Blog Post

Earnings: MSFT Revenues Up 16 Percent In FY4Q06 But Profit Dips 24 Percent; $40 Billion Buyback Anno

Correction: The headline and text have been corrected to accurately reflect the amount of the buyback in billions. Thanks to everyone who caught the typos and took the time to write.
The combination of a 16-percent increase in sales revenue for FY4Q06 and a $240 million buyback was enough to boost Microsoft (MSFT) shares — at least in late trading. Microsoft delivered $2.83 billion profit on record revenue of $11.8 billion; earnings per share were $0.28 compared with $0.34 in FY4Q05. Each quarter included special charges; while last year’s fourth quarter included a tax benefit of $0.09. Revenue was up 11 percent for the year
The buyback is a two-step plan: a $20 million billion tender offer for completion Aug. 1 and a $20 billion five-year repurchase plan to expire Jun 30, 2011.
— This is the last quarter for Mobile and Embedded Devices as a standalone reporting division; it was profitable for the full fiscal year. Licenses for Windows Mobile-based phones grew by 90 per5cent in FY06.
— The Home and Entertainment division sold 5 million Xbox 360 consoles in FY06. For the quarter, H&E revenues increased 94 percent; Xbox alone grew over 125 percent on shipments of 1.8 million Xbox 360s.
— Microsoft doesn’t expect Windows Live to be a “significant” contributor in FY07
— Asked about the planned cap-ex spending, CFO Chris Liddell replied, in part: “In the MSN area, year on year we are probably looking at an increase, depending on some of the decisions we are going to make, around $200 million to $300 million year on year.” And later, ‘we do not expect MSN to be profitable in this fiscal year. By definition, therefore, it is later out than that.”
— Liddell on the adCenter rollout finally underway: “We are not giving a particular schedule for when we will be 100 percent in the year but clearly it is in our line of sight.”
Earnings | Webcast | PowerPoint | Transcript (Via SeekingAlpha.com)