Launch of Office 2003 and Strength in PC Market Fuels Demand for Desktop
Redmond, Wash. — Jan. 22, 2004 — Microsoft Corp. today announced record
revenue of $10.15 billion for the quarter ended Dec. 31, 2003, a 19% increase
over $8.54 billion in the prior year. Operating income for the second quarter
was $1.48 billion, compared to $2.23 billion in the prior year. Net income and
diluted earnings per share for the second quarter were $1.55 billion and $0.14
per share. These results include stock based compensation expense of $2.17
billion (after-tax) or $0.20 per share, of which $1.48 billion (after-tax) or
$0.14 per share related to the completion of the employee Stock Option Transfer
Program. For the previous year, net income and earnings per share for the second
quarter were $1.87 billion and $0.17 per share, including stock based
compensation expense of $709 million (after-tax) or $0.07 per share, a $282
million (after-tax) or $0.03 per share charge for investment impairments, a $126
million or $0.01 per share tax benefit from the reversal of previously accrued
taxes, and $141 million (after-tax) or $0.01 per share legal charge related to
the state antitrust and unfair competition class action lawsuits.
“Consumer and corporate demand for PCs continued to exceed our expectations
and resulted in solid double-digit revenue growth for WindowsÃƒâ€šÃ‚Â® XP and Office
products,” said John Connors, chief financial officer at Microsoft.
“In the second quarter, the overall corporate IT market also began to show
signs of a recovery, with increased demand for both desktop and server products.
Going forward, we will continue to focus on driving broader customer adoption of
our latest enterprise products, including Office 2003, Windows Server (TM) 2003,
Exchange Server 2003, and Small Business Server 2003.”
Information Worker revenue grew 27% over the prior year, as customers took
advantage of the compelling value in the new Office System collaboration and
productivity tools. Strong adoption of Office 2003 by consumers and small
businesses drove sales in the retail and system builder channels to surpass
expectations. Customers acquiring Office during the quarter included Eli Lilly
and Company, Safeco Corporation, and Ticketmaster.
MSNÃƒâ€šÃ‚Â® once again reported stronger than expected revenue growth of 19% over last
year. “As MSN continues to invest in its growing businesses, we remain
focused on achieving long term profitability,” said Bruce Jaffe, chief
financial officer of MSN. “A key factor in attaining that long-term goal
will be the success of MSN’s advertising business which achieved record revenue
with 47% growth year over year, driven by strength in both traditional online
and search-based advertising.” This month, MSN also launched MSN Premium
and the new MSN.com, which provides additional services for broadband customers
as well as new opportunities for advertisers. MSN Premium is Microsoft’s most
comprehensive web service ever offered with advanced communication capabilities,
security and protection features, and rich information services and productivity
Home and Entertainment had a solid quarter driven by sales of XboxÃƒâ€šÃ‚Â® games and
consoles. With over 400 games available, including 70 Live-enabled games, Xbox
grew its U.S. cumulative game attach rate to 6.4, according to NPD Data. Since
the launch of Xbox in 2001, Microsoft has sold over 13.7 million Xbox consoles
worldwide and is on track to have sold 14.5 to 16.0 million consoles by the end
of this fiscal year. In addition, Xbox Live (TM) momentum continued with
subscribers growing to nearly 750,000, keeping the business on target to have
one million subscribers by the end of the fiscal year.
Management offers the following guidance for the quarter ending March 31, 2004,
which includes stock based compensation expenses in accordance with SFAS 123:
Ãƒâ€šÃ‚Â· Revenue is expected to be in the range of $8.6 billion and $8.7 billion.
Ãƒâ€šÃ‚Â· Operating income is expected to be in the range of $3.0 billion and $3.1
billion, including stock based compensation expense of approximately $750
Ãƒâ€šÃ‚Â· Diluted earnings per share are expected to be in the range of $0.23 and
$0.24, including stock based compensation expense of approximately $0.05.
Management offers the following guidance for the full fiscal year ending June
30, 2004, which includes stock based compensation expenses in accordance with
Ãƒâ€šÃ‚Â· Revenue is expected to be in the range of $35.6 billion and $35.9 billion.
Ãƒâ€šÃ‚Â· Operating income is expected to be in the range of $10.3 billion and $10.6
billion, including stock based compensation expense of approximately $5.7
Ãƒâ€šÃ‚Â· Diluted earnings per share are expected to be in the range of $0.82 and
$0.83, including stock based compensation expense of approximately $0.35. The
stock based compensation expense includes $0.14 related to the completion of the
Stock Option Transfer Program in the December quarter.