Microsoft fourth quarter boosted by Office, Windows sales

Net income was up 49 percent compared to a year ago

The release of Office 2010, as well as continued strong sales of Windows 7, helped buoy Microsoft through another quarter of increased revenue and profit, the company announced on Thursday.

The company announced that net income for the quarter, which ended June 30, was US$5.93 billion, an increase of 49 percent over the same quarter a year prior.

Fourth-quarter revenue of $16.04 billion was a 22 percent increase from the fourth quarter in the previous year, which was at $13.10 billion. Earnings per share for the most recent quarter were $0.51, a 50 percent increase.

Microsoft attributed much of the sales growth in the past quarter to Microsoft Office, launched during this quarter, as well as continued strong sales of Windows 7. The company noted that Windows 7 has sold more than 175 million licenses since it was launched last October.

For the fiscal year ending June 30, Microsoft reported net income of $18.76 billion, a 29 percent increase from the prior year, and revenue of $62.48 billion, a 7 percent increase from the prior year. The company had suffered declining income, due to the sluggish economy, in the last fiscal year.

With this past quarter, the company had significantly exceeded investor expectations. A Thomson Reuters survey of analysts expected a 17 percent revenue growth over the year-ago quarter, reaching $15.3 billion.

"This quarter, our strong revenue performance was both strong and deep, with every business achieving double-digit growth," said Peter Klein, Microsoft chief financial officer, in a conference call for analysts. The Windows & Windows Live division as well as the Server & Tools division both recorded "record revenue," he said. Windows brought in $4.5 billion for the quarter, and Server & Tools brought in $4 billion.

Windows sales alone accounted for more than a billion dollars in revenue for Microsoft, according to the company. Windows 7 is now installed on more than 16 percent of all desktops worldwide, the company said.

Bill Koefoed, Microsoft general manager of investor relations, noted in the conference call that consumer spending continues to rebound from the recession, while business sales are picking up, as organizations are finally starting to resume their desktop computer refresh cycles and update their data center hardware.

"The business PC refresh cycle has accelerated and we recorded the second straight quarter of double-digit license growth," he said.

Although the company launched its Windows Azure cloud computing service earlier this year, Microsoft does not expect to see notable revenue from the service in the upcoming fiscal year, Klein said.

Azure "is not material to the financials now, but we're really establishing a leadership position," he said.

While Klein did not mention the upcoming release of the Kinect Xbox hands-free controller by name, he did note that the Entertainment and Devices Division would see second-quarter revenue growth in the mid-teens, percentage wise, thanks to a "compelling wave of consumer offerings coming to market," of which Kinect no doubt would be one component. In the fourth quarter the division generated $1.6 billion in revenue, though it actually lost $172 million.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is Joab_Jackson@idg.com

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Joab Jackson

IDG News Service
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