UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 24, 2008
Microsoft Corporation
(Exact Name of Registrant as Specified in Its Charter)
Washington
(State or Other Jurisdiction of Incorporation)
| 0-14278 | 91-1144442 | |
| (Commission File Number) | (IRS Employer Identification No.) | |
| One Microsoft Way, Redmond, Washington | 98052-6399 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
(425) 882-8080
(Registrant’s Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition |
On April 24, 2008, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended March 31, 2008. A copy of the press release is furnished as Exhibit 99.1 to this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits:
| 99.1 | Press release, dated April 24, 2008, issued by Microsoft Corporation | |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| MICROSOFT CORPORATION (Registrant) | ||||
| Date: April 24, 2008 | /S/ FRANK H. BROD | |||
| Frank H. Brod | ||||
| Corporate Vice President, Finance and Administration; Chief Accounting Officer | ||||
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INDEX TO EXHIBITS
| Exhibit No. |
Description | |
| 99.1 | Press release, dated April 24, 2008 | |
4
Exhibit 99.1
Microsoft Reports Record Third-Quarter Revenue
Quarter marks the worldwide launch of Windows Server 2008, SQL Server 2008 and Visual Studio 2008.
REDMOND, Wash. — April 24, 2008 — Microsoft Corp. today announced third-quarter revenue, operating income and diluted earnings per share of $14.45 billion, $4.41 billion and $0.47, respectively. Operating income and earnings per share results included a charge of $1.42 billion, or $0.15 per share, for the European Commission fine. Income taxes were reduced by $0.15 per share for the resolution of a tax audit.
“Our third-quarter results demonstrate the benefit of our diversified business model,” said Chris Liddell, chief financial officer of Microsoft. “Our broad span across geographies, product categories and customer segments is a tremendous asset and supports our outlook for double-digit revenue, operating income and earnings per share growth for this fiscal year and also for fiscal year 2009.”
Entertainment and Devices revenue for the quarter grew 68% over the comparable period last year driven by robust demand for Xbox 360 consoles. Cumulative console sales surpassed 19 million during the quarter, up 74% from a year ago. Server and Tools revenue growth of 18% added to its string of consecutive double-digit revenue growth quarters, which now stands at 23.
“The breadth of our product offerings and our ability to provide solutions across a range of customer and partner needs paid off again this quarter. The third quarter also kicked off the largest enterprise platform launch in our company history, which highlights Windows Server 2008, SQL Server 2008 and Visual Studio 2008,” said Kevin Turner, chief operating officer of Microsoft. “These new products strengthen our ability to help business customers and partners save money, optimize their people, processes and technology, and position IT as a strategic asset for their businesses.”
Business Outlook
Microsoft management offers the following guidance for the quarter ending June 30, 2008:
| • | Revenue is expected to be in the range of $15.5 billion to $15.8 billion. |
| • | Operating income is expected to be in the range of $5.8 billion to $6.2 billion. |
| • | Diluted earnings per share are expected to be in the range of $0.45 to $0.48. |
Management offers the following preliminary guidance for the full fiscal year ending June 30, 2009:
| • | Revenue is expected to be in the range of $66.9 billion to $68.0 billion. |
| • | Operating income is expected to be in the range of $26.7 billion to $27.4 billion. |
| • | Diluted earnings per share are expected to be in the range of $2.13 to $2.19. |
Additional details on fiscal year 2009 guidance will be provided in the fourth-quarter earnings announcement and during the company’s Financial Analyst Meeting on July 24.
Webcast Details
Microsoft will hold an audio webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today with Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Colleen Healy, general manager of Investor Relations, 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/msft. The webcast will be available for replay through the close of business on April 24, 2009.
Adjusted Financial Results – Reconciliation of Non-GAAP Measures
The financial results for the third quarter of fiscal year 2007 contained the recognition of $1.67 billion of revenue and operating income that had been deferred from the first half of the year related primarily to technology guarantee programs. Operating income also included $154 million of legal charges. Diluted earnings per share included $0.12 per share associated with the technology guarantee program, $0.01 for legal charges and $0.02 for tax benefits.
| Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | Year-over-Year Growth | |||||||||||||||||||||||||||||
| ($ in millions, except per share amounts) |
Revenue | Operating income |
Diluted earnings per share |
Revenue | Operating income |
Diluted earnings per share |
Revenue | Operating income |
Diluted earnings per share |
||||||||||||||||||||||
| As reported |
$ | 14,454 | $ | 4,409 | $ | 0.47 | $ | 14,398 | $ | 6,589 | $ | 0.50 | 0 | % | -33 | % | -6 | % | |||||||||||||
| Technology guarantee & pre-shipment deferrals |
($1,669 | ) | ($1,669 | ) | ($0.12 | ) | |||||||||||||||||||||||||
| Certain legal charges |
$ | 1,417 | $ | 0.15 | $ | 154 | $ | 0.01 | |||||||||||||||||||||||
| Tax benefits |
($0.15 | ) | ($0.02 | ) | |||||||||||||||||||||||||||
| As adjusted |
$ | 14,454 | $ | 5,826 | $ | 0.47 | $ | 12,729 | $ | 5,074 | $ | 0.37 | 14 | % | 15 | % | 27 | % | |||||||||||||
This information has been provided to aid readers of the financial statements in further understanding the company’s financial performance. The impact of certain items and events on the financial results may not be indicative of trends affecting the company’s business. For comparability of reporting, management considers this information in conjunction with GAAP amounts in evaluating business performance. The non-GAAP financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
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.
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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 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; |
| • | 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 April 24, 2008. 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, financial analysts and investors only:
Colleen Healy, general manager, Investor Relations, (425) 706-3703
For more information, press only:
Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070, rrt@waggeneredstrom.com
Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft Web page at http://www.microsoft.com/presspass on Microsoft’s corporate information pages. 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/msft.
Microsoft Corporation
Income Statements
(In millions, except per share amounts) (Unaudited)
| Three Months Ended March 31, |
Nine Months Ended March 31, | |||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||
| Revenue |
$ | 14,454 | $ | 14,398 | $ | 44,583 | $ | 37,751 | ||||
| Operating expenses: |
||||||||||||
| Cost of revenue |
2,514 | 2,140 | 8,732 | 7,456 | ||||||||
| Research and development |
2,035 | 1,750 | 5,757 | 5,173 | ||||||||
| Sales and marketing |
3,155 | 2,936 | 9,161 | 8,126 | ||||||||
| General and administrative |
2,341 | 983 | 4,125 | 2,461 | ||||||||
| Total operating expenses |
10,045 | 7,809 | 27,775 | 23,216 | ||||||||
| Operating income |
4,409 | 6,589 | 16,808 | 14,535 | ||||||||
| Investment income and other |
401 | 382 | 1,038 | 1,282 | ||||||||
| Income before income taxes |
4,810 | 6,971 | 17,846 | 15,817 | ||||||||
| Provision for income taxes |
422 | 2,045 | 4,462 | 4,787 | ||||||||
| Net income |
$ | 4,388 | $ | 4,926 | $ | 13,384 | $ | 11,030 | ||||
| Earnings per share: |
||||||||||||
| Basic |
$ | 0.47 | $ | 0.51 | $ | 1.43 | $ | 1.12 | ||||
| Diluted |
$ | 0.47 | $ | 0.50 | $ | 1.41 | $ | 1.11 | ||||
| Weighted average shares outstanding: |
||||||||||||
| Basic |
9,307 | 9,725 | 9,349 | 9,821 | ||||||||
| Diluted |
9,428 | 9,862 | 9,492 | 9,955 | ||||||||
| Cash dividends declared per common share |
$ | 0.11 | $ | 0.10 | $ | 0.33 | $ | 0.30 | ||||
Microsoft Corporation
Balance Sheets
(In millions)
| March 31, 2008 |
June 30, 2007 (1) |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 11,820 | $ | 6,111 | ||||
| Short-term investments (including securities pledged as collateral of $2,318 and $2,356) |
14,521 | 17,300 | ||||||
| Total cash, cash equivalents, and short-term investments |
26,341 | 23,411 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $147 and $117 |
9,871 | 11,338 | ||||||
| Inventories |
774 | 1,127 | ||||||
| Deferred income taxes |
1,721 | 1,899 | ||||||
| Other |
2,782 | 2,393 | ||||||
| Total current assets |
41,489 | 40,168 | ||||||
| Property and equipment, net |
5,516 | 4,350 | ||||||
| Equity and other investments |
8,659 | 10,117 | ||||||
| Goodwill |
10,346 | 4,760 | ||||||
| Intangible assets, net |
1,639 | 878 | ||||||
| Deferred income taxes |
1,367 | 1,389 | ||||||
| Other long-term assets |
1,731 | 1,509 | ||||||
| Total assets |
$ | 70,747 | $ | 63,171 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,600 | $ | 3,247 | ||||
| Accrued compensation |
2,427 | 2,325 | ||||||
| Income taxes |
3,765 | 1,040 | ||||||
| Short-term unearned revenue |
10,385 | 10,779 | ||||||
| Securities lending payable |
2,476 | 2,741 | ||||||
| Other |
4,375 | 3,622 | ||||||
| Total current liabilities |
27,028 | 23,754 | ||||||
| Long-term unearned revenue |
1,754 | 1,867 | ||||||
| Other long-term liabilities |
4,411 | 6,453 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock and paid-in capital—shares authorized 24,000; outstanding 9,310 and 9,380 |
63,375 | 60,557 | ||||||
| Retained deficit, including accumulated other comprehensive income of $1,355 and $1,654 |
(25,821 | ) | (29,460 | ) | ||||
| Total stockholders’ equity |
37,554 | 31,097 | ||||||
| Total liabilities and stockholders’ equity |
$ | 70,747 | $ | 63,171 | ||||
| (1) |
Derived from audited financial statements |
Microsoft Corporation
Cash Flows Statements
(In millions) (Unaudited)
| Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Operations |
||||||||||||||||
| Net income |
$ | 4,388 | $ | 4,926 | $ | 13,384 | $ | 11,030 | ||||||||
| Depreciation, amortization, and other noncash items |
532 | 445 | 1,448 | 1,059 | ||||||||||||
| Stock-based compensation expense |
373 | 321 | 1,066 | 1,214 | ||||||||||||
| Net recognized gains on investments |
(179 | ) | (61 | ) | (500 | ) | (296 | ) | ||||||||
| Excess tax benefits from stock-based payment arrangements |
(9 | ) | (7 | ) | (111 | ) | (55 | ) | ||||||||
| Deferred income taxes |
103 | 981 | 783 | 630 | ||||||||||||
| Unearned revenue |
5,228 | 4,551 | 15,044 | 13,797 | ||||||||||||
| Recognition of unearned revenue |
(5,368 | ) | (6,121 | ) | (15,701 | ) | (14,436 | ) | ||||||||
| Accounts receivable |
1,857 | 1,455 | 2,077 | 1,011 | ||||||||||||
| Other current assets |
(69 | ) | 7 | 141 | (350 | ) | ||||||||||
| Other long-term assets |
(1 | ) | (32 | ) | (67 | ) | (431 | ) | ||||||||
| Other current liabilities |
1,389 | 772 | 525 | (424 | ) | |||||||||||
| Other long-term liabilities |
(1,162 | ) | 54 | (562 | ) | 645 | ||||||||||
| Net cash from operations |
7,082 | 7,291 | 17,527 | 13,394 | ||||||||||||
| Financing |
||||||||||||||||
| Common stock issued |
268 | 784 | 3,249 | 5,618 | ||||||||||||
| Common stock repurchased |
(1,240 | ) | (6,878 | ) | (8,227 | ) | (20,358 | ) | ||||||||
| Common stock cash dividends |
(1,023 | ) | (976 | ) | (2,995 | ) | (2,853 | ) | ||||||||
| Excess tax benefits from stock-based payment arrangements |
9 | 7 | 111 | 55 | ||||||||||||
| Other |
— | — | — | (23 | ) | |||||||||||
| Net cash used in financing |
(1,986 | ) | (7,063 | ) | (7,862 | ) | (17,561 | ) | ||||||||
| Investing |
||||||||||||||||
| Additions to property and equipment |
(759 | ) | (461 | ) | (1,964 | ) | (1,444 | ) | ||||||||
| Acquisition of companies, net of cash acquired |
(138 | ) | (41 | ) | (5,967 | ) | (502 | ) | ||||||||
| Purchases of investments |
(3,481 | ) | (7,257 | ) | (15,795 | ) | (29,214 | ) | ||||||||
| Maturities of investments |
462 | 1,688 | 1,262 | 3,847 | ||||||||||||
| Sales of investments |
2,829 | 6,264 | 18,645 | 32,413 | ||||||||||||
| Securities lending payable |
309 | 318 | (265 | ) | (86 | ) | ||||||||||
| Net cash from/(used in) investing |
(778 | ) | 511 | (4,084 | ) | 5,014 | ||||||||||
| Effect of exchange rates on cash and cash equivalents |
42 | 13 | 128 | 50 | ||||||||||||
| Net change in cash and cash equivalents |
4,360 | 752 | 5,709 | 897 | ||||||||||||
| Cash and cash equivalents, beginning of period |
7,460 | 6,859 | 6,111 | 6,714 | ||||||||||||
| Cash and cash equivalents, end of period |
$ | 11,820 | $ | 7,611 | $ | 11,820 | $ | 7,611 | ||||||||
Microsoft Corporation
Segment Revenue and Operating Income/(Loss)
(In millions) (Unaudited)
| Three Months Ended March 31, |
Nine Months Ended March 31, |
|||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Revenue |
||||||||||||||||
| Client |
$ | 4,025 | $ | 5,274 | $ | 12,498 | $ | 11,167 | ||||||||
| Server and Tools |
3,255 | 2,748 | 9,433 | 8,087 | ||||||||||||
| Online Services Business |
843 | 603 | 2,377 | 1,764 | ||||||||||||
| Microsoft Business Division |
4,745 | 4,827 | 13,668 | 11,768 | ||||||||||||
| Entertainment and Devices Division |
1,576 | 936 | 6,565 | 4,916 | ||||||||||||
| Unallocated and other |
10 | 10 | 42 | 49 | ||||||||||||
| Consolidated |
$ | 14,454 | $ | 14,398 | $ | 44,583 | $ | 37,751 | ||||||||
| Operating Income/(Loss) |
||||||||||||||||
| Client |
$ | 3,097 | $ | 4,204 | $ | 9,824 | $ | 8,689 | ||||||||
| Server and Tools |
1,092 | 911 | 3,220 | 2,656 | ||||||||||||
| Online Services Business |
(228 | ) | (171 | ) | (745 | ) | (407 | ) | ||||||||
| Microsoft Business Division |
3,138 | 3,399 | 9,017 | 7,794 | ||||||||||||
| Entertainment and Devices Division |
89 | (324 | ) | 614 | (746 | ) | ||||||||||
| Corporate-level activity |
(2,779 | ) | (1,430 | ) | (5,122 | ) | (3,451 | ) | ||||||||
| Consolidated |
$ | 4,409 | $ | 6,589 | $ | 16,808 | $ | 14,535 | ||||||||