Blog Post

Earnings: Microsoft’s 4Q05, FY05 Numbers Show Improvements For MSN, Mobile

Microsoft showed operating income of $2.99 billion, down slighly from $3.13 billion the previous year, and net income of $3.70 billion; 4Q05 revenues of $10.16 billion were up 9 percent over 4Q04. For FY05, Microsoft turned in a record $39.79 billion; net income was $12.25 billion.
Three of Microsoft’s reporting segments particularly resonate in the space we cover:
MSN: 4Q05 revenues were down slightly to $582 million from $588 million due to expected decline of internet access revenue; for the year, though, revenue increased to $2.274 billion from $2.216 billion. Operating income rose almost 300 percent, to $104 million from $29 million in 4Q04; and to $405 million from $87 million.
— The advertising revenue increase of $73 million or 22 percent is attributed display ad revenue pushed by Hotmail and IM. Non-access subscriptions and revenues were up $11 million; for FY05, ad revenue was up $193 million, or 16 percent, while subscriptions and transactions were up $84 million or 88 percent led by growth in MSN access subs.
— At the end of FY05, MSN had 2.7 million internet access subs, down from 4.3 million in FY04; 420 million unique users monthly; 205 million-plus active Hotmail accounts and more than 175 million active IM accounts.

Mobile: Losses for mobile and embedded devices continue to narrow, to $14 million in 4Q05 from $39 million last year; for the full fiscal year, losses dropped to $46 million from $219 million in FY04.
— Revenue growth came from Windows Mobile software and Windows Embedded OS sales driven by an increase in shipped “connected mobile devices.”
— Revenue for MapPoint and Windows Automotive increased 50 percent to $7 million for the quarter; $25 million, or 45 percent, for the year.

Home & Entertainment: Losses were cut nearly in half for the quarter to $179 million from $340 million; for FY05, down to $391 from $1.22 billion in FY04. But the FY06 operating loss will widen, the company said, because of costs associated with the launch of Xbox 360.
— Xbox continues to drive the segment with an increase in revenues of $123 million or 46 percent.
Earnings release. Webcast.