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Microsoft Misses: Q4 Earnings, Quick Look

It was another rough quarter for Microsoft.  After seeing net income sink 32% in the third quarter, the company reported Thursday that its fourth quarter dropped off 29%. 

Fourth quarter net income was $3.05b, or 34 cents a share, down from $4.3b or 46 cents a share last year.  The results include onetime charges equal to 2 cents a share. 

Revenue for the quarter sank 17% to $13.1b.    Analysts expected a much stronger revenue performance with estimates forecasting a result of $14.37b (Thomson Reuters poll).

Looking at the full year, it was the first time in Microsoft’s history annual sales shrank, falling off 3.3%.

The good news CFO Chris Liddell suggested during the conference call was there are “signs we’ve seen the worst.”  The bad news, it will take some time to recover.

Lack of corporate support for Windows Vista,  weakness in the PC market and weakness in the ad market, all appear to be  major challenges in the near term. 

Looking at segments, sales were down in all of five of Microsoft’s principal business groups. 

client-group-revenue-slide.jpgWith PC markets down 5 to 7 %, the Client Group fell 22% (after adjusting for Windows 7 tech guarantee). Server and Tools Revenue fell 6%. The Business Division, which makes Microsoft’s Office suite, shrank 13% in revenue and 16% in earnings.  

Online Service revenue fell 14% to $71m  Losses at the group ballooned to $732m compared to $485m for the same period last year.

entertainment devices earnings slide msftEntertainment and Devices shrank 25%, a far steeper fall off than expected.  The group lost $130m on the quarter.

Microsoft says it will continue to cut expenses into the next fiscal year. On top of the $3b in operating expenses cut in 2009, operating expenses for Fiscal 2010 are now forecast to be at least $500m lighter. msft-segment-2010.jpg Microsoft is predicting a range of $26.6 to $26.9b, down from a prior forecast of $27.4b

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More detailed press coverage of Microsoft’s Earnings can be found at:
Yahoo Finance
Google Finance
Microsoft Investor Relations

[Update: slides added]

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