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Microsoft Reports Record Profit |
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Written by Adam Gosling
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Monday, 30 April 2007 |
Microsoft made US$14.40 billion in revenues for the three months to
March 31, 2007. That's 32 per cent than it did a year ago. The result
pushed diluted earnings per share for the quarter up 72% to $0.50 per
share, which included $0.02 per share in tax benefits and $0.01 per
share in legal charges.
In all the Micro$oft made a profit of US$4.93 billion for the 90 days
which translates to around US$54 million (or enough to buy more than
300,000 OLPC XO devices) per day for the 90 days.
Net cash flow from operations was US$7.29 billion and Microsoft
returned US$7.72 billion in cash to shareholders through share buybacks
and dividends this quarter.
"I am extremely pleased that we delivered a quarter of strong
double-digit growth for revenue, operating income and EPS," said Chris
Liddell, chief financial officer at Microsoft. "And I am looking
forward to a very good finish to this fiscal year with strength
continuing into fiscal 2008."
"This quarter marked the consumer launches of Windows Vista and the
2007 Microsoft Office system, and we are delighted with the positive
customer response these products have received," said Kevin Turner,
chief operating officer at Microsoft. "We continue to deliver on our
compelling product cycle and build upon strong field sales and
marketing execution in order to drive revenue and profit growth for the
company."
These results reflect $1.67 billion of revenue and operating income,
$1.14 billion of net income and $0.12 of diluted earnings per share
that were previously deferred primarily related to the technology
guarantee programs for Windows Vista and the 2007 Microsoft Office
release.
As such revenues are expected to be down to just US$13.1 billion in the quarter ending June 30, 2007.
[Edit: Following Ovum Comment Added]
“While there’s no denying that Microsoft has had an excellent quarter,
its not quite as good as the headline numbers (and the headlines in the
press) indicate," says David Bradshaw, Principal Analyst at Ovum.
Microsoft
points out that its excellent result in Q1 is in part due to the
deferred revenue accruing to it from the Vista upgrade guarantee and
somehealthy exchange rate wins as a result of the poorly performing US
dollar.
Bradshaw estimates that together these factors reduce Microsoft's
growth to 15%. "While this is still an excellent performance for such a
large company, itisn’t quite the same as 32%,” points out Bradshaw.
“Another
factor is that Microsoft has increased the rate at which it recognises
deferred revenue from Windows Vista compared to Windows XP. As we
understand it, Microsoft puts aside some of the up-front revenue from
Vista licenses to pay for updates and service packs that it makes
freely available to everyone over the lifetime of the products. The
faster rate implies that Vista is a less buggy than Windows XP, so
Microsoft has to allow less for issuing updates. Let’s hope that
Microsoft is right!”
“The big story, though," he says, "is that
the uptake of Windows Vista has been at least as good as Microsoft was
anticipated. The only definitive numbers that CFO ChrisLiddell would
give was that 85% of the desktop operating systems shipped in the
quarter were Vista and only 15% were Windows XP," says Bradshaw.
"The key missing piece
of information is how well this compares to the launch of Windows XP. Liddell
would only say that the current mix was “very healthy” and that “faster
adoption of Vista is likely to be the result.” It also emerged that inOEM
shipments to consumers, 71% of sales were of Windows Home Premium. All
this was driven by healthy growth in PC shipments, which Microsoft said
grew at between 10 to 12% in the quarter - is this “Sayonara, Baby” to Apple’s ambitions of growing market share?”
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