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As we all know Microsoft has recently released their second quarter earnings and they did very well: $4.7 billion, or 50 cents a share, on revenue of $16.36 billion.
But how does Microsoft make money? The table below starts to segment their revenue by their various online/offline channels.
| How Microsoft Makes Money | Three Months Ended December 31 |
Six Months Ended December 31 |
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| (In millions) | 2007 | 2006 | 2007 | 2006 | ||
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Revenue |
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Client |
4,238 |
2,669 |
2,669 |
8,283 |
5,975 |
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|
Server and Tools |
3,284 |
2,847 |
2,847 |
6,186 |
5,343 |
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|
Online Services Business |
863 |
625 |
625 |
1,534 |
1,161 |
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|
Microsoft Business Division |
4,814 |
3,512 |
3,512 |
8,921 |
6,944 |
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|
Entertainment and Devices Division |
3,060 |
2,968 |
2,968 |
4,988 |
3,978 |
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|
Unallocated and other |
108 |
(79) |
(79) |
217 |
(48) |
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Consolidated |
16,367 |
12,542 |
12,542 |
30,129 |
23,353 |
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Operating income/(loss) |
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|
Client |
3,243 |
1,929 |
1,929 |
6,488< |
4,599 |
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|
Server and Tools |
1,132 |
986 |
986 |
2,016 |
1,787 |
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|
Online Services Business |
(248 |
(116) |
(116 |
(510 |
(232 |
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Microsoft Business Division |
3,140 |
2,146 |
2,146 |
5,801 |
4,387 |
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Entertainment and Devices Division |
334 |
(306 |
(306 |
470 |
(430 |
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Reconciling amounts |
(1,120 |
(1,167) |
(1,167 |
(1,866 |
(2,165 |
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Consolidated |
6,481 |
3,472 |
3,472 |
12,399 |
7,946 |
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Below are some additional details on how Microsoft makes money – Source: Zdnet: http://blogs.zdnet.com/BTL/?p=7706
- Microsoft’s $16 billion in revenue is a company record.
- The company’s client unit–think Vista and XP–had operating income of $3.36 billion on revenue of $4.33 billion. For the same quarter a year ago, Microsoft’s client group had operating income of $1.84 billion on revenue of $2.58 billion. Translation: For all the whining about Vista folks are buying it.
- Enterprise sales are strong with Microsoft’s business division and server and tools unit posted double-digit revenue growth rates. The business division–Office, Sharepoint etc–in the December quarter reported operating income of $3.18 billion on revenue of $4.81 billion.
- Microsoft’s server and tools business had operating income of $1.72 billion on revenue of $3.28 billion in the December quarter.
- Microsoft says it is seeing “healthy demand from both businesses and consumers in the United States and our growth in emerging markets is especially strong.”
- Xbox 360 console sales hit the 17.7 million unit mark. That’s a lot of units for a relatively small profit. In the December quarter, Microsoft’s entertainment and devices division had an operating profit of $357 million on revenue of $3.06 billion.
- But Microsoft’s online services division–MSN etc.–still isn’t making money with a second quarter operating loss of $245 million on revenue of $863 million.
Microsoft Financial Reports:
Current Fiscal Year
• Second quarter 2008 earnings
• First quarter 2008 earnings
Prior Fiscal Year
• Fourth quarter 2007 earnings
• Third quarter 2007 earnings
• Second quarter 2007 earnings
• First quarter 2007 earnings
Oct. 23, 2009 — Microsoft Corp. today announced revenue of $12.92 billion for the first quarter ended Sept. 30, 2009, a 14% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $4.48 billion, $3.57 billion and $0.40 per share, which represented declines of 25%, 18% and 17%, respectively, when compared with the prior year period.
These financial results reflect the deferral of $1.47 billion of revenue, an impact of $0.12 of diluted earnings per share, relating to the Windows 7 Upgrade Option program and sales of Windows 7 to OEMs and retailers before general availability. Adding back the deferred revenue, revenue totaled $14.39 billion, a 4% year-over-year decline, and EPS totaled $0.52 per share, an increase of 8% over the same period of the prior year.
"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows,” said Chris Liddell, chief financial officer at Microsoft. “We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions."
Windows 7 and Windows Server 2008 R2 launched globally on Oct. 22 as anticipated. Also during October, Microsoft released Microsoft Exchange Server 2010 to manufacturing and in July announced a strategic partnership with Yahoo! Inc. to provide search results for their global properties.
"The worldwide launches of Windows 7, Exchange Server 2010 and Windows Server 2008 R2 are exciting milestones for Microsoft, our partners, and customers," said Kevin Turner, chief operating officer at Microsoft. "We are pleased by the early positive response we are receiving for these products."