Microsoft Reports Gains in Quarter

Microsoft Corp. on Thursday reported a six percent rise in revenue to $8.22 billion in the first quarter to end September, while operating income for the quarter was slightly up at $3.15 billion, compared to $3.03 billion reported in the same quarter the prior year.

Net income rose to $2.61 billion, with earnings of $0.24 a diluted share, which included an after-tax equity compensation expense of some $680 million or $0.06 a share.

John Connors, Microsofts chief financial officer, said in a statement released after the financial markets closed that while corporate IT spending was slow to improve in the quarter, “we saw strength across all of our consumer businesses, driving higher than expected revenue for the company.”

He also made clear that executing on its plan to better help protect customers from a growing number of security attacks were among Microsofts top priorities for the rest of the year.

Strong consumer demand for PCs during the back-to-school shopping season had fueled better than expected client revenue during the quarter, he said.

Server and Tools had also grown 15 percent to $1.87 billion in the quarter year-on-year, with Windows Server, Microsoft SQL Server and Microsoft Exchange all recording double digit revenue growth.

“Windows Server 2003 has sold over two times as many licenses as Windows 2000 Server over the same period of time since launch. In addition, with over 120 million seats sold worldwide, Exchange continues to be a leading messaging solution for companies,” he said.

Connors also pointed to this weeks release of Office System 2003, saying that customers who acquired Office during the quarter under review included Accenture, Ace Hardware Corp. and Gold Kist, Inc.

Connors also offered the following guidance for the current financial quarter to December 31: revenue of between $9.7 billion and $9.8 billion was expected, with operating income of $3.2 billion and $3.3 billion, including an equity compensation expense of approximately $1.0 billion. Diluted earnings per share are expected to be in the range of $0.23 and $0.24, including equity compensation expense of approximately $0.06.

For the full fiscal year to end-June 2004, Microsoft expects revenue of between $34.8 billion and $35.3 billion; operating income of $11.4 billion and $11.7 billion, including an equity compensation expense of approximately $4.0 billion. Diluted earnings in the range of $0.86 and $0.88a share are expected, including equity compensation expense of approximately $0.24, Connors said.