Microsoft Revenue Jumps 13 Percent

Microsoft Corp. on Thursday reported $7.25 billion in revenue for its third quarter, which ended in March-a 13 percent rise from the same quarter a year ago-a result that its chief financial officer John Conners said "exceeded our expectat

Microsoft Corp. on Thursday reported $7.25 billion in revenue for its third quarter, which ended in March—a 13 percent rise from the same quarter a year ago—a result that its chief financial officer John Conners said "exceeded our expectations."

But he cautioned that while PC growth rates for the current quarter were expected to be slightly improved, "our expectations for enterprise IT spending levels continue to be quite modest."

The Redmond, Wash., software firm said operating income rose to $3.3 billion in the quarter from $3 billion the previous year, with quarterly net income coming in at $2.74 billion. This included an $847 million after-tax gain on the sale of Expedia and an $806 million after-tax charge related to investment impairments, the company said in a statement.

Revenue from desktop applications edged up slightly to $2.44 billion in the March quarter from the $2.41 billion reported last year. But revenue from its flagship desktop productivity suite, Office, fell from the comparable quarter a year before.

But desktop platform sales were strong "on the strength of Windows XP—both in the enterprise and in the home," Connors said. "We also took another big bite out of costs this quarter, with single-digit operating expense growth driving costs down and efficiency up throughout the entire organization."

Sales of Windows XP boosted desktop platforms revenue growth of 11 percent, with sales of Windows 2000 Pro and XP Pro, the business versions of Windows, accounting for 47 percent of all operating systems sold this quarter, up from 35 percent in the prior year, Microsoft said.

"This quarter Windows XP shipped on nearly 60 percent of all new PCs, which represents a faster penetration than any of our previous operating systems, said Jim Allchin, Microsofts group vice president of the Platforms Division.

Microsoft also said that since the February launch of Visual Studio .Net and the .Net Framework, more than 1 million units had shipped to developers worldwide.

Conners said Microsoft expected revenue of between $7 and $7.1 billion in the current quarter, which ends in June, with operating income expected to be in the range of $2.9 and $3.0 billion.