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Microsoft Set for a Huge Q3: Fool by Numbers

On Jan. 25, software king Microsoft (Nasdaq: MSFT  ) released second-quarter 2007 earnings for the period ended Dec. 31, 2006.

  • These figures exclude $1.64 billion of unearned revenues, preorders for Windows Vista and Office 2007 that have yet to launch. Those items will hit stores next week, and the next quarter will add that line back into net sales. The bottom-line impact should be about $0.11 per diluted share.
  • The new hotness a year ago was the Xbox 360, and Microsoft couldn't make them fast enough to satisfy early demand. This year, there are some consoles on shelves and in warehouses, and the price per unit hasn't dropped since it was launched, so there's one reason for the rising inventory levels.
  • I've been wondering what a couple of Microsoft's competitors intend to do with their cash balances, but $10 billion looks petty next to the Redmond giant's constant $30 billion stash -- give or take a couple of measly billion. The difference is that we all know that Microsoft has acquisitions in its blood, and now comes with a 1.3% dividend yield, too. No mystery there.

(Figures in millions, except per-share data)

Income Statement Highlights

Q2 2007

Q2 2006






Net Profit








Diluted Shares




Get back to basics with a look at the income statement.

Margin Checkup

Q2 2007

Q2 2006


Gross Margin




Operating Margin




Net Margin




*Expressed in percentage points.

Margins are the earnings engine. See how they work.

Management Effectiveness

Q2 2007

Q2 2006


Return On Assets




Return On Equity




*Expressed in percentage points.

See how management puts its financial tools to work.

Balance Sheet Highlights


Q2 2007

Q2 2006


Cash + ST Invest.




Accounts Rec.









Q2 2007

Q2 2006


Accounts Payable




Long-Term Debt




Learn the ways of the balance sheet.

Cash Flow Highlights

Q2 2007

Q2 2006


Cash From Ops.




Capital Expenditures




Free Cash Flow




Owner Earnings




Find out why Fools always follow the money.

Cash Conversion Checkup

Q2 2007

Q2 2006


Days in Inventory




Days in Receivables




Days Payables Outstanding




Cash Conversion Cycle




Read up on cash conversion metrics.

Related Companies:

Related Foolishness:

Microsoft is a Motley Fool Inside Value pick, and Electronic Arts piqued the interest of our flagship Motley Fool Stock Advisor newsletter service. Grab a couple offree 30-day trials -- no strings attached -- and check out what the fuss is all about.

Fool by Numbers is designed to give you the raw earnings information in a timely fashion, putting all the numbers you need in one easy-to-read place. But at The Motley Fool, we believe numbers tell only part of the story, so check for more of our in-depth discussion of what the numbers mean.

At the time of publication, Anders Bylund had no position in any company mentioned. Fool rules are here.

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Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

Follow Anders on Twitter, LinkedIn, and Google+.

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