Microsoft Corporation (MSFT)’s Fiscal Year 2015 Second Quarter Earnings Conference Call Transcript

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Below is transcript of the Microsoft Corporation (NASDAQ:MSFT)’s Fiscal Year 2015 Second Quarter Earnings Conference Call, held on Monday, January 26, 2015, at 5:30 pm EST. Valueact Capital, Route One Investment Company and Edinburgh Partners was among Microsoft Corporation (NASDAQ:MSFTshareholders at the end of the first quarter.


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Microsoft Corporation (NASDAQ:MSFTis engaged in developing, licensing and supporting a range of software products and services. The Company also designs and sells hardware, and delivers online advertising to the customers. The Company operates in five segments: Devices and Consumer (D&C) Licensing, D&C Hardware, D&C Other, Commercial Licensing, and Commercial Other.


Company Representatives:

Chris Suh –  General Manager of Investor Relations, Microsoft Inc.

Satya Nadella – Chief Executive officer, Microsoft Inc.

Amy Hood – Chief Financial Officer, Microsoft Inc.



Mark Moerdler –  Bernstein
Brent Thill – UBS
Walter Pritchard – Citigroup
Keith Weiss – Morgan Stanley
Rick Sherlund –  Nomura
Philip Winslow – Credit Suisse
Heather Bellini – Goldman Sachs
Raimo Lenschow – Barclays
Brendon Barnicle – Pacific Crest Securities
Ed McGuire – CLSA


Operator: Welcome to the second quarter fiscal year 2015 Microsoft corporation earnings conference call. At this time all participants are in listen-only mode, question and answer session will follow on from presentation. When you require operators assistance during the conference please press *0 on your telephone keypad. As a reminder this conference is being recorded, I would now turn the call over to Chris Suh, General Manager of Investor Relations. Chris, please proceed.


Chris Suh: Thank you. Good after noon and thank you for joining us today. On call with me today are Satya Nadella Chief Executive officer, Amy Hood Chief Financial Officer, Frank Brod Chief Accounting Officer and John Seethoff Deputy General Counsel. On our website we have posted our press release and a file that provides a summary of our results this quarter. Unless otherwise specified all growth comparisons we make on call today relate to the corresponding period of last year. Additionally any mention of operating expense refers to segments operating expenses as defined in the foot notes of our 10Q and includes research & development, sales & marketing and general and administrative but excludes integration and restructuring charges. We will post the preparatory remarks for 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 in any future use of the recording.

You can replay the call and view the transcript on the Microsoft investor relations website until January 26, 2016. During this call we will be making forward-looking statements which are predictions, projections 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 earning press release, in the comments made during this conference call and then the risk factor section of our form 10-K, 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 statements and with that I will turn the call over to Satya.


Satya Nadella: Thank you Chris. Good after noon everyone. Today I will focus my top line talks on our progress this quarter and the progress we are making in transforming our business. This quarter we reached 26.5 billion in revenue with an operating income of 7.8 billion.  This quarter results shows the product and business transformation under way at Microsoft.  We saw success in a number of our strategic areas including cloud adoption, redefining and revitalizing the Windows Eco System and improving  economics in our hardware portfolio. We also saw some challenges this quarter, as expected the one-time benefit of Windows XP end-of-life PC refresh cycle has now tailed off, additionally we ran into unexpected issues in select geographies. Where there are execution issues, we will address them where there are macroeconomic challenges we will weather them.  With that in mind I’ll walk you through the quarter. Let’s start with our cloud business, an area where we are extending our leadership position and accelerating our innovation.  In commercial cloud, we saw continued customer and revenue growth across the growing footprints of cloud services, Office 365, Azure, Enterprise Mobility Suite and Dynamic CRM online.


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