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Microsoft Corporation (MSFT)

F2Q 2013 Earnings Call

January 24, 2013 5:30 pm ET


Chris Suh - General Manager of Investor Relations

Peter Klein - Chief Financial Officer


Philip Winslow - Credit Suisse

Walter Pritchard - Citigroup

Rick Sherlund - Nomura

Adam Holt - Morgan Stanley

Heather Bellini - Goldman Sachs

Kash Rangan - Bank of America Merrill Lynch

Brent Thill - UBS

John DiFucci - JPMC

Colin Gillis - BGC Financials

Brendan Barnicle - Pacific Crest Securities

Gregg Moskowitz - Cowen & Company

Raimo Lenschow - Barclays

Ed Maguire - CLSA



Welcome to Microsoft's fiscal year 2013 second quarter earnings conference call. All lines have been placed in a listen-only mode until the question-and-answer session. Today's call is being recorded. If anyone has any objections, you may disconnect at this time.

I would now like to turn the call over to Chris Suh, General Manager of Investor Relations. Chris, you may begin.

Chris Suh

Thanks, operator and thanks, everyone for joining us this afternoon. This does feel like a bit of a homecoming. Some of you may remember, I was in IR a number of years ago. I am excited to be back and looking forward to working with all of you. 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 our prepared remarks and provides a reconciliation of differences between GAAP and non-GAAP financial measures. 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 January 24, 2014.

During this call, we will be making forward-looking statements that are predictions, protection or other statements about future events. 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 factor section of our Form 10K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.

Before I hand the call over to Peter, I would like to remind you all that all growth comparisons we make on the call today will relate to the corresponding period of last year. Also, unless specified otherwise, all impacted numbers for the current quarter have been adjusted for the cumulative effect of the revenue deferral and recognition related to Windows, Office and Xbox videogame and the details of those adjustments can be found in our financial summary slide deck and press release.

With that I will turn it over to Peter.

Peter Klein

Thanks everyone for joining us. I am pleased to welcome Chris as the new head of investor relations. Chris has been with Microsoft for over 16 years and has been in diverse finance role which gives him a good background for this role. I also want to thank Bill for all he has accomplished over the past four years and congratulate him on his new role as the CFO of the Skype division.

This quarter we had record revenue of $22 billion and record earnings per share of $0.81. It has been an exciting quarter with the launch of Windows 8 and Windows Phone 8. In the enterprise, we continue to see solid demand for our business products and services with particularly strong growth in multiyear licensing. Multiyear licensing revenue benefited from healthy renewals of enterprise agreements as customers continue to make long-term commitments to the Microsoft platform.

Our robust portfolio of enterprise products and services enable CIOs to build efficient infrastructure, unlock business insight, improve productivity and support bring your own device. In the data center, recent releases of Windows Server 2012 and System Center 2012 are driving customer wins and strong renewals. Our cloud OS roadmap uniquely positions us to support the hybrid infrastructure needs of CIOs by providing one consistent platform that can span their own data center, our partners data center, or Windows Azure with ultimate flexibility, portability and scale.

On the data platform, we are growing our revenue share as enterprises continue to move mission-critical workloads to SQL Server and deploy it for their business intelligence solutions. In productivity, we are excited about the upcoming launch of the new Office, and how it redefines user experience with mobility, social and cloud features. The new Office features a fast fluid design that takes full advantage of the new Windows interface.

With Skype and Yammer integration it unlocks new experiences for communication and collaboration and brings social directly into productivity scenarios. With Windows 8, businesses will now be able to give their employees thin and light devices without compromising on security or manageability. Windows 7 momentum in the enterprise continues and today, over 60% of enterprise desktops worldwide are on Windows 7.

We've talked about Windows 8 as Windows re-imagined from the chipset to the user experience. As we undergo this transformation, it is important for us to bring the entire ecosystem along with us. With the launch in October, we collectively took the first of many steps changing the way people use technology at work and in play. Since then, the number of Windows 8 certified systems has nearly doubled. The number of apps in the Windows store has quadrupled and Windows users have downloaded over 100 million apps.

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