,839
Other 1,669 1,543 1,473
Unearned revenue $15,297 $12,139 $12,646
Unearned revenue by segment was as follows:
June 30, March 31, June 30,
(In millions) 2008 2008 2007
Client $2,738 $2,524 $2,875
Server and Tools 5,007 3,890 3,652
Microsoft Business Division 7,101 5,253 5,771
Other 451 472 348
Unearned revenue $15,297 $12,139 $12,646
The following table outlines the expected recognition of unearned revenue
as of June 30, 2008:
Recognition
of Unearned
Revenue
(In millions)
Three months ended:
September 30, 2008 $5,120
December 31, 2008 4,033
March 31, 2009 2,775
June 30, 2009 1,469
Thereafter 1,900
Unearned revenue $15,297
Cash Flows
Fourth Quarter
Cash flow from operations decreased
Full Fiscal Year
Cash flow from operations increased
SOURCE Microsoft Corp.