Microsoft Reports Higher Sales, Lower Earnings - Twice

Microsoft Reports Higher Sales, Lower Earnings

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Redmond, Wash. — Microsoft reported record revenue of $12.5 billion for the quarter, ended Dec. 31, a 6 percent increase from $11.8 billion over the same period of the prior year, even though its Windows Vista and 2007 Microsoft Office will be released next week.

Operating income for the quarter was $3.47 billion, down from $4.65 billion for the same quarter last year, and net income was $2.63 billion, down from $3.65 billion in the prior year.

Microsoft said these results reflect the deferral of $1.64 billion of revenue and operating income and $1.13 billion of net income due primarily to the technology guarantee programs that were announced Oct. 24, 2006, for Windows Vista and the 2007 Microsoft Office release.

Microsoft said revenue growth over the same period of the prior year would have been 14 percentage points higher before the technology guarantee programs.

“Results this quarter exceeded our expectations across the board, with revenue growth at or above our high-end guidance for all divisions,” said Chris Liddell, chief financial officer at Microsoft. “Healthy PC and server markets as well as broad-based business and consumer demand for Microsoft offerings fueled revenue growth this quarter.”

The same period last year marked the launches of Xbox 360, Microsoft SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0. One year later, these products have contributed over $1.0 billion of revenue growth, the firm said.

“The execution of our field sales and marketing teams were a major contributor to this quarter's extremely positive results,” said Kevin Turner, chief operating officer at Microsoft. “Customers have responded positively with strong contract renewals and license sales. We are pleased with such strong financial results and look forward to making Windows Vista and the 2007 Microsoft Office system widely available to all customers next week.”

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