Money Matters - Simplified

Office, Windows boost Microsoft’s profit

The release of Office 2010, as well as continued strong sales of Windows 7, helped Microsoft record another quarter of increased revenue and profit.

Buoyed by phenomenal sales of Window 7, whose 175 million licenses have been sold since the product was released last year, Microsoft rumbled to record sales in the last quarter.

Driven by strong sales, the behemoth reported a 22 percent jump in revenues to $16 billion in the quarter ending June. Operating profits spiked 49 percent to $5.9 billion during the same quarter.

Microsoft’s net income for the full year rose 29 percent to $18.76 billion, and revenue increased 7 percent to $62.48 billion.

Windows and Office bring "broad and deep" results
The results signify that both consumers and corporations, who had scaled down their technology budgets in the wake of recession, have started spending money again.

"This quarter's record revenue reflects the breadth of our offerings and our continued product momentum. The revenue growth, combined with our ongoing cost discipline, helped us achieve another quarter of margin expansion," averred Klien.

“We are encouraged by the resurgence of business PC shipments,” said Peter Klein, the chief financial officer at Microsoft.

Microsoft registered sales worth $4.55 billion of Windows, up from $3.17 billion in the same quarter last year. Office also clocked sales of $5.25 billion, up from $4.57 billion in the comparable period last year.

“Consumers are even buying Office when they’re refreshing their PCs,” said Katherine Egbert, an analyst with Jefferies & Company.

Peter Klein, Microsoft's chief financial officer, called the results "broad and deep."

"This quarter's record revenue reflects the breadth of our offerings and our continued product momentum. The revenue growth, combined with our ongoing cost discipline, helped us achieve another quarter of margin expansion," averred Klien.

The misses
But results from businesses like search, entertainment, and mobile technologies were not encouraging for the Redmond, Washington-based company.

The online services group that includes the Bing search engine lost $696 million during the fourth quarter, while the loss from the entertainment and devices group that include Xbox game console and mobile phone products was reported to be $172 million.

Bing, which competes with Google in the search industry, has just not been able to wield the required influence on the internet community.

“Everyone thinks they will spend a lot of money to become relevant in search, and that is exactly what they are doing. I don’t think anyone buys the stock because of Bing,” said Ms. Egbert.

Microsoft has recently scrapped its Kin smartphone line which was targeted at a younger crop of customers.

The device had been under development for close to two years but reported dismal sales after launch. That contrasts with the astounding success of the iPhone which is, in part, responsible for sending the Apple’s share price soaring.