Microsoft Revenue Tops $13 Billion in First Quarter

[Sunite]

Microsoft Revenue Tops $13 Billion in First Quarter
By Mark Long
October 26, 2007 12:45PM

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In its first-quarter report, Microsoft talked up the Client unit, which has shipped 88 million copies of Vista to date. "Customer demand for Windows Vista this quarter continued to build with double-digit growth in multiyear agreements by businesses and with the vast majority of consumers purchasing premium editions," said Microsoft's Kevin Johnson.

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   Microsoft
   Windows Vista
   Windows XP
   Office 2007
   Windows Server
   Xbox

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   Microsoft Relevant Products/Services posted revenue of $13.76 billion for the company's fiscal first quarter -- a 27 percent increase over the year-earlier period. Net income amounted to $4.29 billion or 45 cents per share.

"The first quarter represented an outstanding start of the fiscal year, with every part of the company performing above expectations," said Microsoft CFO Chris Liddell. "I was particularly happy that we increased revenue while meeting operating expense guidance."

Microsoft's Client, Business Division, and Server and Tools units grew combined revenue in excess of 20 percent, with demand for Vista, Office 2007, Windows Server, and SQL Relevant Products/Services Server all leading the way. "The performance was across all divisions, customer segments, channels and geographies," Liddell noted.

Higher Octane Vista Mix

The company's Business Division saw revenue climb by 20 percent to reach $4.11 billion, even as revenue at the company's Server and Tools unit rose by 16 percent to $2.5 billion. Microsoft also saw sales soar in its Entertainment and Devices division, driven by the uptake of 1.8 million Xbox 360 consoles as well as by soaring demand for the new Halo 3 video game. The $1.93 billion in revenue racked up by the division represented a 91 percent increase over the prior-year period.

But Microsoft executives were clearly the most pleased with the performance of the company's Client unit, which has shipped 88 million copies of Vista to date -- almost double the number of XP copies that had shipped in the equivalent period of XP's product cycle.

"Customer demand for Windows Vista this quarter continued to build with double-digit growth in multiyear agreements by businesses and with the vast majority of consumers purchasing premium editions," said Kevin Johnson, the president of the company's Platform and Services Division. "Since we launched Vista, the revenue growth has been in excess of 20 percent for three quarters in a row," Liddell added.

Liddell also noted that the sales ratio of high-end versus low-end editions of both Vista and XP -- which Microsoft calls the "premium mix" -- stood at 75 percent in the quarter compared with 59 percent in the year-earlier period.

Business Growth Ahead

The volume portion of Microsoft's sale of its client annuity agreement, which includes an upgrade path to Vista for enterprise, rose by 27 percent. Liddell said this is probably the best indicator Microsoft has for gauging the intention of businesses to adopt Vista.

"Certainly some businesses will be waiting for Vista SP1 to roll out, but in terms of multiyear agreements, their intention to roll out is signaled by that," he added. "We still think that the consumer side will grow faster than business, but overall it was a very good story on the client side."

Liddell also said that Microsoft had enjoyed 20 percent growth in the so-called BRIC countries of Brasil, Russia, India, and China. "I think that the benefit we saw on the business aspect was most particular in some of the emerging markets, and that helped us with the legalization and piracy aspect of our growth," Liddell said. "Enlarging our geographic presence has positioned us to benefit from the continued worldwide economic expansion."