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Microsoft FY2014 Q4 Earnings: Revenues Up, Profits Down Slightly
Microsoft has released their latest earnings report, and it's not as bleak as last week's news might have you suspect. Quoting Forbes: Microsoft reported $23.38 billion of revenue for the fourth quarter, up 17.5% from the same period last year. Net income, however, came in at $4.6 billion, down from last year and behind Wall Street analysts' consensus estimate, both about $5 billion. At 55 cents earnings per share were down 4 cents and a nickel short of the Street’s call. For the full year, revenue clocked in at $86.8 billion an 11.5% increase from a year earlier. Net income was $22.1 billion and earnings per share were $2.63.
They took a hit from finalizing the acquisition of Nokia's handset division (not unexpected). The cloud services side of the business appears to be growing, while traditional software sales have stagnated. The layoffs will cost Microsoft between $1.1 and $1.6 billion over the first half of next year.
Its also going to cost them all the mind-share and best people as they get rid of all the A- and V- people who did all the actual work.
They could probably cut half of the company in the form of middle management without anyone who does real work affected. Supposedly that's their plan. Who knows though after the middle managers' necks are on the line who gets offered up as the sacrificial lamb.
Hmmm...they are doing just fine and getting stronger. How can that be - according to this message board Linux rules and is taking over the world! Seems to fly in the face of the SD worldview. Keep dreaming...I'm counting my returns in stock portfolio and enjoying life. Curious how many of you zealots will admit how wrong you are.
They had not in the prior ten years gotten stronger than the S&P 500. If ten years ago you had invested in an index fund tracking the S&P 500, your return to today would be 77% instead of the 57% you would have received by investing in MSFT. Many other companies out-performed the S&P 500 in the same ten-year period.
Is there any way to find out how much of M$ revenue/profits are due to government & other public sector contracts?
It's our money, so I'd be nice to know how much we're paying them.
Thank you Dave Raggett
They are taking on more and more hardware business. This is a much less profitable venture than they had before, so I don't expect things to be as rosy as you seem to. It is very hard to maintain the profit margins that they are accustomed to. Wall Street has given them a huge boost over the last year, but remember that comes after 10 years of no movement, and they still aren't anywhere near their highs during the dot-com bubble.
Still, the layoffs show that they are serious and PC sales have finally stabilized. While I am not a stockholder, I think you are right to be bullish in the short term.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
I would not recommend holding onto the stocks of a company whose overall balance sheet has been stagnant for about a decade, and where its core revenue source is sufficiently threatened that they're undergoing a major restructuring to pivot away from it altogether. One quarterly earnings report is nothing to make investment decisions about.
The last time I saw this sort of acquisition, layoff, and rehiring cycle from a major company, it was Pfizer, and that did not end well for the shareholders.
No kidding!!! What do you say at this point?
If you are tracking a company's performance by its stock price it's kind of laughable; share holders are a mentally unstable bunch, and unless you sacrifice your company for short term profits they really don't get excited. There is no long term outlook for companies any more, and MS' long term strategy I think, is getting stronger. The cutting of the 18k employees is just showing they are narrowing their focus and really concentrating on the areas they think will be big; cloud, and mobile.
And as somebody in the cloud space myself (for work), I look at Azure with great interest because of their investment into it. We are a huge Microsoft customer already, and we can leverage that size and contract for our benefit with Azure and licensing; Amazon can't beat them on that, and if I get the enterprise tools I want... it's a no brainer. AWS has a lot of features, but the vast majority of them aren't useful at this point for our needs... we need pure infrastructure, autoscaling, and database services -- all of which are available through Azure, and all of which are available for a lower cost.
The price is always right if someone else is paying.
However when it comes to hardware, MS barely makes any profit.
Well, there's spam egg sausage and spam, that's not got much spam in it.
There is sure to be a Dead Sea effect and MS's long-term prospects cannot be great if they have lost / will lose their best people
If you are tracking a company's performance by its stock price it's kind of laughable; share holders are a mentally unstable bunch, and unless you sacrifice your company for short term profits they really don't get excited.
You need to learn the difference between a company that pays stock dividends and one that does not.
They had not in the prior ten years gotten stronger than the S&P 500. If ten years ago you had invested in an index fund tracking the S&P 500, your return to today would be 77% instead of the 57% you would have received by investing in MSFT. Many other companies out-performed the S&P 500 in the same ten-year period.
I don't think you are considering the regular dividends that MSFT has paid out over the last 10 years, which have been anywhere from a 1.2% - 2.5% annual yield. Plus, 10 years ago, at the end of 2004, they cashed out a special dividend of over 10%. So really, if you had the same amount of money in the S&P 500 and in MSFT for the last 10 years, you might actually have more value from the MSFT investment if you re-invested the dividends in MSFT.
I haven't run any calculations, so I'm not positive on the numbers, but you would not have a 20% disparity as you suggest. That having been said, I am not invested in MSFT and don't intend to be any time soon. I prefer indexes as opposed to individual companies.
They're essentially gutting the company.
I would not recommend holding onto the stocks of a company whose overall balance sheet has been stagnant for about a decade, and where its core revenue source is sufficiently threatened that they're undergoing a major restructuring to pivot away from it altogether. One quarterly earnings report is nothing to make investment decisions about.
The last time I saw this sort of acquisition, layoff, and rehiring cycle from a major company, it was Pfizer, and that did not end well for the shareholders.
But, it isn't only one quarter. Microsoft have for many years published very strong and growing results, quarter after quarter, with very few exceptions. People on sites like Slashdot keep proclaiming that they are dead, year after year, and Microsoft keep doing better and better, year after year. It is a quite funny situation to witness if you are neutral to the whole discussion.
It is true the stock was flat for several years some years back, but if you look at the last three years -- Microsoft stock is +63,5%. This in the period they have had the strongest prediction of decline and gloom on sites like this (and about the same stock performance as Apple at +73%!)
For some reason Google Finance link changed to 5 years, here is the 3 year link, with Apple./a
Microsoft has returned 100% in the past 10 years, dividends reinvested, or 7.25% annually. S&P 500 has returned 118% with dividends reinvested, or 8.2%.
Which, in my mind, makes them kind of equal. Microsft is now considered a value company , so lower risk and lower reward. Adjust for risk and it looks better. Also, chosing the past 10 years is kind of arbitrary - why not 7 or 12 years.
Ok, I ran quick calculations, so they may be off a bit, but you'd be looking at a return of around 110 - 118% from MSFT including their special dividend in 2004. If you cut that out and move to Q1 2005 through today that's about a 104% return. Much better than the return based only on stock price.
Getting stronger is subjective. If you analyze their performance, here's what you see: two divisions make up the majority of their revenue and profit. It appears to be Windows and Office. That is the same as 20 years ago.
However when it comes to hardware, MS barely makes any profit.
Your statement that Windows and Office make up the majority of their revenue and profit, same as 20 years ago, is simply wrong. Unless you call Exchange and Sharepoint for "Office" and Server and Tools for "windows". These are the most successful and most revenue and profit generating products/divisions of Microsoft. Last it was reported separately, Server and Tools division was zooming past the Windows division both in revenue and profit.
Getting stronger is subjective. If you analyze their performance, here's what you see: two divisions make up the majority of their revenue and profit. It appears to be Windows and Office. That is the same as 20 years ago.
However when it comes to hardware, MS barely makes any profit.
Your statement that Windows and Office make up the majority of their revenue and profit, same as 20 years ago, is simply wrong. Unless you call Exchange and Sharepoint for "Office" and Server and Tools for "windows". These are the most successful and most revenue and profit generating products/divisions of Microsoft. Last it was reported separately, Server and Tools division was zooming past the Windows division both in revenue and profit.
And guess who ran Server & Tools: http://venturebeat.com/2013/05...
If you are tracking a company's performance by its stock price it's kind of laughable
What do you suggest then? A Ouija board? The stock price is the consensus opinion of people investing real money. If you are so much smarter than the market, you should have made billions by now taking highly leveraged contrary positions. Please post a picture of your yacht.
unless you sacrifice your company for short term profits they really don't get excited. There is no long term outlook for companies any more
Sure. That is why companies that invested for the long term, like Amazon, Google, and even Microsoft in their early days, were unable to raise capital, and have all gone out of business.
Is this the quarter where they get the bulk of forced upgrades to Win 7 because of the end of support for Win XP?
They are taking on more and more hardware business. This is a much less profitable venture than they had before, so I don't expect things to be as rosy as you seem to. It is very hard to maintain the profit margins that they are accustomed to. Wall Street has given them a huge boost over the last year, but remember that comes after 10 years of no movement, and they still aren't anywhere near their highs during the dot-com bubble.
Still, the layoffs show that they are serious and PC sales have finally stabilized. While I am not a stockholder, I think you are right to be bullish in the short term.
Well, Apple have managed to eke amazing profit margins out of hardware buyers, but it seems to be the exception to get buyers to pay such a premium over component cost compared to competitors. It sounds to me that Ballmer wanted to copy the Apple playbook on this, while Nadella seems more skeptical that they can, and should rather focus on software and services.
I may be a Linux "fanboy" or whatever it's called, but I've still had MS in my portfolio. I can be very happy running Linux on all my machines and making relatively good money (considering risk) from MS. My "fanboy-ness" does not extend to my bank account.
One quarterly earnings report is nothing to make investment decisions about.
Are you kidding? The Street makes investment decisions based on single news reports!
Really, the day to day volatility of the market never ceases to amaze me. One bad news report? DJIA down 200. One good report? Up 150. It seems to be based on moment to moment emotion rather than logic. No wonder out-guessing the market is so hard. I think the big traders more or less permanently forget to take their meds.
Word is that most of their non-Nokia layoffs are QA, not management.
If you are tracking a company's performance by its stock price it's kind of laughable
I agree, but the poster to which I replied was bragging about how MSFT is doing so well and his stock portfolio is being counted by him and he is enjoying life. I merely pointed out that MSFT did not even perform better than the index.
Posting this as my Karma is bad right now.
In what fantasy universe does investment in one company yield lower risk than investing in 500?
From a pure investment perspective, you should have had 100% of your money in an S&P 500 index starting 10 years ago. Much lower risk, much higher return.
Most companies are happy to turn a 10% profit after expenses, employees, and so forth. 20% is a fantasy for them.
Yet the greedy Wall Street pricks aren't happy with a 20% profit.
I do not fail; I succeed at finding out what does not work.
I went here: http://www.microsoft.com/inves...
They have a nice little drop-down to select year/quarter and links to financial statements...it's all right there
My problem is I don't know how to read this MBA/budget speak...
I looked at 2009, their xls "financials" info...Q4...
Saw the breakout by sector tab, but the categories were type of services (servers, 'client', etc) but couldn't see where there was a "Public Sector" or anything similar...couldn't find a category for type of client.
Also, I"m a bit miffed that my GP post was labeled "troll"...seriously...not trolling...trying to find out info here that we all, in our industry, should have some idea of...
Thank you Dave Raggett
Revenues up, profits down. Odd. Revenues up all the time because inflation.
Stocks don't reflect real business performance.
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They're investing money in the idea that the stock is undervalued.
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Well, they've already become AAPL - their margins are almost identical at around 20%. But that is down from the roughly 30% margins they enjoyed over the last 5 years. And the trend is downward. A pessimist might look and see them trending towards Samsung's 12% margins if they insist on ramping up their hardware business.
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
Investing in Microsoft, Virgin, or Symantic is a diversified investment strategy. The companies operate in many market sectors, produce products across diversified markets, and supply services to everyone from miners to financials, home users to governments. Your risk is thusly spread across more than 500 companies.
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Or $255555 per recently-laid-off 18000 employees.
In what fantasy universe does investment in one company yield lower risk than investing in 500?
I am a huge fan of passive index investing. However, that rests on the efficient mark hypothesis, which assumes the underlying stocks are being priced correctly. In order to do that you need to enter my fantasy world were 1. time machines don't exist, and the future is filled with risk and uncertainty and 2. people have varying risk profiles, some of which are lower than the generic risk profile of the S&P 500.
Without people pricing the individual securities correctly the aggregate index means nothing. Another way of say this is, "What price do you think MSFT should be?"
The S&P is expected to return what this year – 9.65% with a standard deviation (assuming a normal bell curve, which is optimistic) of 9.61%. Is that the right risk / return level for you? Maybe you want to invest in lower return but less risky stocks?
And on a side note, why chose the S&P 500 to invest in? Why not the Russell 3000 or the MSCI World Index?
Microsoft should be made to pay that money back to the consumers who were coerced to upgrade needlessly. This is just another travesty in the extremely long list of travesties in the 21st century so far.
I find it a bit ironic that Microsoft has helped usher in this huge digital age where none of us really want to "own" digital content any more. We don't rush out to buy CD's any more, we subscribe to music services or stream Pandora. We don't go out and purchase DVD's, we subscribe to Netflix or rent some viewing via iTunes.
Yet, despite some little things like Office 365, Microsoft still makes its bread and butter via selling software to OEM's and volume customers that runs on hardware, both of which many of us are increasingly not wanting to own. I f*cking hate installing an OS on a server and then making sure the damn thing stays running. I'd much rather rent the VM in the cloud. Even better, just let me subscribe to your web service.
----- obSig
If there's a general perception that a stock is undervalued, people try to invest money by buying stock. This raises the price until people in general don't think it's undervalued any more.
"When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
They're investing money in the idea that the stock is undervalued.
For every buyer who thinks the stock is undervalued, there is an equal and opposite seller who thinks it is overvalued. The current stock value is the market clearing price where supply equals demand.
Apples gross margin for Q3 2014 was 39.4%. thats a bit better than 20%
Obviously I was not quoting gross. Microsoft's is over 65%, and headed downward. In 2010 it was around 80%!
W..w..W - Willy Waterloo washes Warren Wiggins who is washing Waldo Woo.
I'm not too concerned about their stock price, I'm concerned about their cash flow and the future of the business.
No kidding!!! What do you say at this point?
Except the stock has movement, and there is some probability that it will move up or down. Savvy investors have more information: they know general trends in stock movement, and can predict more accurately which way it will move. Non-savvy investors don't: they work on the principles of stability, that being that a nice, safe stock that's been climbing will continue climbing, and so they buy in as the stock gains value.
The second group tends to believe the stock is undervalued more when its spot price has climbed longer. They think it will go up forever. The first group has target prices and technical analysis, and starts to sell out at a certain point; this creates a visible stock movement that tips off more risk-tolerant investors who also do technical analysis, who sell out later. Eventually, the small-time traders who want to buy have "enough", or are out of money; the big-time traders who think the stock is overvalued aren't buying; liquidity decreases; and sale price becomes lower.
This difference in evaluation means different groups of people will think the stock is overvalued or undervalued. Even though their methods are different and their valuation of the stock is different, they're both purchasing "stock should increase in price from here". My point was that they're not investing in companies.
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