Microsoft Records $9.18 Billion Revenue for Quarter

Microsoft reported a year-to-year 17 percent rise in revenue for the last quarter, about $1 billion under its record-breaking December result of $10 billion. But operating income was cut in half when compared with the year-ago quarter.

Microsoft Corp. on Thursday reported a 17 percent rise in revenue to $9.18 billion for its fiscal third quarter ended March 31, compared with the same quarter a year ago. But this was lower than the new record the company posted in the previous quarter to end-December 2003, where quarterly revenue rose 19 percent to breach the $10 billion mark.

But operating income for the quarter under review was more than halved to $1.28 billion from $2.74 billion in the prior year, with net income and diluted earnings per share for the quarter coming in at $1.32 billion and 12 cents a share, respectively.

That slump was attributable to the $1.89 billion after-tax payment related to the settlement of the Sun Microsystems Inc. litigation and the fine imposed on the company by the European Union as well as a taxed, stock-based compensation expense of $501 million.

In comparison, net income and earnings for the third quarter of the last financial year were $2.14 billion and 20 cents per share, including an after-tax, stock-based compensation expense of $655 million.

John Connors, Microsofts chief financial officer, was upbeat about the results, saying in a statement released after the financial markets closed that "broad-based demand and solid execution across all our businesses drove outstanding results for the quarter."

"All of our businesses met or exceeded our expectations this quarter with the client, information worker and server and tools businesses growing a combined 17 percent," he said. "Overall corporate IT spending continued to improve, and we expect to see healthy demand through the end of our fiscal year."

Breaking down the results by business unit, Connors said information worker revenue grew 18 percent over the prior year as Office experienced strong sales across all customer segments.

Worldwide retail license sales of Office 2003 since its launch in October 2003 were double those of Office XP over its first five months. Office OEM sales grew 35 percent and benefited from the increased adoption of Office 2003, he said.

For their part, server and tools grew a solid 19 percent, driven by demand for Windows, Exchange, SQL Server and Visual Studio products. "Rapid customer adoption of Windows Server 2003 continued with new licenses growing 31 percent." Connors said.

"Windows Server 2003 is our most successful server operating-system product ever, with customer license sales doubling any previous version over a comparable period since launch," said Eric Rudder, Microsofts senior vice president of servers and tools.

/zimages/5/28571.gifAt its release, Microsoft execs said the theme of Windows Server 2003 was "doing more with less." Click here to read more about its launch and the companys expectations.

MSN was also profitable, reporting a 16 percent rise in revenue growth on the back of growth in its advertising business, which surged 43 percent over the quarter. Connors said there are now more than 170 million active MSN Hotmail unique users and more than 120 million active MSN Messenger unique users worldwide on a monthly basis.

He also issued guidance for the quarter ending June 30, 2004, which includes stock-based compensation expenses: Revenue is expected to be in the range of $8.9 billion to $9.0 billion, with operating income expected between $2.8 billion and $2.9 billion, including stock-based compensation expenses of about $750 million. Diluted earnings are expected to be about 23 cents a share, including stock-based compensation expenses of about 5 cents a share.

For the full fiscal year ending June 30, 2005, Connors said management expects revenue in the range of $37.8 billion to $38.2 billion, with operating income likely to come in between $15.9 billion and $16.3 billion, including stock-based compensation expenses of about $2.5 billion.

Diluted earnings per share are expected to be in the range of $1.16 and $1.18, including stock-based compensation expenses of about 15 cents.

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