New Products Help Microsoft Deliver Record Revenue

By Peter Galli  |  Posted 2006-07-20 Print this article Print

Demand for a number of recently released products helped the Redmond software maker report record revenue of $11.80 billion in the fourth quarter, a 16 percent rise over the same quarter of the prior year.

Microsoft reported record revenue of $11.80 billion in the fourth quarter to June 30, 2006, a 16 percent rise over the same quarter of the prior year, on the back of strong customer demand for Xbox 360, SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0. The demand for all those recently released products fueled a combined 31 percent revenue growth for those business groups in the quarter, said Chris Liddell, Microsofts chief financial officer, in a statement released July 20 after the financial markets had closed in New York.
Operating income for the fourth quarter came in 30 percent higher at $3.88 billion from $2.99 billion in the same period the prior year, which included legal charges of $351 million, more than half of the $756 million for the prior year period.
But net income for the fourth quarter fell to $2.83 billion from $3.70 billion for the same quarter of the previous year, with diluted earnings a share of 28 cents this year, which included 3 cents of certain legal charges, compared to 34 cents in the same period the previous year, which included 5 cents of legal charges and 9 cents of tax benefits. To read more about how Microsoft surprised Wall Street last quarter with news that it plans to spend an additional $2 billion in the next fiscal year, click here. Microsoft, of Redmond, Wash., also announced a new share repurchase program to buy back up to $20 billion of its common stock at between $22.50 and $24.75 a share. This represents the repurchase of up to 808.08 million shares of common stock, or about 8.1 percent of the common shares outstanding. Microsoft also announced that it had received board authorization for up to an additional $20 billion ongoing share repurchase program that would expire June 30, 2011, and that it had completed its previously announced $30 billion stock repurchase program. Microsofts directors and executive officers did not intend to tender any of their shares under this latest tender offer, the company said. "With our share repurchase programs announcement today, we reaffirm our confidence and optimism in the long-term future of the company and continue to execute on our strategy of returning capital to shareholders," Liddell said. Microsoft also reported July 20 an 11 percent rise in revenue to $44.28 billion for the full fiscal year ended June 30, 2006, compared with the prior year. Operating income for the fiscal year was 13 percent up at $16.47 billion, and included $1.11 billion in legal charges, which was significantly lower than the $2.06 billion for legal charges in the prior-year period. Net income for the fiscal year was $12.60 billion, slightly up on the previous years $12.25 billion, with diluted earnings of $1.20 a share for this fiscal year, which included 8 cents of legal charges and 1 cent of tax benefits, compared to earnings a share of $1.12 the prior fiscal year, which included 13 cents of certain legal charges and 9 cents of tax benefits. Liddell was also confident that the upcoming launches of Windows Vista, the 2007 Microsoft Office system, Exchange Server 2007, and other key products, would position the company to continue to deliver strong revenue growth in fiscal year 2007. Click here to read more about how Microsoft is still gunning to launch Vista and Office 2007 together. The server and tools business had delivered 18 percent revenue growth for the quarter, driven by an increase of over 35 percent revenue growth for SQL Server, while the Microsoft Dynamics CRM 3.0 product added more than 50,000 seats during the quarter and licenses for Windows Mobile-based phones grew by 90 percent in fiscal year 2006, he said. "We are also very pleased that both the Microsoft Business Solutions and the Mobile and Embedded Devices businesses achieved profitability for the full fiscal year," he said. Going forward, Microsoft management said it expected revenue for the quarter ending Sept. 30, 2006, to be in the range of $10.6 billion to $10.8 billion, with operating income of between $4.0 billion and $4.2 billion and diluted earnings a share of 30 cents to 32 cents. For the full fiscal year ending June 30, 2007, Microsoft management expected revenue in the range of $49.7 billion to $50.7 billion, with operating income of between $18.9 billion and $19.4 billion and diluted earnings a share in the range of $1.43 to $1.47. Check out eWEEK.coms for Microsoft and Windows news, views and analysis.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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