Microsoft Corp. has announced third-quarter revenue, operating income, and diluted earnings per share of $14.45 billion, $4.41 billion, and 47 cents, respectively. Operating income and earnings per share results included a charge of $1.42 billion, or 15 cents per share, for the European Commission fine, the company said.
(The European Commission in 2004 found Microsoft to be violating anti-trust regulations and ordered the company to make available interoperability information for work group servers and fined it $740 million. Three years later, it found Microsoft was still non-compliant with the order when it determined the fees Microsoft was charging for that information were unreasonable. The Commission then fined the company approximately $1.3 billion (exact amount depends on currency exchange rates) for non-compliance with its order. See Microsoft Fine).
Income taxes were reduced by 15 cent per share for the resolution of a tax audit, the company said.
"Our third-quarter results demonstrate the benefit of our diversified business model," said Chris Liddell, chief financial officer of Microsoft. "Our broad span across geographies, product categories, and customer segments is a tremendous asset and supports our outlook for double-digit revenue, operating income, and earnings per share growth for this fiscal year and also for fiscal year 2009."
Entertainment and Devices revenue for the quarter grew 68 percent over the comparable period last year driven by robust demand for Xbox 360 consoles. Cumulative console sales surpassed 19 million during the quarter, up 74 percent from a year ago. Server and Tools revenue growth of 18 percent added to its string of consecutive double-digit revenue growth quarters, which now stands at 23.
"The breadth of our product offerings and our ability to provide solutions across a range of customer and partner needs paid off again this quarter. The third quarter also kicked off the largest enterprise platform launch in our company history, which highlights Windows Server 2008, SQL Server 2008, and Visual Studio 2008," said Kevin Turner, chief operating officer of Microsoft. "These new products strengthen our ability to help business customers and partners save money, optimize their people, processes and technology, and position IT as a strategic asset for their businesses."
Business Outlook
Microsoft management offers the following guidance for the quarter ending June 30, 2008:
-- Revenue is expected to be in the range of $15.5 billion to $15.8 billion.
-- Operating income is expected to be in the range of $5.8 billion to $6.2 billion.
-- Diluted earnings per share are expected to be in the range of $0.45 to $0.48.
Management offered the following preliminary guidance for the full fiscal year ending June 30, 2009:
-- Revenue is expected to be in the range of $66.9 billion to $68.0 billion.
-- Operating income is expected to be in the range of $26.7 billion to $27.4 billion.
-- Diluted earnings per share are expected to be in the range of $2.13 to $2.19.
Additional details on fiscal year 2009 guidance will be provided in the fourth-quarter earnings announcement and during the company's Financial Analyst Meeting on July 24.
Adjusted Financial Results
Reconciliation of Non-GAAP Measures: The financial results for the third quarter of fiscal year 2007 contained the recognition of $1.67 billion of revenue and operating income that had been deferred from the first half of the year related primarily to technology guarantee programs. Operating income also included $154 million of legal charges. Diluted earnings per share included $0.12 per share associated with the technology guarantee program, $0.01 for legal charges and $0.02 for tax benefits.
About Microsoft
Founded in 1975, Microsoft (Nasdaq: MSFT) is a worldwide leader in software, services, and solutions that help people and businesses realize their full potential.
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