Microsoft rides corporate upgrade cycle, crushes Q4 target

Microsoft rides corporate upgrade cycle, crushes Q4 target

Summary: Microsoft's fourth quarter was much better than expected as it rode growth in its server and tools unit, the corporate PC upgrade cycle and its business division, which features Office.

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Microsoft's fourth quarter was much better than expected as it rode growth in its server and tools unit, the corporate PC upgrade cycle and its business division, which features Office.

The company reported fourth quarter earnings of $5.87 billion, or 69 cents a share, on revenue of $17.37 billion, up 8 percent from a year ago.

Wall Street was looking for earnings of 58 cents a share on revenue of $17.23 billion.

For fiscal 2011, Microsoft reported earnings of $23.15 billion, or $2.69 a share, on revenue of $69.94 billion, up 12 percent from a year ago. Shares of Microsoft were mixed afterhours on concerns about the company's earnings quality---its fourth quarter tax rate was lower than expected.

Microsoft's quarter was notable on a few fronts. First, Microsoft's server and tools division's fourth quarter revenue nearly matched the Windows unit due to better growth. Microsoft's business division, think Office, delivered revenue of $5.77 billion with an operating profit of $3.68 billion. To sum it up, Microsoft is being carried by enterprise spending and appears to have three cash cows. The last one, servers and tools, is more like a skinny cow now, but plumping up. Here's the financial breakdown of Microsoft's divisions.

That picture yields the following takeaways.

  • Microsoft's Business division continues to ride Office as corporations continue to deploy Office 2010. Meanwhile, Microsoft Lync and SharePoint are posting double-digit growth. Lync is the unified communications juggernaut overlooked by the masses.

  • Server and tools have become a strong performer based on Windows Server as well as System Center, a suite that manages Windows environments. In terms of revenue, server and tools are close to eclipsing Windows. Operating profit still favors the Windows unit by a wide margin.

  • As for the Windows and Windows Live division, Microsoft's financials are tracking the broader market. Consumer PC demand was down 2 percent, but enterprises are adopting Windows 7. Until Windows 8 emerges, this unit is going to depend on enterprise demand.
  • Microsoft's online services unit continues to astound. The more it grows the more money it loses. Bing is the star of the unit, but Microsoft is struggling to improve revenue per search metrics. This unit managed to deliver a fourth quarter operating loss of $728 million on revenue of $688 million. For fiscal 2011, Microsoft's online efforts lost $2.55 billion.
  • The unit that houses Xbox continues to shine. Xbox 360 is the No. 1 console and Kinect is a hit. On the phone side of the division, Microsoft is prepping to launch Mango, its latest Windows Phone 7 effort, in the fall. The catch? The entertainment and devices unit had a fourth quarter operating profit of $32 million, a drop in Microsoft's earnings bucket. For fiscal 2011, the Xbox unit delivered an operating profit of $1.32 billion on revenue of $8.91 billion.

See also:

Topics: Banking, Enterprise Software, Microsoft

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  • Well that really sucks

    they were supposed to have a big losing quarter, start down that road towards bankruptcy next year.

    Oh well, there's always next quarter.
    William Pharaoh
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @William Pharaoh

      Yeah, I thought so too. These must be forged somehow. I actually think MS went out of business after the release of Windows 7.
      The one and only, Cylon Centurion
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @William Pharaoh & @Cylon Centurion
        +1. :D
        Ram U
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @Cylon Centurion I might be a Linux user now but...

        "Whoo Hoo! Developers! Developers! Developers!" (Takes off shirt, waves it around, sweats profusely in hot room in honor of Steve Ballmer)

        As the only Linux user posting in this thread so far, do I HAVE TO post some sort of obligatory conspiracy theory about Microsoft secretly (?!?) giving money to Attachmate to purchase Novell to secretly riddle SUSE with bugs to destroy the inevitable rise of desktop Linux and dot Net just being a secret software patent time bomb to get people to adopt Mono before suing them into submission to destroy the inevitable rise of desktop Linux or the only reason Canonical hasn't posted identical earnings this quarter is because Microsoft has used threats of non-existent patent violations in the Linux kernel to destroy the inevitable rise of desktop Linux because Steve Ballmer lies awake at night worrying about open source and desktop Linux?

        Tomorrow it's once more back into the trenches, but for the rest of tonight this is going to be my video background wallpaper....
        http://www.youtube.com/watch?v=KMU0tzLwhbE
        jgm@...
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @William Pharaoh +1 <a href="http://www.uk-djs.net">Booking agency</a>
      mrswilliamson
  • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

    Bing is the rising star,I dumped google search 2 years back, never to look back, and probably never will.
    owlnet
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @owlnet

      Same here. I wonder if that loss is due to building out infrastructure that will eventually result in profitability.
      1DaveN
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @DaveN_MVP Bing is good, but RPS is too low compared to Google. Advertisers not not bidding more currently on Bing and that's one of the reasons of loss. For profit, AdCenter need to drive more traffic, which is where Microsoft is not yet ahead. In terms of a search engine without ads, Bing is very impressive. They need to do something for Ads, very soon.
        animageofmine1
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @DaveN_MVP <br>i don't think so. Google is still number 1.
        F!j!
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @DaveN_MVP<br>Bing is good in the US, but drops off features pretty quickly overseas.
        A.Sinic
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @owlnet
      if it is iphone and ipad for apple and android for google then it is Xbox for Microsoft .
      http://goo.gl/gWzVS
      TechExpert21
  • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

    Wow, MS is losing a lot in Windows world... The results show why they are emphasizing consumers in Windows 8 and leave us, .Net devs, in dust!
    browser.
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @browser. : What have you been smoking? Windows sales dipped a bit.
      Gis Bun
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @browser. This is expected, given that tablets are rising and its been a while windows 7 was launched. Its unfortunate that Microsoft does not have a hardware division for its laptops. Just because of some cheap hardware, non-technical end users blame Microsoft thinking that Windows is crap. This is not the case with Apple since they control E2E, that's one more reason for Apple customer satisfaction ratio.
      animageofmine1
      • Ummm ..

        @animageofmine1 .. <i>" ...Its unfortunate that Microsoft does not have a hardware division for its laptops. "</i><br><br>.. they're called 'OEM partners' .. you know the guys that specialize in hardware. Besides, why would they want to waste money in hardware where margins are thin enough as they are.<br><br>Unless hardware is your life, you don't go around spreading yourself thin - especially into a industry-field that others are already masters at. (.. geez, they're MS .. not RIM).<br><br><img border="0" src="http://www.cnet.com/i/mb/emoticons/wink.gif" alt="wink">
        thx-1138_
  • THE BEAST IS BACK!!!!

    Take that AAPL and GOOG. This fully functional battleship has once again proven it cannot be controlled nor contained. I just put another BUY order in. This does not even account for the pent up demand for Windows Phone Mango devices that is surging out there. There is such an aura of respect around Windows Phone. None other than Jim Cramer told me Mr. Softee is primed to blow out the market and I for one could not agree more. My rep and I are off to celebrate another stellar quarter at Yarrow's.
    Mike Cox
    • 9.0!

      @Mike Cox

      :)
      William Pharaoh
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @Mike Cox

      As you say a great result. With 8% your reps bonus will pay for all the soda the pair of you can drink. Sadly my rep works in the online section and has no budget to call me any longer and his WM7 phone broke the other day so now he has to wait for his Mango+ Nokia next year. Could your rep check what's happening with my rep I hope he's ok.
      martin23
    • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

      @Mike Cox
      I think Apple is going in a different direction, they want the consumer market, not the business market...
      Hasam1991
      • RE: Microsoft rides corporate upgrade cycle, crushes Q4 targets

        @Hasam1991 They're starting on the Enterprise. Don't know if they want to dominate it, but it's obvious it's a juicy target they want to go after.
        fer.paredesb@...