Microsoft Q3 revenue grows almost across the board, beats Wall Street expectations

However, profits dipped slightly in the quarter

Microsoft revenue grew across most of its businesses in the third quarter, with the exception of its entertainment division, but profit fell slightly, according to the company.

Overall, revenue grew 6 per cent to $US17.41 billion in the quarter ended March 31, but net income dropped to $US5.11 billion, or $US0.60 per share, from $US5.23 billion, or $US0.61 per share, year-on-year.

Microsoft noted that the 2011 third-quarter profit was helped by a one-time tax benefit of $US461 million, or $US0.05 per share, related to a tax settlement with the US government.

Microsoft exceed the consensus expectation of financial analysts polled by Thomson Financial of $US0.58 earnings per share and $US17.18 billion in revenue.

Microsoft CEO Steve Ballmer called the results "strong" in a statement and highlighted the intense upgrade cycle the company is in the midst of, including upcoming major new releases of key consumer and enterprise products like Windows and Office.

Many industry experts see the next 12 to 18 months as a crucial period for Microsoft, which finds itself scrambling to ride the wave of cloud computing, a threat to its historical business model, based on on-premise desktop and server software.

Microsoft officials have said repeatedly their strategy of offering enterprise customers hybrid options for cloud and on-premise software deployments is the right one, and yielding expected results. However, Microsoft faces intense pressure from many quarters, including from Google's Apps suite, which competes directly with Exchange and Office.

As such, much is riding on the success of upcoming Microsoft products like the Windows 8 family of OSes for desktop and laptop PCs, tablets and, possibly, smartphones, and the Office 15 revamping of the Office productivity desktop and server-side applications like Word, Excel, SharePoint and Exchange.

In the third quarter, the Server and Tools Division, which includes products like the company's enterprise database SQL Server, posted revenue of $US4.57 billion, up 14 per cent, thanks in part to strong SQL Server and System Center sales.

The Microsoft Business Division grew its revenue 9 percent to $US5.81 billion, helped by continued success of Office 2010 among both consumers and businesses, and of the Dynamics enterprise software family.

The Windows and Windows Live Division, whose revenue fell in the second quarter, rebounded with a 4 per cent increase to $US4.62 billion, thanks to "strong" sales of Windows 7, especially among enterprises.

The Online Services Division, which includes online advertising generated by products like the Bing search engine, had revenue of $US707 million, up 6 percent.

However, revenue at the Entertainment and Devices Division, which makes the Xbox, fell 16 per cent to $US1.62 billion, a drop Microsoft attributed to what it called "a soft gaming console market."

Juan Carlos Perez covers enterprise communication/collaboration suites, operating systems, browsers and general technology breaking news for The IDG News Service. Follow Juan on Twitter at @JuanCPerezIDG.

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