14 DAY TRIAL // Microsoft felt the full impact of the global economic crisis in the forth quarter of the 2009 fiscal year that ended June 30, 2009. The Redmond company reported a drop in revenue of 17% compared to Q4 2008. Essentially, revenue went down to just $13.1 billion in Q4 2009, over one billion less than analyst forecasts. Operating income for the quarter dropped 30% to $3.99 billion, with net income also down by 29% to $3.05 billion and diluted earnings per share 26% lower, namely $0.34 per share. The comparison is made with the financial results Microsoft reported for Q4 2008.
According to the software giant, lower PC and server sales worldwide affected directly revenue. “Our business continued to be negatively impacted by weakness in the global PC and server markets,” explained Chris Liddell, chief financial officer at Microsoft. “In light of that environment, it was an excellent achievement to deliver over $750 million of operational savings compared to the prior year quarter.”
The Windows Division is one of the heaviest hit at Microsoft. Windows revenue went down from $4.36 billion to just $3.11. The decline in revenue comes not only as a result of weaker PC and server sales, but also as a shift in consumer preferences toward cheaper netbook computers that in turn are preloaded with cheaper versions of Windows.
While Microsoft continues to boast that Windows computers are cheaper than Apple machines, its hardware rival from Cupertino has reported record results for the past quarter. Apple revenue grew to $7.46 billion, the company reporting a net quarterly profit of $1.07 billion. According to statistics from the NPD Group, no less than 91% of all computers sold at retail worth in excess of $1,000 were Apple machines.
There are additional details that contributed to Microsoft's drop in revenue. In this regard, the software giant noted that the financial results for Q4 2009 also took into account a deferral of $276 million of revenue associated with the introduction of the Windows 7 Upgrade Option program. This move shrunk earnings per share by $0.02. On top of this, Microsoft also had to cough up $193 million in legal charges, as well as $108 million of impairments to investments and $40 million of severance charges. At the same time Microsoft noted that it had cut operating expenses by $105 million in research and development costs.
June 30, 2009 marked not only the end of Q4 2009, but also of the 2009 Fiscal Year for Microsoft. For FY09, the company posted revenue of $58.44 billion, namely 3% less compared to FY 2008. “While economic conditions presented challenges this year, we maintained our focus on delivering customer satisfaction and providing solutions to our customers to save money,” added Kevin Turner, chief operating officer at Microsoft. “I am very excited by the wave of product and services innovations being delivered in this next fiscal year.”