Demand for Xbox Live Drives Microsofts Revenue

By Peter Galli  |  Posted 2006-04-27

Microsofts revenue rose 13 percent to $10.9 billion in the third quarter to end-March 2006 from the same period a year earlier on the back of a surge in demand for newly released products, especially the Xbox 360 system.

Operating income for the quarter rose 17 percent to $3.89 billion from the $3.33 billion in the prior-year period, benefiting partly from a large reduction in legal costs to $397 million over the quarter compared to $768 million in the prior-year period.

Net income came in at $2.98 billion for the quarter, with diluted earnings of 29 cents per share, which included 3 cents of legal charges.

That compares with net income of $2.56 million for the same quarter of the previous year and diluted earnings of 23 cents a share, of which 5 cents was for legal charges.

Home and Entertainment revenue was up more than 80 percent on strong demand for the Xbox 360 system; Microsoft Business Solutions notched up 21 percent in revenue growth on continued interest in the Microsoft Dynamics line of business management solutions, said Chris Liddell, Microsofts chief financial officer, in a statement released after the financial markets closed in New York on April 27.

"This quarter marked the 15th consecutive quarter of double-digit revenue growth for the server and tools business, with Microsoft SQL Server revenue up more than 30 percent over the quarter," said Kevin Johnson, the co-president of Microsofts platforms and services division, in a statement.

Click here to read more about the release of Service Pack 1 for SQL Server 2005.

Microsoft is also forecasting a rosy year ahead, with Liddell saying the company believes the next fiscal year will deliver "even stronger double-digit revenue growth than this year. Given our confidence in the future, we have also continued our momentum on buyback execution, acquiring $4.9 billion of our stock during the quarter," he said.

Microsoft management is also forecasting revenue for the next quarter, ending June 30, 2006, to be in the range of $11.5 billion to $11.7 billion, with operating income likely to come in at $4.0 billion to $4.2 billion and diluted earnings per share expected of 30 cents.

For the full fiscal year ending June 30, 2007, managements guidance is that revenue is likely to be in the range of $49.5 billion to $50.5 billion, with operating income of $18.7 billion to $19.3 billion and diluted earnings of $1.36 to $1.41.

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