Microsoft results show times are still tough in tech

24 Jul 2009

Microsoft’s profits fell by almost a third in its latest Q4 results based on a 17pc decline in revenues of US$13bn. The company is banking its return to growth on the next generation of innovative products hitting the market in the coming year.

Microsoft’s revenues fell 17pc year-on-year to US$13.1bn in Q4. The company produced a profit of US$3.05bn, down 29pc on last year, and an operating profit of US$3.9bn, down 30pc year-on-year.

For the full year Microsoft reported revenue of US$58.4bn, down 3pc on last year. For the year Microsoft produced a profit US$14.57bn, down 18pc, and an operating profit of US$20.36bn, down 9pc on last year.

“Our business continued to be negatively impacted by weakness in the global PC and server markets,” said Chris Liddell, chief financial officer at Microsoft .

“In light of that environment, it was an excellent achievement to deliver over US$750m of operational savings compared to the prior year quarter.”

The Q4 results included the deferral of US$276m of revenue related to the Windows 7 Upgrade Option program that was announced on 25 June. This revenue deferral reduced earnings per share by US$0.02.

The fourth-quarter financial results also included US$193m of legal charges, US$108m of impairments to investments and US$40m of additional severance charges related to the previously announced plan.

Operating expenses were reduced by US$105m of capitalised research and development expenses due to the technical milestones reached for Windows 7. Combined, these also reduced earnings per share by US$0.02.

Product milestones were achieved in the quarter including the releases of Windows 7 release candidate, Windows Server 2008 R2 release candidate, as well as Bing, Microsoft’s search engine designed to help people make faster, more informed decisions.

“While economic conditions presented challenges this year, we maintained our focus on delivering customer satisfaction and providing solutions to our customers to save money,” said Kevin Turner (pictured), chief operating officer at Microsoft.

“I am very excited by the wave of product and services innovations being delivered in this next fiscal year,” Turner said.

For the full year ending in June 2010, Microsoft provided an operating expense guidance of US$26.6bn to US$26.9bn.

By John Kennedy

Pictured: Kevin Turner, chief operating officer at Microsoft

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years