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Q4 2011 Earnings Call
July 21, 2011 5:30 pm ET
Bill Koefoed - General Manager of Investor Relations
Peter Klein - Chief Financial Officer
Brendan Barnicle - Pacific Crest Securities, Inc.
Adam Holt - Morgan Stanley
Brad Reback - Oppenheimer & Co. Inc.
Brent Thill - UBS Investment Bank
John DiFucci - JP Morgan Chase & Co
Heather Bellini - Goldman Sachs Group Inc.
Philip Winslow - Crédit Suisse AG
Edward Maguire - Credit Agricole Securities (USA) Inc.
Walter Pritchard - Citigroup Inc
Colin Gillis - BGC Partners, Inc.
Tim Klasell - Stifel, Nicolaus & Co., Inc.
Robert Breza - RBC Capital Markets, LLC
Gregg Moskowitz - Cowen and Company, LLC
Previous Statements by MSFT
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Thank you, Carol, and thank you, everyone, for joining us this afternoon. As usual, with me today are Peter Klein, Chief Financial Officer; Frank Brod, Chief Accounting Officer; and John Seethoff, Deputy General Counsel.
On our website is our financial summary slide deck which is intended to follow the flow of our prepared remarks and provide the reconciliation of differences between GAAP and non-GAAP financial measures. This information is available at microsoft.com/investor.
As a reminder, we will post today's prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript and any future use of the recording. You can replay the call and view the transcript at the Microsoft Investor Relations website until July 21, 2012.
During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10-K, Form 10-Qs and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
Okay. And with that, I'll turn the call over to Peter.
Thanks, Bill, and thanks, everyone, for joining us today. I'm pleased to share with you our financial results for the fourth quarter, which rounded out a solid fiscal year. We closed the year with terrific sales execution, as enterprises furthered their commitment to our Windows, Office and Server products. Customers continued to invest in our Business Desktop offerings, including Windows 7, where enterprise deployments have increased almost 50% since March. Our overall multiyear licensing business was especially strong, driven by attach of additional seats and additional products. As a result, fourth quarter bookings were up 17%.
As I look back on fiscal year '11, we delivered strong financial results and products while making strategic investments and alliances that will allow us to capitalize on long-term growth opportunities. We grew fiscal year '11 revenues double digits and we delivered another year of operating margin expansion. We also grew earnings per share by more than 20% for the second year in a row.
Our financial results reflect Office 2010's outstanding market reception. Deployment remains 5x faster than the previous version. Customers are also adding our business productivity applications, including Exchange, SharePoint, Lync and Dynamics to their multiyear agreements. These 4 products collectively drove approximately 30% of the business division's growth this year.
We made great progress on our cloud initiative this year. We continue to lead the industry through this transformation by enabling our customers to transition to the cloud in a flexible, customized way. Last month, we launched Office 365, the latest generation of our cloud productivity service. With Office 365, we've created new profit growth opportunities for us and our partners while enabling scenarios that weren't viable in the past.
In the enterprise, Office 365 enables us to increase revenue and profit per seat while strengthening customer commitment through increased product satisfaction and high return on investment. It gives us new opportunities to address the workforce that doesn't regularly use a PC in the workplace. For small and mid-sized businesses, we now offer a productivity solution with simple deployment and low upfront cost. And with 80% of small businesses having never purchased a business productivity application aside from Office, the opportunity for Microsoft and our partners is significant.
During the year, we made important platform enhancements to Windows Azure, driving increased developer interest and momentum and enabling new scenarios. Companies such as Pixar, Toyota and Boeing have leveraged Azure to develop innovative solutions and enhanced experiences for their customers. At the same time, building private cloud infrastructure remains a top priority for many of our customers, and Windows Server, System Center and SQL Server are scaling with the increased workloads in data centers.
In search, Bing continues to gain market share. In this quarter, we further differentiated our platform by deepening our relationship with Facebook. During the quarter, we partnered closely with Yahoo! to uncover and address several platform gaps and inefficiencies. We still face monetization challenges and will continue to work closely with Yahoo!. We remain confident in the long-term potential of the combined search marketplace.
During the year, we reinvigorated our Xbox franchise with a refreshed console and with Kinect, which revolutionized home entertainment and natural user interface technology. We also had great momentum with Xbox Live, which now has approximately 35 million members. Together, these products and services drove record fiscal year revenue and operating income in the Entertainment and Devices division.