Microsoft Reports Record Second Quarter Results

REDMOND, Wash. — January 24, 2008 — Microsoft Corp. today announced second quarter records for revenue, operating income and diluted earnings per share of $16.37 billion, $6.48 billion and $0.50, respectively. Compared to the year ago period, these figures represent growth of 30%, 87% and 92% for revenue, operating income and diluted earnings per share, respectively.

Results in the prior year were impacted by the deferral of $1.64 billion of revenue and operating income and $0.11 of diluted earnings per share from the second to the third quarter of fiscal 2007, due primarily to technology guarantee programs. Without these deferrals, second quarter growth rates for revenue, operating income and earnings per share would be 15%, 27% and 32%, respectively.

“Revenue of over $16 billion this quarter exceeds our previous record by $2 billion,” said Chris Liddell, chief financial officer at Microsoft.  “We are extremely pleased by the broad based strength of our business performance and field execution. Throughout the first half of our fiscal year, all of our businesses met or beat our expectations.”

Since Windows Vista became generally available one year ago, Microsoft’s Client business has grown over 20% on average and sales of Windows Vista have surpassed 100 million licenses.

“We are pleased with the progress of Windows Vista in the market.  We’ve hit our stride with partners and customers and are looking forward to the release of our first service pack later this quarter,” said Kevin Johnson, president of the Platforms and Services Division at Microsoft.

Sales to business customers remained brisk in the quarter with Microsoft Business Division and the Server and Tools business each experiencing double-digit revenue growth rates over the prior year and together increased revenue over $1 billion versus the comparable quarter last year. Microsoft Business Division generated 23% business revenue growth driven by the versions of Microsoft Office, Microsoft SharePoint and Microsoft Exchange that were launched last November.

“We are in the midst of another strong year with great momentum heading into calendar year 2008,” said Kevin Turner, chief operating officer at Microsoft. “We continue to see healthy demand from both businesses and consumers in the United States and our growth in emerging markets is especially strong. Looking across Brazil, Russia, India and China, our field revenue reached a combined growth rate over 65% this quarter.  As we look ahead, our Windows Server 2008 launch, with our virtualization solution, will further our quest to bring exceptional value to our customers.”  

Microsoft rolled out new consumer focused offerings during the quarter such as Windows Home Server, new versions of the Zune media player and the next generation of Windows Live Online Services. Exiting the calendar year, the life to date sales of Xbox 360 consoles reached 17.7 million units, representing a 70% increase from the prior year.

Business Outlook

Microsoft management offers the following guidance for the quarter ending March 31, 2008:

  • Revenue is expected to be in the range of $14.3 billion to $14.6 billion.

  • Operating income is expected to be in the range of $5.6 billion to $5.7 billion.

  • Diluted earnings per share are expected to be in the range of $0.43 to $0.45.

Management offers the following guidance for the full fiscal year ending June 30, 2008:

  • Revenue is expected to be in the range of $59.9 billion to $60.5 billion.

  • Operating income is expected to be in the range of $24.2 billion to $24.4 billion.

  • Diluted earnings per share are expected to be in the range of $1.85 to $1.88.

Webcast Details

Microsoft will hold an audio webcast at 2:30 p.m. PST (5:30 p.m. EST) today with Chris Liddell, senior vice president and chief financial officer, Frank Brod, corporate vice president and chief accounting officer, and Colleen Healy, general manager of Investor Relations, to discuss details of the company’s performance for the quarter and certain forward-looking information. The session may be accessed at The webcast will be available for replay through the close of business on January 26, 2009.

Microsoft Corporation

Adjusted Financial Results – Non-GAAP Measures Reconciliation

This information has been provided to aid readers of the financial statements in further understanding the company’s financial performance and the impact that certain items and events had on the financial results may not be indicative of trends affecting the company’s business.  For comparability of reporting, management considers this information in conjunction with GAAP amounts in evaluating business performance. The non-GAAP financial measures provided above should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services and solutions that help people and businesses realize their full potential.

Forward-Looking Statements

Statements in this release that are “forward-looking statements” are based on current expectations and assumptions that are subject to risks and uncertainties.  Actual results could differ materially because of factors such as:

  • challenges to Microsoft’s business model;

  • intense competition in all of Microsoft’s markets;

  • Microsoft’s continued ability to protect its intellectual property rights;

  • claims that Microsoft has infringed the intellectual property rights of others;

  • the possibility of unauthorized disclosure of significant portions of Microsoft’s source code;

  • actual or perceived security vulnerabilities in Microsoft products that could reduce revenue or lead to liability;

  • government litigation and regulation affecting how Microsoft designs and markets its products;

  • Microsoft’s ability to attract and retain talented employees;

  • delays in product development and related product release schedules;

  • significant business investments that may not produce offsetting increases in revenue;

  • changes in general economic conditions that affect demand for computer hardware or software;

  • adverse results in legal disputes;

  • unanticipated tax liabilities;

  • Microsoft’s consumer hardware products may experience quality or supply problems;

  • impairment of goodwill or amortizable intangible assets causing a charge to earnings;

  • exposure to increased economic and regulatory uncertainties from operating a global business;

  • geo-political conditions, natural disaster, cyber-attack or other catastrophic events disrupting Microsoft’s business;

  • acquisitions and joint ventures that adversely affect the business;

  • improper disclosure of personal data could result in liability and harm to Microsoft’s reputation;

  • sales channel disruption such as the bankruptcy of a major distributor; and

  • Microsoft’s ability to implement operating cost structures that align with revenue growth.

For further information regarding risks and uncertainties associated with Microsoft’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of Microsoft’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting Microsoft’s Investor Relations department at (800) 285-7772 or at Microsoft’s Investor Relations website at

All information in this release is as of January 24, 2008. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.

For more information, financial analysts and investors only:

Colleen Healy, general manager, Investor Relations, (425) 706-3703

Note to editors: If you are interested in viewing additional information on Microsoft, please visit the Microsoft web page at on Microsoft’s corporate information pages. Web links, telephone numbers and titles were correct at time of publication, but may since have changed. Shareholder and financial information, as well as today’s 2:30 p.m. PST conference call with investors and analysts, are available at

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