Microsoft profits take a beating in spite of record fourth quarter | Ars Technica

http://arstechnica.com/information-technology/2012/07/microsoft-profits-take-a-beating-in-spite-of-record-fourth-quarter/

Microsoft's fourth quarter of its 2012 financial year was a mixed bag. Revenue is up to $18.06 billion, up 4 percent year-on-year. However, operating income is down 97 percent to just $192 million, and the company reported a $0.06 loss per share.

Microsoft attributes the results to two things. The company has written off $6.2 billion of goodwill value in the fallout of its 2007 purchase of advertising company aQuantive.

In addition, a further $540 million of revenue (and $540 of operating income) is deferred until next quarter, as the revenue is tied in to the Windows 8 Upgrade program (the company can only book the revenue when it fulfills the promised upgrades). The same behavior was seen in the run-up to the releases of Windows 7 and Office 2010, and is a recurring pattern for Microsoft. The deferrals will continue to accumulate until at least the second quarter of Microsoft's 2013 financial year, as that is when Windows 8 will become available. Microsoft expects to defer $1.0-$1.2 billion in revenue next quarter.

Excluding these charges, the quarterly revenue comes in at $18.6 billion, a 7 percent year-on-year increase, with operating income of $6.9 billion and earnings per share of $0.73, increases of 12 percent and 6 percent on the same results a year ago.

For the full year, the company posted revenue of $73,723 million and an operating income of $21,763 million, a gain of 5.4 percent and a loss of 19.9 percent respectively.

The Windows and Windows Live's Division reported total revenue of $4.69 billion, down 1 percent year-on-year. However, only $4.15 billion is booked in the quarter just gone; $0.54 billion is deferred for the upgrade program. As a result of the deferral, operating income is down 17.5 percent. The 1 percent revenue decline was in line with trends in the PC market; business PCs were up 1 percent, but consumer PCs were down 2 percent. The enterprise performance was strong, with a double-digit growth in volume license revenue, and Microsoft is claiming that more than 50 percent of enterprise desktops worldwide are now running Windows 7.

Whole year revenue was $18,373 million (excluding deferred revenue) and operating income was $11,460 million, drops of 3.5 percent and 6 percent respectively.