Microsoft’s Result: Fun with Deferred Revenue

As expected, Microsoft has made its numbers, with deferred revenue providing the kicker. More later after the call.

[Update] Some fine people pointing out in comments that I said “made” rather than “beat”. Made doesn’t imply non-beat, and they did beat by $0.04 on the $0.46 consensus earnings. Still waiting for more color, but no-one should have been surprised by this given the previously-tipped change in deferred revenue policy. No nefariousness.

[Update^2] Post-call, I’m not seeing the level of concern around Vista uptake that I expected. The skew helped, with Premium doing better than Microsoft (and I and analysts) expected, but nevertheless, these are solid numbers. Sure, Microsoft had a more favorable tax rate than in recent quarters, which accounts for a penny or two, and the revenues, net of deferred revenues recognized, are not nearly so impressive, but this is still, I’ll admit, a better quarter than I expected.  Could my favorite whipping company be being lifted by the rising tech tide? Strangers things have happened!


  1. as expected? i thought you were blowing the horn of the apocolypse?

  2. so microsoft isn’t “dead” Paul? But you said!!!

  3. Nope, been saying deferred revenue would goose the quarter. Still think Vista’s set to disappoint, but not calling for the apocalypse — yet.

  4. Why do you say ‘made the numbers’? looks like a beat to me. and more than their usual penny.

  5. Ha! Will take a long time for Microsoft to expire. I’m still long-term bearish. Sorry.

  6. Meant “made” as opposed to “missed”. No underperformance expressed or implied. Let’s wait for the call. Maybe Microsoft’s a growth stock again … not :-)

  7. pantywaist says:

    ‘goose’? that clearly makes it sound like they cheated somehow. that’s not a fair characterization. everyone knew how much was deferred from the miss last quarter. that was all clearly laid out. there isn’t a wall street analyst who missed estimate projections because of the deferred component.

  8. Paul if you and your bros like Roger can spin this in any other way than Monsterous, my hat is off to your skill and acumen!

  9. the deferred revenue change was in the estimates as pointed out above. The reaction in after hours trading suggests this was a huge Surprise. After all the Apple and Google centric bloggers have been quite extremely bearish on Msft. Vista only gets stronger from here out as the tire kickers place their orders and SP1 is released.

  10. pantywaist says:

    the question now is why the beat. i believe people looking to oems and amazon for sales numbers are missing a big chunk of sales. a lot of the tech guys (IT geeks, developers, etc.) usually go to a newegg/tiger/etc. to make these purchases. off the radar. and i’m guessing these are premium editions with higher margins than equivalent oems sales. just a guess.
    msft will never be a revenue growth stock. but they could become an eps growth stock like ibm. this is the kind of growth that counts. it would just take someone with more fiscal responsibility.

  11. for a $60b company 12% revenue growth, largely organic, is outstanding. In fact if you look at the 08 numbers it looks to be trading at 18 times earnings. This is headed to $35 then $40. That’s why they are buying back so much stock. The missing link in the analysis the substantial price increase MS got away with when pricing Vista. That’s the story though unreported so far.
    from Barron’s..
    For the full year ending in June, the company sees revenue of $50.9 billion to $51.2 billion, with EPS of $1.48 to $1.50 a share, or $1.47 to $1.49 on a pro forma basis. The company’s newly offered 2008 guidance – revenue of $56.5 billion to $57.5 billion – represents growth of 10.4%-13%. The EPS guidance of $1.68-$1.72 a share represents growth of 12.8%-17%.

  12. Conf call and earnings broken down nicely / fairly by the anonymous / disgruntled employee blogger at msftextrememakeover:

  13. Come on Paul.
    On this one, you have to admit that you were just plain wrong. Microsoft handily beat the numbers, and increased earnings more than 60%.
    That’s pretty impressive for a company that’s north of $60 B in revenues. EPS of $0.50 versus a consensus of $0.40. And this is for a mature company. About $7B of buybacks, which also boosts the price per share.
    Microsoft is definitely not a lean and efficient machine, and much more needs to be done on that front. But it’s still a juggernaut, still worth many times the value of AAPL, AMZN, GOOG, YHOO, etc.