Microsoft 2011 4Q financial analysis
|2012 March 4||Posted by admin under 2011 4Q, Microsoft, Technology, USA|
Companies 4Q results was quit static. Revenue grew only by 5% from 20 bn.$ to 20,9 bn.$. While Net income before Depreciation remained the same 7,3 bn.$ Bad news for the company is that one of its key segment “Windows” income decreased from 5,1 bn.$ to 4,7 bn.$ (Δ-6%), while other segments showed some growth: Server and tools from from 4,2 bn.$ 4,8 bn.$ (Δ+14%); Business from 6,1 bn.$ to 6,3 bn.$ (Δ+3%); Entertainment from 3,7 bn.$ to 4,2 bn.$ (Δ+14%), this is not good for the company as results show that companies core product “windows” is slowly creeping toward “old dog” from “money cow” by Boston matrix. Unless company will do something it might end up overrun by its competitors Google and Apple in long term. In general companies results are average.
Balance sheet stays strong. Equity level increased over time from 53% to 57% and is at good level. Liquidity ratio is 2,9 which is very good and mainly influence by large amount of cash and short term investment reserves which are 51,7 bn.$ or 46% of total asset (112 bn.$). Inventory level stays around the same 1-2 bn.$ Account receivables floats at its normal 12-15 bn.$ level and its turnover is around 60 days. Account payable 8,3 bn.$ and its turnover reach 130 days which is a bit a lot, but this is mostly due to good delay payment conditions from its suppliers. Working capital change is variation as can seen from picture below, since company does not show any rapid growth.
One visible thing at Q4 is large amount of investments into long term asset (not investment tipe) which reach 9,3 bn.$ mainly it is driven by Goodwill increase from 12,5 bn.$ to 19,7 bn.$ Goodwill contains quit large amount of companies total asset – 18%. The only big investment that company was made on Y2011 was purchase of Skype for 8,5 bn.$, but it was purchased at Q1. Goodwill change at Q4 comes from acquisitions at these sections: Business 2,8$ Entertainment 4,3 bn.$. Entertainment could be the acquisition of VideoSurf Inc. at 2011-11-22, but it is stated that it was bought for only 100 m.$, so this change is remain quit fogy.
ROE (return on equity) remains around the same 40% level and is quit good, but is quit lower then at 2010Q4 which was 55% it is due to increase of companies equity from 48 bn.$ to 68 bn.$. ROA dropped from 29% to 24% This is mainly due to companies investments which increased companies long term asset from 33 bn.$ to 40 bn.$ and also increase in companies short term investments and cash from 41 bn.$ to 52 bn.$. In general companies balance structure is acceptable.
|Common Stocks||63,9 bn.$||8,465 bn.||7,55 $|
|+ Retained earnings||0,2 bn.$||+ 0,02 $||7,57 $
|+ 1 year Net income before Depreciation||26,0 bn.$||+ 3,07 $||10,64 $
Companies share basic value is ~7,6$. Current market price is 32$ which shows that market is paying 24,4$ more or 7,9 years of Net income before Depreciation earnings. Share profitability (share market price/Net income before Depreciation) is 10%.
Company at the moment pays 0,8$/share annual dividends (0,2$/quarter) before tax or 2,5% investment yield. Since no growth is predicted dividend level should stay the same.
Analysis source: Microsoft 2011 4Q 10-Q financial statments
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