Microsoft Reports Q4 Earnings Of $4.97 Billion, Writes Down $900 Million For The Surface RT

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Microsoft Corporation reported their fourth quarter earnings.  Their earnings and sales missed analyst expectations and the company reported a large write-down of Microsoft Surface RT tablets.  Microsoft reported fourth quarter earnings of $4.97 billion on revenues of $19.9 billion.  These results include a $900 million inventory write-down for the Surface RT.

Wall Street analysts were expecting fourth-quarter earnings of 72 cents per share on revenues of $20.73 billion.  For the year, Microsoft reported earnings of $2.58 per share on revenues of $77.85 billion.

The reason why the Microsoft Surface RT write-down is due to price cuts from earlier this past week and increased distribution.  Microsoft chief financial officer Amy Hood said that the results were “impacted by the decline in the PC market.”  However, the company’s enterprise business was strong.

The Microsoft Windows division reported an operating income of $1.1 billion, which is down from $2.42 billion a year ago.  Microsoft’s online service division cut their operating loss to $372 million.  Microsoft’s entertainment and devices division lost money as it dropped $110 million in the fourth quarter.  That will likely change towards the holiday season when consumers start buying up the Xbox One console.

Microsoft’s server and tools unit had a fourth quarter operating income of $2.35 billion on revenues of $5.5 billion.  The company’s business division (Microsoft Office) had an operating income of $4.87 billion on $7.2 billion.

The company has seen an increase of consumer demand for their cloud services like, Office 365, and Skype.  The cloud services division is seeing an annual revenue run rate of $1.5 billion.  The SQL Server and System Center division saw double-digit revenue growth.

Total cash, cash equivalents, and short-term investments for Microsoft was at $77.02 billion as of June 30.  Microsoft lowered their expense guidance to $31.3 billion from $31.9 billion for the fiscal year ending June 30, 2014.  Microsoft spent $10.41 billion on R&D, which is up from $9.81 billion for fiscal 2012.

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