As in past years, all information in this report is taken from Microsoft’s publicly available 2012 10-K filing. Numbers may vary from past reports. When Microsoft moves products between revenue categories, they retroactively adjust the totals for past years so that year-to-year comparisons are accurate. This article uses 2010 and 2011 values as calculated in the 2012 report. All values are in USD.
If you’ve read my past reports, feel free to skip down to the charts. If this is your first time here, let me provide a quick explanation of how Microsoft breaks down its earnings.
Microsoft Total Revenue and Operating Income (June 2011 – June 2012)
Total Revenue: $73,723,000,000
Operating Income: $21,763,000,000
Total Revenue is the total amount of money Microsoft takes in from normal business operations.
Operating Income is calculated as (Operating Revenue – Operating Expenses). In other words, “Operating Income” is the profit made from normal business operations. (A more formal definition is available from Investopedia: “Operating income would not include items such as investments in other firms, taxes or interest expenses. In addition, nonrecurring items such as cash paid for a lawsuit settlement are often not included. Operating income is required to calculate operating margin, which describes a company’s operating efficiency.”)
Operating Income is particularly important when looking at a company like Microsoft. Certain Microsoft divisions take in a great deal of money, but they also require much higher costs to operate. Therefore, it is important to look at not just how much money a certain division brings in – but at how much it costs to operate that division.
Microsoft Revenue and Operating Income by Division (June 2011 – 2012)
Microsoft products (and earnings) are divided into five divisions: Windows & Windows Live, Microsoft Business, Server and Tools, Entertainment and Devices, and Online Services. The types of products and services provided by each segment are summarized below:
- Windows and Windows Live – Windows operating system, Windows Live applications and web services, Microsoft PC hardware products.
- Microsoft Business – Microsoft Office (including Office Web Apps and Office 365), Microsoft Exchange, Microsoft SharePoint, Microsoft Lync, Microsoft Office Project and Office Visio, and Microsoft Dynamics ERP and CRM.
- Server and Tools – Windows Server operating system, Windows Azure, Microsoft SQL Server, SQL Azure, Visual Studio, Silverlight, Windows Intune, Windows Embedded, System Center products, Microsoft Consulting Services, and Premier product support services.
- Entertainment and Devices – Xbox 360 console, games, and accessories (e.g. Kinect), Xbox LIVE, Windows Phone. In 2012, Microsoft also added Skype to this division.
- Online Services – Bing, Microsoft adCenter, MSN, and Atlas online tools for advertisers.
(Note: these divisions are pretty much identical to 2011, with the exception of Skype being added to Entertainment and Devices.)
Here are the 2011-2012 revenue and operating income values for each division, in USD. Note that the number in parentheses is the percentage change between 2011 and 2012.
Windows and Windows Live
Revenue: $18,373,000,000 (-3%)
Operating Income: $11,460,000,000 (-6%)
Business (Office, Exchange, SharePoint)
Revenue: $23,991,000,000 (+7%)
Operating income: $15,719,000,000 (+7%)
Server and Tools (Windows Server, Microsoft SQL, Visual Studio)
Revenue: $18,686,000,000 (+12%)
Operating Income: $7,431,000,000 (+18%)
Entertainment and Devices (XBox 360/LIVE, Windows Phone)
Revenue: $9,593,000,000 (+8%)
Operating income: $364,000,000 (-71%)
Online Services (Bing, MSN, Hotmail)
Revenue: $2,867,000,000 (+10%)
Operating income: $-8,121,000,000 (*)
(* – Microsoft marks the large difference between Online Services’ 2011 and 2012 operating income as “not meaningful.” The explanation: “OSD’s fiscal year 2012 operating loss reflects a goodwill impairment charge of $6.2 billion, which we recorded as a result of our annual goodwill impairment test in the fourth quarter. The non-cash, non-tax-deductible charge related mainly to goodwill acquired through our 2007 acquisition of aQuantive, Inc.”)
Total Revenue Charts – 2012
Operating Income Chart – 2012
Year-over-year comparisons (2010-2012)