Five Businesses Refocus for FY'10

Coming off a difficult year, executives at Microsoft’s annual Financial Analysts Meeting (FAM) presented a cautious outlook for fiscal year (FY) 2010, which started July 1, 2009. Top priorities for FY’10 include containing costs, preserving cash, and stopping the revenue slide in the Windows client business through more aggressive pricing. Partners and customers may have a harder time finding product information and presales support as Microsoft scales back sales and marketing budgets. At the same time, Microsoft reiterated its commitment to investing in research and funding long-term opportunities like search and mobile phones.

Surviving the Reset

For the first time since becoming a public company in 1986, Microsoft’s business shrank during the fiscal year: FY’09 revenue dropped 3% from the previous year to US$58.44 billion, operating income was down more than 8% to US$20.36 billion, and net income fell 18% to US$14.57 billion (net income dropped more than operating income because of foreign exchange fluctuations and losses on derivatives in FY’09). All five of the business segments Microsoft uses for financial reporting fell short of expectations expressed at last year’s FAM, and only one—Server and Tools—grew during the year. (For an overview of the performance of Microsoft’s business segments, see the chart “Five Businesses: Financial Overview“.)