Q4'04 Sees Record Profits

Profits reached a record US$2.69 billion in the fourth quarter of Microsoft’s 2004 fiscal year, which ended June 30-a record profit for the company since it began counting stock-based employee compensation as an expense. The strong quarter was driven by growth in PC and server shipments, particularly to businesses, and stronger-than-expected sales of multiyear licenses to large customers. (For an overview of Q4’04 financials and how they compare with previous quarters, see the chart “Microsoft Financials for the Last Five Quarters“.)

Microsoft Chief Financial Officer John Connors expects strong corporate IT spending to continue at least through the first half of FY’05, and he raised Microsoft’s revenue guidance for the fiscal year to between US$38.4 and US$38.8 billion. However, in Dec. 2005, Microsoft will return about US$32 billion in cash to investors in the form of a one-time payment, reducing the earnings it receives from its cash and short-term investments. As a result of this and other factors, including the lack of a new Office release and the likely end of a foreign-currency benefit, Connors expects profits to grow only 5% in the coming fiscal year. (For details of Microsoft’s cash disbursement plan, see “Big Dividend, Buyback Announced“.)