I'll be live-blogging Microsoft's Q4 call right here here in a few minutes. Until then, I'm of the belief that analysts will again grill Microsoft brass on its internet strategy -- specifically its AdCenter platform (competitor to Google Inc. (NASDAQ: GOOG) and Yahoo! Inc. (NASDAQ: YHOO)) and how performance there is shaping up. Also, the sparks may fly a little on Microsoft's billion-dollar commitment to extend the warranties on some Xbox 360 game consoles and the possible insider trades that happened right before the bad news broke.
On a lighter note, I'm interested to see how sales of Microsoft's newer Office 2007 productivity software are shaping up, since that is the single largest piece of Microsoft's revenue arsenal outside of the Windows franchise. Is Office 2007 selling, and well? Here we go -- please remember to use the "Refresh" key on your browser to refresh this page every few minutes, as updates will be frequent. All times below are in PDT.
2:32pm -- while we wait for the executive remarks to commence, here is the overview on Microsoft's Q4 and full-year results:
- Microsoft Corp. today announced revenue of $13.37 billion for the quarter ended June 30, 2007, a 13% increase over the same period of the prior year. Diluted earnings per share for the quarter were $0.31. Excluding $0.08 of previously announced charges primarily related to Xbox 360™ warranty policies, earnings per share would have been $0.39, an increase of 26% over the same period of the prior year when also adjusted for certain items.
- For the fiscal year ended June 30, 2007, Microsoft announced revenue of $51.12 billion, a 15% increase over the prior year. Diluted earnings per share for the year were $1.42. Excluding certain items, earnings per share would have been $1.49, an increase of 17% over the prior year when also adjusted for certain items. $31 billion in cash, or approximately 175% of operating cash flow, was returned to shareholders during the year through share buybacks and dividends.
2:36pm -- one question: why is CEO Steve Ballmer or even outgoing Chief Software Architect Bill Gates no longer involved in these end-of-year calls? How about Ray Ozzie? Where are these Microsoft folks? Hmm.
2:40pm -- Microsoft's Q1 guidance is as follows, according to Liddell:
- Revenue is expected to be in the range of $12.4 billion to $12.6 billion.
- Operating income is expected to be in the range of $5.0 billion to $5.2 billion.
- Diluted earnings per share are expected to be $0.38 to $0.40.
- Management offers the following guidance for the full fiscal year ending June 30, 2008:
- Revenue is expected to be in the range of $56.8 billion to $57.8 billion.
- Operating income is expected to be in the range of $22.2 billion to $22.7 billion.
- Diluted earnings per share are expected to be in the range of $1.69 to $1.73.
2:44pm -- Colleen Healy with Microsoft Investor Relations says that emerging market growth surpassed mature market growth, and consumer software sales surpassed business software sales. This tells me that Windows Vista sales to OEMs (instead of retail sales) were excellent during this past quarter. This is hardly a surprise -- almost every PC sold now comes with Vista pre-installed, since Windows XP is not even available from most computer makers any longer.
2:47pm -- Business revenues by business segment are now being discussed, with plenty of acronyms like CRM and ERP flying throughout the jargon jungle. CRM = Customer Relationship Management and ERP = Enterprise Resource Planning.
2:50pm -- the Microsoft Zune sold over one million units in its first eight months, although it has a way to go in catching with iPod sales, which stand at 100 million units sold.
2:55pm -- Liddell is making some closing comments before asking for analyst Q&A. He is going over the Q1 guidance figures in detail. Microsoft always does this -- it really sets the stage at the end of each quarter for the next quarter with very specific details. He is still going over every business division and the guidance each one should have in the next quarter as well as fiscal 2008.
3:02pm -- the analyst Q&A begins. First question: the online services group saw some gains in the last month, although those gains may have been made by special programs. Do Q1 figures show a slowdown. Answer: Microsoft did have good search volumes as well as monetization of that volume. Also, Microsoft's display business did very well this past quarter. Liddell says that fiscal 2008 should see growth in the mid-twenties percentage. That's not bad.
3:05pm -- next question: where could the mix of Windows Vista be in the next quarter? Liddell says that the shift to premium versions of Windows Vista (consumer and business) should sway more to the consumer area since the company sees more Vista sales continuing to go to consumers instead of businesses (just like the recent quarter).
3:08pm -- next question: in the entertainment and devices area for fiscal 2008, could more details be given? Answer: Liddell expects guidance throughout 2008 in this business segment to be more linear than surges and pullbacks. He does say that specific details can't be given for competitive reasons.
3:12pm -- next question: was cash flow in the recent fiscal year caused by having Xbox 360 inventory (instead of making them throughout the year)? Liddell: yes, there is a difference between existing and build inventory, and the $1 billion writedown on the recent Xbox 360 warranty was a non-cash transaction, but does have an effect on cash flow indirectly.
3:16pm -- next question: client and server software sales came in lower than expected. Why? Answer: sales were inline with guidance even with Vista revenue recognition, and the details when licenses ship and are then recognized as revenue can make figures pop at times that may seem inconsistent based on the specific months when revenue recognition is slated to occur.
3:21pm -- next question: how is adoption of Windows Vista being seen in the business industry? Answer from Liddell: 78% of business licenses next year will from from Vista, with the 22% remainder coming from Windows XP. This is down from a previous 85% level of business Vista adoption as the prediction for next year. Reason? Business customers need more time to transition and Microsoft (most likely) needs to continue selling Vista to the business premium customer. Microsoft makes money either way, adds Liddell.
3:26pm -- last question: what is in the forecast for the business Windows Vista premium version mix (for fiscal 2008). Liddell: it should be inline with fiscal 2007, which was a 67% adoption of the premium business as a piece of overall Windows Vista product mix.
3:29pm -- that's it -- Microsoft's Q4 and fiscal 2007 call is over. Overall, Microsoft had an other excellent quarter and continues to chug along with new products and slowly-increasing sales in its operating system software (insofar as its "Premium" versions). Microsoft is the giant that won't stop it seems, even with a $1 billion warranty issue with the Xbox 360 gaming console.