Strong Server, PC Sales Boost Microsoft Revenue
The company's earnings beat Wall Street expectations.Joris Evers, IDG News Service
Citing continued strength in the PC and server markets, Microsoft reported earnings that beat Wall Street expectations, and a 12 percent increase in revenue for the first quarter of its 2005 fiscal year.
The world's largest software vendor reported net income of $2.9 billion on revenue of $9.19 billion for the three-month period ended September 30. That compares to net income of $2.61 billion and revenue of $8.22 billion in the year-earlier period, the company said in a statement.
Earnings per share including an unspecified expense for stock-based compensation amounted to $0.27, beating by $0.02 Microsoft's own July forecast and the consensus estimate of analysts polled by Thomson First Call on that basis.
The 12 percent year-over-year revenue increase was primarily driven by sales of the Windows Server operating system and other server applications, as well as Office products and Windows client operating system software, Microsoft said. Small and midmarket buyers especially led improvements in IT spending, the company said.
"We've had a strong beginning to what we expect will be a very good year," John Connors, Microsoft chief financial officer, said in a statement.
Not Just Windows
Aside from its flagship Windows and Office products, Microsoft also saw strong customer interest in its management offerings. Its management server business, with products such as Microsoft Operations Manager and Systems Management Server, grew more than 20 percent in revenue, the company said.
Other parts of the company also did well, with the MSN Internet group maintaining operational profitability and increasing revenue by 10 percent. Microsoft Home and Entertainment, the group that includes the Xbox game console business, is still loss-making but is ramping up for the November 9 release of Halo 2, a much-anticipated video game that has been preordered 1.5 million times already.
Looking ahead, Microsoft expects revenue for its second quarter ending December 31 to be between $10.3 billion and $10.5 billion, with earnings per share at $0.28, including stock-based compensation expenses.
The Redmond, Washington, company slightly raised its full fiscal year 2005 forecast and now expects revenue for the year ending June 30, 2005, to be between $38.9 billion and $39.2 billion with earnings per share between $1.07 and $1.09. In July, the top of Microsoft's fiscal 2005 forecast was for revenue of $38.8 billion and earnings per share of $1.08.