Microsoft already has deferred of $1.64 billion of revenue and $1.13 billion of net income, or 11 cents a share, from the second quarter ending Dec. 31 to the third fiscal quarter ending March 30. That's not a bad sum to have banked already. The deferrals are "due primarily to the technology guarantee programs for Vista and Office."
Microsoft blew away expectations with fiscal second quarter net income of $2.63 billion, or 26 cents a share, on revenue of $12.54 billion. According to Thomson Financial, Wall Street was expecting earnings of 23 cents a share on revenue of $12.09 billion. The outlook is also strong with Microsoft projecting revenue of $13.7 billion to $14 billion and earnings per share to be 45 cents a share to 46 cents a share. That guidance is in line with expectations.
However, those big overarching financials only tell part of the Microsoft story. To really get a feel for things you have to read between the numbers. A few nuggets that jump out from the earnings statement and Microsoft investor Power Point:
–The year ago launches of Xbox 360, Microsoft SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0. have contributed more than $1 billion in revenue growth.
–Microsoft spent $1.64 billion on research and development for the three months ending Dec. 31. That's up from the $1.6 billion spent in the same quarter a year ago. For the six months ending Dec. 31, Microsoft spent $3.4 billion on R&D compared to $3.1 billion for the same period a year ago.
–Total cash and short term investments as of Dec. 31 totaled $28.87 billion.
–Microsoft said its PC growth estimate for the fiscal second quarter is 8 to 10 percent.
–In the second fiscal quarter, the entertainment and devices division (led by Xbox) and the online services business (led by MSN) continue to lose money. The entertainment and devices unit had an operating loss of $289 million on revenue of $2.96 billion. Online services had an operating loss of $155 million on revenue of $624 million.
–Microsoft's business division (Office, Great Plains and CRM) is the biggest unit in terms of revenue for the company. It had revenue of $3.5 billion and an operating profit of $2.16 billion. Server and tools was second with revenue of $2.8 billion and an operating profit of $1.88 billion. Client came in third, but that'll change next quarter with Vista.
–Company's billing mix is 30 percent to OEM; 25 percent multi-year licensing deals and 20 percent straight licensing.
–SQL Server revenue growth topped 30 percent in the second quarter compared to a year ago.
–Advertising revenue was up 20 percent. There were 268 million Hotmail accounts and 263 million Messenger accounts.
–Dynamics customer billings were up 19 percent.
–Microsoft has sold 10.4 million Xbox 360 consoles so far. Gears of War sold more than 2.7 million units.
–Licenses for Windows Mobile phones up 90 percent from a year ago.
–Microsoft is projecting PC market revenue growth of 9 percent to 11 percent for the fiscal third quarter. Server and tools growth of 16 percent to 17 percent, client (driven obviously by Vista) growth of 54 percent to 56 percent; online services growth of 4 percent to 10 percent; Microsoft Business Division (Office, Great Plains and CRM) growth of 27 percent to 28 percent; and entertainment and devices division is expected to show a revenue decline of 15 percent to 25 percent.
See also: Microsoft F2Q07 (Qtr End 12/31/06) Earnings Call Transcript