Q1 2011 Earnings Call
October 28, 2010 5:30 pm ET
Nasdaq Powers Past Record High Amid Bond Market Lull; Tesla Extends Gains
With investors content to buy into Fed Chairman Jerome Powell's inflation optimism, bond markets are holding steady and stocks are looking to test fresh record highs.
Bill Koefoed - General Manager of Investor Relations
Peter Klein - Chief Financial Officer
Adam Holt - Morgan Stanley
Heather Bellini - ISI Group Inc.
Brad Reback - Oppenheimer & Co. Inc.
Katherine Egbert - Jefferies & Company, Inc.
Brent Thill - UBS Investment Bank
John DiFucci - JP Morgan Chase & Co
Philip Winslow - Crédit Suisse AG
Edward Maguire - Credit Agricole Securities (USA) Inc.
Walter Pritchard - Citigroup Inc
Sarah Friar - Goldman Sachs Group Inc.
Jason Maynard - Wells Fargo Securities, LLC
Gregg Moskowitz - Cowen and Company, LLC
Kash Rangan - BofA Merrill Lynch
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Welcome to the Microsoft's First Quarter Fiscal Year 2011 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mr. Bill Koefoed, General Manager, Investor Relations. Sir, you may begin.
Thank you, Barb, and thank you, everyone for joining us this afternoon. As usual, with me here today are Peter Klein, Chief Financial Officer; Frank Brod, Chief Accounting Officer; and John Seethoff, Deputy General Counsel.
Today we filed our Form 10-Q. In addition, we posted our earnings release and financial summary slide deck on our new Investor Relations website at microsoft.com/investor. The slide deck is intended to follow the flow of our prepared remarks and provide a reconciliation of differences between GAAP and non-GAAP financial measures, as well as a summary of segment reporting to industry historical results. As was the case last quarter, we will post today's prepared remarks to our website immediately following the call until the complete transcript is available. Today's call will be webcast live and recorded. If you ask a question, it will be included in our live transmission in the transcript and any future use of the recording. You can replay the call and view the transcript at the Microsoft Investor Relations website until October 28, 2011.
This conference call is protected by copyright law and international treaties. Unauthorized reproduction or distribution of this call or any portion of it without the expressed written permission of Microsoft may result in civil and criminal penalty. Today, we will be making statements during this call that are forward looking. 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 earnings press release, in the comments made during this conference call, and in the Risk Factors 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 statement.
Okay. And with that, I'll turn the call over to Peter.
Thanks, Bill. Good afternoon, everyone. I'm pleased to be able to share with you our excellent results for the first quarter, which reflect the ongoing strength and breadth of our product portfolio.
Demand from both businesses and consumers drove healthy revenue growth. We delivered record first quarter revenue, operating income and earnings per share.
We continue to control costs while prioritizing our investments into the highest growth opportunities, resulting in another quarter of margin expansion. As we discussed at our Analyst Meeting in July, we have eight core focus areas that we feel have the greatest opportunity to drive shareholder value.
This quarter, we had exceptional momentum across these focus areas and I want to start today's call by giving you some important highlights.
First, Microsoft Business Desktop is thriving with Enterprises and small- and medium-size businesses investing in our products and services. Not only are companies adopting Windows 7 and Office 2010 at historically high rates, they are also investing in our Office productivity platform, including SharePoint, Exchange, Dynamics CRM and Lync, the newly rebranded Office Communication server, all of which grew double digits this quarter.
Server and Database businesses had strong momentum as our data center and cloud offerings remain a top priority for our customers as they continue to adopt the Microsoft platform.
In addition, Windows Azure had strong subscription growth and we announced a number of platform enhancement this morning at our Professional Developers Conference.
As I mentioned at the beginning of the call, consumer demand for our products continue to drive terrific results this quarter. In terms of our core focus areas, Xbox momentum continued with our console outselling every competing console in the U.S. for the fourth consecutive month, being used at an all-time high with almost double the number of queries since its launch last year. And consumers continue to show their strong preference for Windows 7 and Office 2010.
Customer satisfaction across our products remains at record-high levels. We also made exciting progress in the mobile space with the recent launch of Windows Phone 7 in Europe and Asia and the upcoming November 8 launch in the U.S..
So in summary, I'm very pleased with our performance this quarter. We executed well in all of our core focus areas, and are off to a good start for the year.
With that, I'll hand it back to Bill to provide more details on the quarter's results.
Thanks, Peter. I'll start today by noting that all of my comments are adjusted for the $1.5 billion of revenue, which was deferred in the first quarter of last year. As you probably recall, this deferral was related to the Windows 7 Upgrade Program and Windows 7 licenses sold in advance of general availability in the first quarter of last year.