| Microsoft's gizmo-Windows turns in first profitable year |
Jul. 20, 2006
Microsoft on July 20 reported record fourth quarter revenue of $11.80 billion, for the period ended June 30, 2006, 16 percent over the prior year's fourth quarter. Revenue for the full fiscal year was reported as $44.28 billion, up 11 percent from the prior year.
Operating income for the fourth fiscal quarter was $3.88 billion, up 30 percent over the same period during the prior year. Full-year operating income came in at $16.47 billion, a 13 percent increase over the prior year.
Mobile and Embedded Devices segment
For the Mobile and Embedded Devices (MED) segment of Microsoft's business, the fourth fiscal quarter revenue was $113 million, a 41 percent increase over the same quarter last year. From the income perspective, the segment reported a loss of $2 million for the quarter, a substantial improvement over the $15 million loss in the prior year's fourth quarter.
Mobile and Embedded Devices segment revenue trend
For the full fiscal year, MED showed $2 million income on revenue of $377 million, compared to a loss of $65 million on $262 million in revenue the prior fiscal year. Of note, this marks the first time in Microsoft's history that its mobile and embedded OSes have turned in a year with positive net income.
Mobile and Embedded Devices segment income trend
While revenues have grown steadily, profits have remained elusive. In fact, the second quarter of fiscal 2006 is the only quarter in which Microsoft's embedded and mobile OS business segment has generated positive net income. Still, in the just-completed quarter, MED was only narrowly negative -- just 1.8 percent -- on record revenue.
The consumer device OS market is extremely competitive and cost-sensitive, with tens of millions of mobile phones and other gadgets demanding highly sophisticated software, but only able to afford a few dollars of cost.
Stock repurchase plan
Microsoft also announced plans to buy back $20 billion worth of its shares by mid August, and another $20 billion by mid 2011.
The company says it will buy back its common stock at a price per share between $22.50 and $24.75, representing up to 808,080,808 shares, or about 8.1 percent of the common shares outstanding. The tender offer is expected to commence on July 21 and to expire, unless extended, on August 17.
A "modified Dutch auction" will allow shareholders to indicate how many shares and at what price within the specified range they wish to tender, according to Microsoft. Based on the number of shares tendered and the prices specified, the company will determine the lowest price per share within the range that will enable it to purchase up to 808,080,808 shares.
As of 2:12 P.M. PDT on July 20, the share price stood at $22.85.
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