Microsoft Posts Higher Sales, Lower Operating Profit

TWICE Staff -- TWICE, 1/27/2011

Redmond, Wash. - Microsoft reported higher revenue and but lower operating profit in its fiscal second quarter, ended Dec. 31.

Revenue was $19.95 billion and rose 5 percent under GAAP rules while operating income for the quarter was $8.17 billion, down 4 percent compared with the prior year's second quarter.

Prior-year results reflect the recognition of $1.71 billion of deferred revenue relating to the Windows 7 Upgrade Option program and sales of Windows 7 before general availability in October 2009.

"We are enthusiastic about the consumer response to our holiday lineup of products, including the launch of Kinect. The 8 million units of Kinect sensors sold in just 60 days far exceeded our expectations," said Peter Klein, CFO at Microsoft. "The pace of business spending, combined with strong consumer demand, led to another quarter of operating margin expansion and solid earnings per share growth."

Among the factors driving Microsoft's record revenues and earnings was the 55 percent growth in revenue for the entertainment and devices division, as the success of the Kinect sensor boosted sales of Xbox 360 consoles, Xbox Live subscriptions and Xbox games, the company said.

Among the other product and business highlights Microsoft reported in the quarter:

·         Windows Phone 7 launched during the quarter in 30 countries and on 60 operators and nine different devices. Microsoft announced developers are adding Windows Phone 7 applications to the marketplace at a rate of over 100 per day.

·         Bing completed the integration of Yahoo! search in the U.S. and Canada and continues to gain share.

·         Internet Explorer 9 is Microsoft's fastest downloaded beta browser of all time, with more than 20 million downloads to date.