MSFT Q1 Financials
Microsoft's ability to grow revenue across multiple business units, business, and consumer, is striking.
- Productivity and Business Processes. 11% growth in the quarter. In this category, the Dynamics products and cloud services revenue, which includes Microsoft's customer relationship management product, had the highest growth at 19%.
- Intelligent Cloud. 20% quarterly growth
- More Personal Computing. 6% quarterly growth. In this segment, Xbox growth contributed to the most growth in this business segment.
- LinkedIn revenue growth increased by 16%. This growth suggests that employee recruiting and business advertising, the key to LinkedIn's business model, is starting to pick up. LinkedIn users are also spending more time on the professional social media network. LinkedIn sessions were up 31%.
- Microsoft's tablet. Microsoft's suite of tablet computer products, the Surface, is continuing to sell well. Sales for these devices increased by 36% in the period.
- Net Income. The company grew net income by 30% to $13.9 billion.
Despite the growth, Microsoft's growth appears to have slowed compared to the previous quarter. In the most recent quarter, Microsoft reported $37 billion in revenue, down $1 billion from the prior quarter.
$9 Billion for MSFT Shareholders
Microsoft has allocated nearly $10 billion to reward shareholders. The company spent $5.3 billion on share buybacks and $4.3 billion on dividends. This shareholder-friendly decision is reflective of the company's stock price. Pre-pandemic, Microsoft's share price was $188 in early February. By October 27, the stock price closed at $213.
From a dividend perspective, Microsoft increased its quarterly dividend to 56 cents per share in September. That's a 10% increase in the company's dividend. The company had doubled its dividend since 2013 when the quarterly dividend was 23 cents per share.
Microsoft Remains a Cash Machine
In the quarter ending September 30, Microsoft reported a free cash flow of $14.4 billion, which is up 38% year over year. In contrast, the company earned $10.4 billion in free cash flow for the same quarter in 2019. These growing cash reserves suggest that the company will be in an excellent position to continue share buybacks and dividend increases.
Microsoft Teams Is Getting Better
In 2020, Microsoft Teams, MSFT's answer to Zoom, is growing in popularity. The company is also investing heavily in new product features. Microsoft Teams and Cisco Webex integration have been improved so that attendees in these rooms can better collaborate. You can now view up to 49 people in a Microsoft Teams video conference call using the large gallery feature (i.e., seven rows of seven participants). Zoom currently offers a similar feature of displaying 49 participants and lets users have several pages of 49 user groups.
Microsoft Teams' additional features take it beyond a simple video conferencing tool. The product now includes task management capabilities and a customized virtual lobby as well. Furthermore, Microsoft Teams now includes templates for videos so that customers can create virtual meetings more quickly. These additional features are likely to make Microsoft Teams more appealing to business users.
Since launching in 2017, Microsoft Teams has grown steadily. In August 2018, there were five million users. By April 2020, there are an estimated 75 million users on Microsoft Teams. By comparison, Cisco Webex has approximately 300 million active users. Although it should be noted that users are not necessarily equivalent to customers since these platforms offer free user accounts.
LinkedIn Is Fighting Bias
As one of the world's largest professional networks, LinkedIn has become essential to the job market, and it is not taking a neutral position anymore. Instead, the company is actively seeking to fight bias, evidenced by the launch of a name pronunciation feature so that users can avoid mistakes. With this feature, users can add a voice recording to their profile with their name's correct pronunciation.
Bias in artificial intelligence is another problem that LinkedIn is tackling. The LinkedIn Fairness Toolkit, released in August 2020, is designed to mitigate this issue. For example, LinkedIn Recruiter now includes "diversity by design" in how it presents search results. Due to these improvements, LinkedIn is less likely to repeat Amazon's flawed recruiting algorithm, retired in 2018, which was biased against female candidates.
MSFT Boosts Cybersecurity
Cybersecurity remains an area of focus for Microsoft. The company's investment in IT security will improve customer loyalty, mainly for security-conscious corporate customers. Microsoft is also working harder to protect Android devices with the Microsoft Defender for Endpoint. This product is designed to prevent malware attacks. Larger companies will be interested in the risk scoring and risk assessment capabilities in Compliance Manager.
About the Author
Bruce Harpham is an author and marketing consultant based in Canada. His first book "Project Managers At Work" shared real-world success lessons from NASA, Google, and other organizations. His articles have been published in CIO.com, InfoWorld, Canadian Business, and other organizations. Visit BruceHarpham.com for articles, interviews with tech leaders, and updates on future books.