Microsoft Reports Record Third-Quarter Revenue

REDMOND, Wash. — April 24, 2008 — Microsoft Corp. today announced third-quarter revenue, operating income and diluted earnings per share of $14.45 billion, $4.41 billion and $0.47, respectively. Operating income and earnings per share results included a charge of $1.42 billion, or $0.15 per share, for the European Commission fine. Income taxes were reduced by $0.15 per share for the resolution of a tax audit.

“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% 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% from a year ago. Server and Tools revenue growth of 18% 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 offers 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.

Webcast Details

Microsoft will hold an audio webcast at 2:30 p.m. PDT (5:30 p.m. EDT) 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 April 24, 2009.

Microsoft Corporation

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.

Adjusted Financial Results – Reconciliation of Non-GAAP Measures

This information has been provided to aid readers of the financial statements in further understanding the company’s financial performance. The impact of certain items and events 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 Web site at

All information in this release is as of April 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. PDT conference call with investors and analysts, is available at

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