Microsoft Q1/2004 Highlights

Microsoft kicked off its 2004 fiscal first quarter with revenue rising six percent to $8.22 billion from $7.75 billion a year ago. Operating income nudged up to $3.15 billion from $3.03 billion from first quarter 2003. Net income, which takes into account new compensation expenses, was $2.61 billion or 24 cents a share. Microsoft's fiscal first quarter ended Sept. 30.

Microsoft issued guidance for its fiscal second quarter: Revenue between $9.7 billion and $9.8 billion, operating income between $3.2 billion and $3.3 billion and earnings per share between 23 cents and 24 cents. The estimates take into account $1 billion in equity compensation expense, or 6 cents a share. Microsoft’s fiscal second quarter ends Dec. 31.

For the year, Microsoft raised revenue projections to the $34.8-$35.3 billion range from $34.2-$34.9 billion. Operating income projections also rose, from the $11.3-$11.6 billion range to the $11.4-$11.7 billion range. Microsoft's fiscal year ends June 30.

Microsoft’s seven business units reported mixed results, in part suggesting that the big revenue pop from Licensing 6 is beginning to subside. Consumer divisions delivered surprisingly strong results, helping to offset some enterprise sales.

Client revenue of $2.81 billion was flat year over year. Microsoft estimated that PC shipment growth was in the mid teens, which was stronger than expected. Information Worker revenue rose a paltry 1 percent to $2.29 billion year over year. Client revenues were $2.53 billion in the fiscal fourth quarter 2003 and $2.35 billion for Information Worker.

Any fall off in either division would be important to Microsoft, as both groups account for the majority of Microsoft revenues and profits. The Client group includes Windows desktop and Information Worker the Office productivity suite. In the second quarter, Microsoft could see some sales surge from Office 2003, which launched this week. But, I believe any surge will be somewhat muted by Licensing 6. I explain why here.

Microsoft forecast, that in the second fiscal quarter, Client revenues would surge 18-19 percent year over year and Information Worker 16-17 percent.

Server and Tools, Microsoft’s only other money-making division, saw year-over-year revenues rise 15 percent to $1.87 billion. MSN continues to see subscriber losses. The number of subscribers declined 6 percent, or $17 million. The division’s revenue rose to $491 million from $427 million in first quarter 2003. MSN continues to rely heavily on paid search, with network services revenue reaching $81 million, a 51 percent increase, in part because of paid search and improved online advertising sales. I’ve blogged previously on declining subscribers, here, and paid search, here.

Still, in a milestone, Microsoft reported that MSN had reached operating profitability for the first time.

Business Solutions revenue jumped 21 percent year over year to $128 million. Mobile and Embedded Devices contributed to the consumer sales surge, with increased Pocket PC shipments and MapPoint licensing contributing to $53 million in revenue, up from $28 million a year earlier. Home and Entertainment revenue rose 20 percent to $581 million.

Posted by Joe Wilcox at October 23, 2003 04:44 PM