Microsoft main Irish unit posts profit of €2.8bn for 2021

The main Irish arm of technology giant Microsoft recorded a profit of $3.1 billion (€2.8 billion) last year, as its business grew and it kept a tight rein on costs. This came as two separate Irish Microsoft companies each paid a €30 billion dividend to their parents for the year.

Revenue at Microsoft Ireland Operations Ltd (MIOL) for the 12 months ended June 30th, 2021, was $56.2 billion, up $9.5 billion compared with the previous year. Microsoft said there were increases across all lines of the business: intelligent cloud, more personal computing, and productivity and business processes.

The pretax profit of $3.1 billion was up from $2.6 billion in 2020. The company’s corporation tax charge was $394.5 million for the year, compared with a charge of $378.4 million in the previous 12 months.

The year saw operating profit rise by $662 million in line with the growth in activities, reaching $3.1 billion.

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Microsoft Ireland Operations is involved in the marketing, selling and distribution of hardware and software products and services for Europe, the Middle East and Africa, and the Asia Pacific region.

The accounts illustrate growth in the importance of services to the Irish business. Services and other revenue accounted for more than half of revenue for the year, at $32.2 billion, with products accounting for $24 billion. In the previous year’s accounts, the revenue was split evenly between the two.

The figures also included revenue of $791 million from sales to Italy.

Working from home

While the coronavirus pandemic has hit some businesses particularly hard, the shift to working from home has accelerated enterprises' switch to cloud-based computing, and benefited companies such as Microsoft and Amazon, which have invested heavily in their cloud business.

MIOL kept costs in check over the year, cutting distribution costs to $90.4 million, and administrative costs to $1.87 billion, from $101.2 million and $2 billion respectively in the prior year.

However, it continued to expand, adding staff to its digital sales team. As of June 30th, 2021, the company employed more than 2,000 people, more than half of them in sales roles. That translated into a wage bill of $278.5 million, with total staff costs of just under $349 million, up from $284 million in the previous year.

Pension costs were also higher at $11.65 million for the financial year, an increase from $10.3 million in 2020.

Total shareholders’ equity increased by $2.7 billion to $6.48 billion.

Separate accounts filed by Microsoft Ireland Research recorded a pretax profit of almost $19 billion, up from $17.8 billion a year earlier. Operating profit was $18.8 billion, up $4.84 billion year on year.

Royalty income

Microsoft Ireland Research licenses the rights to assets owned and developed by the company to others within the group.

Turnover was $41.1 billion in the year to June 30th, 2021, an increase of $7.68 billion due to increased royalty income from group companies.

Total shareholders’ equity rose $5.4 billion to $104.1 billion. Microsoft Ireland Research paid a dividend of $30 billion to its parent company, up from $13.6 billion in the previous year.

Accounts were also filed for holding company Microsoft Round Island One, which became tax resident in Ireland as of January 1st, 2021.

The Irish-registered subsidiary saw a significant decrease in profit, from $314 billion in 2020 to $30.1 billion in 2021. However, the 2020 figures included a gain from surpluses and assets received from the liquidation of Microsoft Luxembourg USA Mobile Sarl and MACS Holdings Ltd.

Turnover rose to $30 billion from $13.6 billion a year earlier, due to an increase in income from investment in other group companies received during the year. Microsoft Round Island One paid $30.5 billion in dividends to its parent company, compared to $24.6 billion in the previous year.

Shareholders’ equity fell by $346 million due to the decrease in profit.