On October, 23, Microsoft released its quarterly earnings and 1Q-2010 quarterly report.
From the earnings report, it can quickly be learned that revenues dropped from $15,061 to $12.920 billion in the same quarter last year. Net Income dropped from $4,373 million to $3,574 million for the same quarter last year. Yet, this is only the beginning of the information that was released.
Some information is also not often discussed. It is interesting to note that the share count has dropped slightly. From 9,183 million diluted shares to 8,983 million diluted shares. This represents a decrease of 200 million diluted shares or about 2.2%. Fully diluted shares are the company’s outstanding shares, adjusted for potentially dilutive activities related to stock option grants and convertible bonds. The bottom line is that a shareholders partial ownership in a company is increased as the number of diluted shares decreases.
Other information can be gleaned from the 10-Q. Free cash flow can easily be calculated. Many view free cash flow as the most important measure of value since earnings can give a false impression of reality due to the effects of depreciation and amortization. Microsoft in the recent quarter reported free cash flow of $ 5,672 million compared to $2,592 million in the same quarter last year. This large increase is due to the fact that Microsoft reduced its capital expenditures in the same quarter and more importantly, there has been a large increase in the deferral of unearned income. This refers to revenues paid by a client where Microsoft still needs to deliver a product. It can be assumed that this increase is due in part to the release of Windows 7 which occurred on October 22, 2009. The annual report was for the quarter ending September 30, 2009. It is better to look at FCF from a long term perspective as it is discussed in the discussion on Microsoft’s value.
The value of Microsoft has been discussed in the past. To learn more about the value of Microsoft, please read the discussion on Microsoft’s valuation.
It is recommended that the quarterly report be read in order to learn more about Microsoft works. Read more in the Microsoft 10-Q. After that is reviewed, it is recommended that the last annual report be read.
Microsoft Corp. is owned by 27 Gurus.
1 Guru Initiated Positions in MSFT:
Tom Gayner bought 32,690 shares in the quarter that ended on 06/30/2009, which is 0.07% of the $1.11 billion portfolio of Markel Gayner Asset Management Corp.
8 Gurus Increased Positions in MSFT:
George Soros owns 321,660 shares as of 06/30/2009, an increase of 273.81% from the previous quarter. Bill Nygren owns 2,600,000 shares as of 06/30/2009, an increase of 62.5% from the previous quarter. Richard Perry owns 1,500,000 shares as of 06/30/2009, an increase of 36.36% from the previous quarter. Sarah Ketterer owns 27,157 shares as of 06/30/2009, an increase of 15.28% from the previous quarter. Ron Baron owns 271,000 shares as of 06/30/2009, an increase of 13.87% from the previous quarter. Donald Yacktman owns 3,309,975 shares as of 06/30/2009, an increase of 13.75% from the previous quarter. Mark Hillman owns 788,850 shares as of 06/30/2009, an increase of 12.54% from the previous quarter. Chris Davis owns 53,976,445 shares as of 06/30/2009, an increase of 11.41% from the previous quarter.
17 Gurus Kept Positions in MSFT Unchanged or Slightly Adjusted:
Sarah Ketterer owns 27,157 shares as of 06/30/2009, which accounts for 0.9% of the $71 million portfolio of CAUSEWAY CAPITAL MANAGEMENT LLC. Ron Baron owns 271,000 shares as of 06/30/2009, which accounts for 0.05% of the $11.99 billion portfolio of Baron Funds. Donald Yacktman owns 3,309,975 shares as of 06/30/2009, which accounts for 7.39% of the $1.06 billion portfolio of Yacktman Asset Management Co.. Mark Hillman owns 788,850 shares as of 06/30/2009, which accounts for 5.08% of the $369 million portfolio of Hillman Capital Management. Chris Davis owns 53,976,445 shares as of 06/30/2009, which accounts for 2.48% of the $51.82 billion portfolio of Davis Selected Advisers. PRIMECAP Management owns 45,941,190 shares as of 06/30/2009, which accounts for 2.26% of the $48.26 billion portfolio of PRIMECAP Management. Jean-Marie Eveillard owns 13,018,707 shares as of 06/30/2009, which accounts for 3.47% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC. Kenneth Fisher owns 18,777,600 shares as of 09/30/2009, which accounts for 1.62% of the $29.78 billion portfolio of Fisher Asset Management, LLC. David Einhorn owns 1,000,000 shares as of 06/30/2009, which accounts for 0.86% of the $2.76 billion portfolio of Greenlight Capital Inc. Ruane Cunniff owns 86,543 shares as of 06/30/2009, which accounts for 0.03% of the $6.9 billion portfolio of Ruane & Cunniff & Goldfarb Inc. Brian Rogers owns 9,221,800 shares as of 06/30/2009, which accounts for 1.61% of the $13.63 billion portfolio of T Rowe Price Equity Income Fund. Charles Brandes owns 21,363,055 shares as of 06/30/2009, which accounts for 2.77% of the $18.33 billion portfolio of Brandes Investment. Wallace Weitz owns 2,553,912 shares as of 06/30/2009, which accounts for 3.95% of the $1.54 billion portfolio of Weitz Wallace R & Co. NWQ Managers owns 21,533,606 shares as of 06/30/2009, which accounts for 3.46% of the $14.8 billion portfolio of NWQ Investment Management Co. Arnold Van Den Berg owns 5,273,638 shares as of 06/30/2009, which accounts for 8.8% of the $1.43 billion portfolio of Century Management. Ronald Muhlenkamp owns 13,435 shares as of 06/30/2009, which accounts for 0.05% of the $660 million portfolio of Muhlenkamp Fund. Richard Pzena owns 10,008,214 shares as of 06/30/2009, which accounts for 2.8% of the $8.5 billion portfolio of Pzena Investment Management LLC. [/b]
[b]6 Gurus Reduced Positions in MSFT:
Dodge & Cox owns 19,670 shares as of 06/30/2009, a decrease of 22.77% of from the previous quarter. This position accounts for less than 0.01% of the $66.88 billion portfolio of Dodge & Cox. HOTCHKIS & WILEY owns 15,923,571 shares as of 06/30/2009, a decrease of 23.59% of from the previous quarter. This position accounts for 3.26% of the $11.61 billion portfolio of HOTCHKIS & WILEY Capital Management LLC. John Hussman owns 2,500,000 shares as of 06/30/2009, a decrease of 28.57% of from the previous quarter. This position accounts for 1.17% of the $5.08 billion portfolio of Hussman Economtrics Advisors, Inc.. Robert Olstein owns 633,600 shares as of 06/30/2009, a decrease of 30.47% of from the previous quarter. This position accounts for 3.22% of the $467 million portfolio of Olstein Financial Alert Fund. John Griffin owns 7,365,000 shares as of 06/30/2009, a decrease of 64.44% of from the previous quarter. This position accounts for 4.45% of the $3.93 billion portfolio of Blue Ridge Capital. David Dreman owns 577,929 shares as of 06/30/2009, a decrease of 81.09% of from the previous quarter. This position accounts for 0.44% of the $3.12 billion portfolio of Dreman Value Management.
1 Guru Sold Out MSFT:
Richard Aster Jr sold out his holdings in the quarter that ended on 06/30/2009.
From the earnings report, it can quickly be learned that revenues dropped from $15,061 to $12.920 billion in the same quarter last year. Net Income dropped from $4,373 million to $3,574 million for the same quarter last year. Yet, this is only the beginning of the information that was released.
Some information is also not often discussed. It is interesting to note that the share count has dropped slightly. From 9,183 million diluted shares to 8,983 million diluted shares. This represents a decrease of 200 million diluted shares or about 2.2%. Fully diluted shares are the company’s outstanding shares, adjusted for potentially dilutive activities related to stock option grants and convertible bonds. The bottom line is that a shareholders partial ownership in a company is increased as the number of diluted shares decreases.
Other information can be gleaned from the 10-Q. Free cash flow can easily be calculated. Many view free cash flow as the most important measure of value since earnings can give a false impression of reality due to the effects of depreciation and amortization. Microsoft in the recent quarter reported free cash flow of $ 5,672 million compared to $2,592 million in the same quarter last year. This large increase is due to the fact that Microsoft reduced its capital expenditures in the same quarter and more importantly, there has been a large increase in the deferral of unearned income. This refers to revenues paid by a client where Microsoft still needs to deliver a product. It can be assumed that this increase is due in part to the release of Windows 7 which occurred on October 22, 2009. The annual report was for the quarter ending September 30, 2009. It is better to look at FCF from a long term perspective as it is discussed in the discussion on Microsoft’s value.
The value of Microsoft has been discussed in the past. To learn more about the value of Microsoft, please read the discussion on Microsoft’s valuation.
It is recommended that the quarterly report be read in order to learn more about Microsoft works. Read more in the Microsoft 10-Q. After that is reviewed, it is recommended that the last annual report be read.
Microsoft Corp. is owned by 27 Gurus.
1 Guru Initiated Positions in MSFT:
Tom Gayner bought 32,690 shares in the quarter that ended on 06/30/2009, which is 0.07% of the $1.11 billion portfolio of Markel Gayner Asset Management Corp.
8 Gurus Increased Positions in MSFT:
George Soros owns 321,660 shares as of 06/30/2009, an increase of 273.81% from the previous quarter. Bill Nygren owns 2,600,000 shares as of 06/30/2009, an increase of 62.5% from the previous quarter. Richard Perry owns 1,500,000 shares as of 06/30/2009, an increase of 36.36% from the previous quarter. Sarah Ketterer owns 27,157 shares as of 06/30/2009, an increase of 15.28% from the previous quarter. Ron Baron owns 271,000 shares as of 06/30/2009, an increase of 13.87% from the previous quarter. Donald Yacktman owns 3,309,975 shares as of 06/30/2009, an increase of 13.75% from the previous quarter. Mark Hillman owns 788,850 shares as of 06/30/2009, an increase of 12.54% from the previous quarter. Chris Davis owns 53,976,445 shares as of 06/30/2009, an increase of 11.41% from the previous quarter.
17 Gurus Kept Positions in MSFT Unchanged or Slightly Adjusted:
Sarah Ketterer owns 27,157 shares as of 06/30/2009, which accounts for 0.9% of the $71 million portfolio of CAUSEWAY CAPITAL MANAGEMENT LLC. Ron Baron owns 271,000 shares as of 06/30/2009, which accounts for 0.05% of the $11.99 billion portfolio of Baron Funds. Donald Yacktman owns 3,309,975 shares as of 06/30/2009, which accounts for 7.39% of the $1.06 billion portfolio of Yacktman Asset Management Co.. Mark Hillman owns 788,850 shares as of 06/30/2009, which accounts for 5.08% of the $369 million portfolio of Hillman Capital Management. Chris Davis owns 53,976,445 shares as of 06/30/2009, which accounts for 2.48% of the $51.82 billion portfolio of Davis Selected Advisers. PRIMECAP Management owns 45,941,190 shares as of 06/30/2009, which accounts for 2.26% of the $48.26 billion portfolio of PRIMECAP Management. Jean-Marie Eveillard owns 13,018,707 shares as of 06/30/2009, which accounts for 3.47% of the $8.91 billion portfolio of Arnhold & S. Bleichroeder Advisers, LLC. Kenneth Fisher owns 18,777,600 shares as of 09/30/2009, which accounts for 1.62% of the $29.78 billion portfolio of Fisher Asset Management, LLC. David Einhorn owns 1,000,000 shares as of 06/30/2009, which accounts for 0.86% of the $2.76 billion portfolio of Greenlight Capital Inc. Ruane Cunniff owns 86,543 shares as of 06/30/2009, which accounts for 0.03% of the $6.9 billion portfolio of Ruane & Cunniff & Goldfarb Inc. Brian Rogers owns 9,221,800 shares as of 06/30/2009, which accounts for 1.61% of the $13.63 billion portfolio of T Rowe Price Equity Income Fund. Charles Brandes owns 21,363,055 shares as of 06/30/2009, which accounts for 2.77% of the $18.33 billion portfolio of Brandes Investment. Wallace Weitz owns 2,553,912 shares as of 06/30/2009, which accounts for 3.95% of the $1.54 billion portfolio of Weitz Wallace R & Co. NWQ Managers owns 21,533,606 shares as of 06/30/2009, which accounts for 3.46% of the $14.8 billion portfolio of NWQ Investment Management Co. Arnold Van Den Berg owns 5,273,638 shares as of 06/30/2009, which accounts for 8.8% of the $1.43 billion portfolio of Century Management. Ronald Muhlenkamp owns 13,435 shares as of 06/30/2009, which accounts for 0.05% of the $660 million portfolio of Muhlenkamp Fund. Richard Pzena owns 10,008,214 shares as of 06/30/2009, which accounts for 2.8% of the $8.5 billion portfolio of Pzena Investment Management LLC. [/b]
[b]6 Gurus Reduced Positions in MSFT:
Dodge & Cox owns 19,670 shares as of 06/30/2009, a decrease of 22.77% of from the previous quarter. This position accounts for less than 0.01% of the $66.88 billion portfolio of Dodge & Cox. HOTCHKIS & WILEY owns 15,923,571 shares as of 06/30/2009, a decrease of 23.59% of from the previous quarter. This position accounts for 3.26% of the $11.61 billion portfolio of HOTCHKIS & WILEY Capital Management LLC. John Hussman owns 2,500,000 shares as of 06/30/2009, a decrease of 28.57% of from the previous quarter. This position accounts for 1.17% of the $5.08 billion portfolio of Hussman Economtrics Advisors, Inc.. Robert Olstein owns 633,600 shares as of 06/30/2009, a decrease of 30.47% of from the previous quarter. This position accounts for 3.22% of the $467 million portfolio of Olstein Financial Alert Fund. John Griffin owns 7,365,000 shares as of 06/30/2009, a decrease of 64.44% of from the previous quarter. This position accounts for 4.45% of the $3.93 billion portfolio of Blue Ridge Capital. David Dreman owns 577,929 shares as of 06/30/2009, a decrease of 81.09% of from the previous quarter. This position accounts for 0.44% of the $3.12 billion portfolio of Dreman Value Management.
1 Guru Sold Out MSFT:
Richard Aster Jr sold out his holdings in the quarter that ended on 06/30/2009.
