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) October 23, 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 October 23, 2008, Microsoft Corporation issued a press release announcing its financial results for the fiscal quarter ended September 30, 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 October 23, 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: October 23, 2008 | /s/ Frank H. Brod | |||
| Frank H. Brod Corporate Vice President, Finance and Administration; Chief Accounting Officer | ||||
3
INDEX TO EXHIBITS
| Exhibit No. |
Description | |
| 99.1 | Press release dated October 23, 2008 | |
4
Exhibit 99.1
Microsoft Reports Record First-Quarter Revenue
Revenue surpasses $15 billion with healthy sales of enterprise software and Xbox 360 consoles
REDMOND, Wash.—Oct. 23, 2008—Microsoft Corp. today announced revenue of $15.06 billion for the fiscal quarter ended Sept. 30, 2008, a 9% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $6.00 billion, $4.37 billion and $0.48, respectively.
Microsoft showed particular strength in multiyear annuity sales, which grew more than 20% during the quarter from the combined businesses of Client, Microsoft Business Division and Server and Tools.
“Our customers are asking how they can save money and do more with less,” said Kevin Turner, chief operating officer at Microsoft. “Microsoft is uniquely positioned to help our customers save money through supplier consolidation, increased productivity, and a low total cost of ownership through the depth and breadth of our product portfolio and solutions.”
Microsoft continued to add to its product and services portfolio with innovative offerings such as Microsoft SQL Server 2008, Microsoft Hyper-V Server 2008 and the first service update to Microsoft Dynamics CRM Online.
“In a challenging economic environment, the first-quarter results exhibit the strength and diversity of our business model,” said Chris Liddell, chief financial officer of Microsoft.
Business Outlook
Microsoft’s business outlook reflects a balance of risks and the likelihood of a continued economic slowdown. The trends seen late in the first-quarter are now forecasted to continue, whereas previous expectations were for the economy to improve in the second half of the fiscal year. In this economic environment, the company is focused on three main
actions; working with customers to provide high value products at the lowest total overall cost of ownership, increasing focus on expense management and targeting investment into the highest priority strategic opportunities.
Microsoft management offers the following guidance for the quarter ending Dec. 31, 2008:
| • | Revenue is expected to be in the range of $17.3 billion to $17.8 billion. |
| • | Operating income is expected to be in the range of $6.1 billion to $6.4 billion. |
| • | Diluted earnings per share are expected to be in the range of $0.51 to $0.53. |
Management offers the following guidance for the full fiscal year ending June 30, 2009:
| • | Revenue is expected to be in the range of $64.9 billion to $66.4 billion. |
| • | Operating income is expected to be in the range of $24.4 billion to $25.5 billion. |
| • | Diluted earnings per share are expected to be in the range of $2.00 to $2.10. |
Liddell noted that “we feel extremely good about our relative competitive position and our ability to continue outgrowing IT spend. We believe our exceptionally strong cash flow, product pipeline and financial strength will allow us to weather economic conditions well.”
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 Bill Koefoed, general manager of Investor Relations, to discuss details of the company’s performance for the quarter and certain forward-looking information. The webcast will be available for replay through the close of business on Oct. 23, 2009.
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 gain customer acceptance and produce offsetting increases in revenue; |
| • | changes in general economic conditions that affect our investment portfolio or demand for computer hardware or software; |
| • | adverse results in legal disputes; |
| • | unanticipated tax liabilities; |
| • | quality or supply problems in Microsoft’s consumer hardware or other vertically integrated hardware and software products; |
| • | impairment of goodwill or amortizable intangible assets causing a charge to earnings; |
| • | exposure to increased economic and regulatory uncertainties from operating a global business; |
| • | geopolitical conditions, natural disaster, cyberattack 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 Oct. 23, 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, press only:
Rapid Response Team, Waggener Edstrom Worldwide, (503) 443-7070, rrt@waggeneredstrom.com
For more information, financial analysts and investors only:
Bill Koefoed, general manager, Investor Relations, (425) 706-3703
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 September 30, | |||||||
| 2008 | 2007 | ||||||
| Revenue |
$ | 15,061 | $ | 13,762 | |||
| Operating expenses: |
|||||||
| Cost of revenue |
2,848 | 2,675 | |||||
| Research and development |
2,283 | 1,837 | |||||
| Sales and marketing |
3,044 | 2,683 | |||||
| General and administrative |
887 | 718 | |||||
| Total operating expenses |
9,062 | 7,913 | |||||
| Operating income |
5,999 | 5,849 | |||||
| Other income (expense) |
(8 | ) | 367 | ||||
| Income before income taxes |
5,991 | 6,216 | |||||
| Provision for income taxes |
1,618 | 1,927 | |||||
| Net income |
$ | 4,373 | $ | 4,289 | |||
| Earnings per share: |
|||||||
| Basic |
$ | 0.48 | $ | 0.46 | |||
| Diluted |
$ | 0.48 | $ | 0.45 | |||
| Weighted average shares outstanding: |
|||||||
| Basic |
9,084 | 9,380 | |||||
| Diluted |
9,183 | 9,513 | |||||
| Cash dividends declared per common share |
$ | 0.13 | $ | 0.11 | |||
Microsoft Corporation
Balance Sheets
(In millions)
| September 30, 2008 |
June 30, 2008 (1) |
|||||||
| (Unaudited) | ||||||||
| Assets |
||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 9,004 | $ | 10,339 | ||||
| Short-term investments (including securities pledged as collateral of $1,011 and $2,491) |
11,718 | 13,323 | ||||||
| Total cash, cash equivalents, and short-term investments |
20,722 | 23,662 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $168 and $153 |
9,535 | 13,589 | ||||||
| Inventories |
1,640 | 985 | ||||||
| Deferred income taxes |
1,974 | 2,017 | ||||||
| Other |
3,331 | 2,989 | ||||||
| Total current assets |
37,202 | 43,242 | ||||||
| Property and equipment, net of accumulated depreciation of $6,622 and $6,302 |
6,552 | 6,242 | ||||||
| Equity and other investments |
4,381 | 6,588 | ||||||
| Goodwill |
12,291 | 12,108 | ||||||
| Intangible assets, net |
1,899 | 1,973 | ||||||
| Deferred income taxes |
1,041 | 949 | ||||||
| Other long-term assets |
1,751 | 1,691 | ||||||
| Total assets |
$ | 65,117 | $ | 72,793 | ||||
| Liabilities and stockholders’ equity |
||||||||
| Current liabilities: |
||||||||
| Accounts payable |
$ | 3,351 | $ | 4,034 | ||||
| Short-term debt |
1,975 | — | ||||||
| Accrued compensation |
2,138 | 2,934 | ||||||
| Income taxes |
514 | 3,248 | ||||||
| Short-term unearned revenue |
11,815 | 13,397 | ||||||
| Securities lending payable |
1,070 | 2,614 | ||||||
| Other |
3,520 | 3,659 | ||||||
| Total current liabilities |
24,383 | 29,886 | ||||||
| Long-term unearned revenue |
1,662 | 1,900 | ||||||
| Other long-term liabilities |
5,478 | 4,721 | ||||||
| Commitments and contingencies |
||||||||
| Stockholders’ equity: |
||||||||
| Common stock and paid-in capital - shares authorized 24,000; outstanding 8,977 and 9,151 |
61,655 | 62,849 | ||||||
| Retained deficit, including accumulated other comprehensive income of $877 and $1,140 |
(28,061 | ) | (26,563 | ) | ||||
| Total stockholders’ equity |
33,594 | 36,286 | ||||||
| Total liabilities and stockholders’ equity |
$ | 65,117 | $ | 72,793 | ||||
| (1) |
Derived from audited financial statements |
Microsoft Corporation
Cash Flows Statements
(In millions) (Unaudited)
| Three Months Ended September 30, |
||||||||
| 2008 | 2007 | |||||||
| Operations |
||||||||
| Net income |
$ | 4,373 | $ | 4,289 | ||||
| Depreciation, amortization, and other noncash items |
585 | 435 | ||||||
| Stock-based compensation expense |
443 | 333 | ||||||
| Net recognized losses (gains) on investments and derivatives |
36 | (187 | ) | |||||
| Excess tax benefits from stock-based payment arrangements |
(44 | ) | (69 | ) | ||||
| Deferred income taxes |
376 | 357 | ||||||
| Unearned revenue |
4,186 | 3,821 | ||||||
| Recognition of unearned revenue |
(6,044 | ) | (4,965 | ) | ||||
| Accounts receivable |
3,985 | 2,806 | ||||||
| Other current assets |
(558 | ) | (235 | ) | ||||
| Other long-term assets |
(116 | ) | (11 | ) | ||||
| Other current liabilities |
(4,552 | ) | (1,189 | ) | ||||
| Other long-term liabilities |
700 | 493 | ||||||
| Net cash from operations |
3,370 | 5,878 | ||||||
| Financing |
||||||||
| Proceeds from short-term debt |
1,975 | — | ||||||
| Common stock issued |
228 | 646 | ||||||
| Common stock repurchased |
(6,493 | ) | (2,930 | ) | ||||
| Common stock cash dividends |
(998 | ) | (938 | ) | ||||
| Excess tax benefits from stock-based payment arrangements |
44 | 69 | ||||||
| Net cash used in financing |
(5,244 | ) | (3,153 | ) | ||||
| Investing |
||||||||
| Additions to property and equipment |
(778 | ) | (510 | ) | ||||
| Acquisition of companies, net of cash acquired |
(377 | ) | (5,396 | ) | ||||
| Purchases of investments |
(4,246 | ) | (5,997 | ) | ||||
| Maturities of investments |
464 | 330 | ||||||
| Sales of investments |
7,075 | 9,120 | ||||||
| Securities lending payable |
(1,543 | ) | 196 | |||||
| Net cash from (used in) investing |
595 | (2,257 | ) | |||||
| Effect of exchange rates on cash and cash equivalents |
(56 | ) | 58 | |||||
| Net change in cash and cash equivalents |
(1,335 | ) | 526 | |||||
| Cash and cash equivalents, beginning of period |
10,339 | 6,111 | ||||||
| Cash and cash equivalents, end of period |
$ | 9,004 | $ | 6,637 | ||||
Microsoft Corporation
Segment Revenue and Operating Income (Loss)
(In millions) (Unaudited)
| Three Months Ended September 30, |
||||||||
| 2008 | 2007 | |||||||
| Revenue |
||||||||
| Client |
$ | 4,218 | $ | 4,139 | ||||
| Server and Tools |
3,406 | 2,900 | ||||||
| Online Services Business |
770 | 671 | ||||||
| Microsoft Business Division |
4,949 | 4,117 | ||||||
| Entertainment and Devices Division |
1,814 | 1,929 | ||||||
| Unallocated and other |
(96 | ) | 6 | |||||
| Consolidated |
$ | 15,061 | $ | 13,762 | ||||
| Operating Income (Loss) |
||||||||
| Client |
$ | 3,267 | $ | 3,388 | ||||
| Server and Tools |
1,151 | 959 | ||||||
| Online Services Business |
(480 | ) | (267 | ) | ||||
| Microsoft Business Division |
3,311 | 2,700 | ||||||
| Entertainment and Devices Division |
178 | 167 | ||||||
| Corporate-level activity |
(1,428 | ) | (1,098 | ) | ||||
| Consolidated |
$ | 5,999 | $ | 5,849 | ||||