Microsoft on Thursday reported a year-over-year profit decline of nearly 24 percent in the fiscal fourth quarter of 2006 due partly to a one-time legal charge, and announced a $40 billion stock repurchase plan.
The company reported net income for the quarter of $2.83 billion sharply off the $3.7 billion the company reported in the fiscal fourth quarter of 2005. The $2.83 billion included a legal charge of 3 cents a share. Without the charge, Microsoft said earnings would have been 31 cents per share for the most recent quarter, exceeding Wall Street estimates of 30 cents per share.
For the 2006 fiscal year, Microsoft reported $12.60 billion in net income as compared to $12.25 billion in the previous year, an increase of 2.8 percent. Revenue was up 11 percent over fiscal 2005 to $44.28 billion.
Microsoft set a company revenue record for a fourth quarter at $11.8 billion. That mark was a 16 percent increase over the same quarter in 2005.
The company also announced it would repurchase $20 billion of its stock before Aug. 17 and another $20 billion before June 30, 2011. In addition, the company again realigned its financial reporting structure, which will have five operating segments in fiscal 2007: Client, Server and Tools, Information Worker, Online Services Group, Microsoft Business Division, and Microsoft Entertainment and Devices Division. The groups align with the three organizational groups Microsoft recently created: Microsoft Platforms and Services Division, Microsoft Business Division, and Microsoft Entertainment and Devices Division.
Microsoft said it had a strong quarter in terms of volume licensing with strong renewals particularly in its enterprise agreements, which tracked to traditional levels of 66 percent to 75 percent.
The company also said that Select and Open annuity licensing growth outpaced non-annuity licensing, but did not provide exact figures.
The company’s unearned revenue balance – an indicator of the health of its annuity licensing – hit a record $10.9 billion in the quarter, an increase of 19 percent over the same quarter in 2005 and a $2 billion increase over the third quarter of 2006.
“[Volume licensing] renewals were strong and that was the majority of it, but we saw good acceptance on new [purchases], said Chris Liddell, Microsoft’s CFO.
The company said its Server and Tools business posted its 16th consecutive quarter of double-digit revenue growth with an 18 percent gain fueled by a 35 percent-plus year-over-year revenue growth in SQL Server. The company also reported 12 percent year-over-year growth for the fourth quarter in its client-revenue based on strong sales of PCs that fueled purchases of the Windows client operating system.
Microsoft also said that it added 50,000 new Dynamics CRM customers in the quarter.