Microsoft Earnings, Revenues Grow in 4th Quarter

Microsoft on Thursday announced 15 percent revenue growth, and 82 percent earnings growth for its fourth quarter compared to the year-ago period. But the company missed analyst expectations for earnings per share.

Microsoft generated $9.29 billion in revenues for the quarter ended June 30, compared with $8.07 billion for Microsoft's fourth quarter of 2003. Net income hit $2.69 billion for the quarter, compared with $1.48 billion for the comparable quarter in 2003.

Those numbers amount to diluted earnings of 25 cents per share, up from 14 cents per share in the earlier period. Analysts had been expecting Microsoft to announce earnings in the range of 29 cents per share on Thursday.

Microsoft got a 3 percent bounce in its stock value from its announcement on Tuesday of a $3 per share special dividend, doubled regular dividends and a massive stock buyback program. Shares were down in after-hours trading after Microsoft's earnings announcement Thursday.

Microsoft also released its results for the full year that ended June 30. Revenue for the year was up 14 percent to $36.8 billion from $32.2 billion last year. Net income was up 8.5 percent to $8.17 billion from $7.53 billion the previous year. Diluted earnings per share reached 75 cents, up from 69 cents the previous year.

Chief financial officer John Connors declared fiscal 2004 a "banner year" in a statement. "Revenue grew 14 percent on strong performances from each of our seven businesses, our emerging business operating margins improved, and we resolved a significant portion of our legal exposure," Connors said.

The company claimed growth across all segments of the company. Server and tools grew 20 percent due in part to a 20 percent jump in Windows Server license units and increased demand for SQL Server and Exchange Server. Information Worker, the segment that includes Office, grew 23 percent compared to the previous fourth quarter.

MSN posted its first profitable year. After losing $567 million in fiscal year 2003, MSN turned a $121 million profit in fiscal year 2004.

Providing guidance for the financial quarter that runs through Sept. 30, Microsoft predicted revenues of $8.9 billion to $9 billion and operating income of $3.7 billion to $3.8 billion. For fiscal 2005, Microsoft predicted revenues of $38.4 billion to $38.8 billion and operating income of $16.1 billion to $16.5 billion. The company will rely on cost savings to deliver stronger earnings on those revenues next year. Earlier this month, CEO Steve Ballmer told employees in an e-mail that he and Connors are looking for ways to cut expenses by $1 billion in Microsoft's fiscal 2005.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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