Microsoft Upbeat on Revenue Growth for 2006

The company posts a 5 percent rise in revenue over the year-ago quarter to $9.62 billion.

For some Microsoft investors, the latest quarterly results were either up or down, given ones perspective. The company on Thursday offered investors a 5 percent rise in revenue to $9.62 billion for the quarter ended March 31 over the same quarter a year ago. But that figure was down by more than $1 billion when compared with the results posted in December.

Operating income for this, the third quarter of Microsoft Corp.s financial year, came in at $3.33 billion, which was more than double the $1.28 billion in the year-ago quarter, largely as a result of a sharp fall in legal charges.

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In the quarter under review, operating income included $768 million related to legal charges, compared with the $2.53 billion in legal charges in the year-ago quarter, largely as a result of the companys settlement with Sun Microsystems Inc.

As a result, net income nearly doubled to $2.56 billion, and diluted earnings per share for the third quarter came in at 23 cents per share, which included 5 cents per share in legal charges. That compared with net income of $1.32 billion and earnings of 12 cents per share, including 17 cents in legal charges, in the comparable period last year.

"Despite a mixed enterprise software environment, the quarter played out largely as we expected, and operating income and earnings-per-share results were in line with our expectations," Scott Di Valerio, Microsofts corporate vice president and corporate controller, said in a statement released after the financial markets closed Thursday.

Di Valerio was upbeat about the outlook for revenue growth in fiscal year 2006, saying, "Given our optimism about the future with our strong product pipeline and the growth opportunities from our investments in innovative products and services, we expect increased revenue growth in fiscal 2006."

A healthy server and tools business helped drive revenue and operating income grow for the quarter, Di Valerio said, pointing to a 12 percent revenue growth for the segment in the third quarter compared with the year-ago quarter, with a double-digit growth in the SQL Server and Exchange Server product lines largely behind that.

While he did not give a detailed breakdown of how Windows XP and Office grew during the quarter, Di Valerio did announce that revenue for mobile and embedded devices had grown by 31 percent year-over-year on strong demand, with Windows Mobile license sales for connected devices more than double the prior year levels.

"The Windows Mobile software platform continues to experience strong momentum with developers. There are currently over 380,000 active Windows Mobile professional developers and over 18,000 Windows Mobile applications," he said.

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Microsoft also repurchased more than 95 million shares of common stock for $2.42 billion during the quarter, which helped push total share repurchases so far this fiscal year higher than for all of fiscal year 2004, Di Valerio said.

"Overall, the company has returned $39 billion to investors during the fiscal year through share repurchases and dividends," he added.

Turning to the business outlook, Di Valerio said that for the quarter ending June 30, management expected revenue to be in the range of $10.1 billion to $10.2 billion, with operating income expected in the range of $4.1 billion to $4.2 billion, including stock-based compensation expenses.

Diluted earnings per share would likely come in at between 27 cents and 28 cents, including stock-based compensation expenses.

Management expects revenue of $43.3 billion to $44.1 billion for the full fiscal year ending June 30, with operating income of $18.3 billion to $18.9 billion, including stock-based compensation expenses. Diluted earnings per share would be in the range of $1.26 to $1.30, including stock-based compensation expense, he said.

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