Microsoft quarter shows continued growth

Microsoft fools analysts and reports better-than-expected quarterly revenue

Microsoft kicked off its first quarter of fiscal 2012 with solid growth, reporting a 7 percent increase in revenue compared to a year ago, and a 6 percent increase in net income.

Overall, Microsoft reported first-quarter revenue of US$17.37 billion, beating the consensus estimate from financial analysts of $17.24 billion, according to Thomson Reuters. Net income for the quarter ending Sept. 30 was $5.74 billion, or $0.68 per share, in line with analysts' consensus estimate.

As in quarters past, business sales dominated the growth for the company.

The Microsoft Business Division, which oversees Microsoft Office, reported $5.62 billion in revenue, an 8 percent increase from the prior year's first quarter, which itself benefitted from the release of Office 2010.

"We had another strong quarter for Office, SharePoint, Exchange, and Lync, and saw growing demand for our public and private cloud services including Office 365, Dynamics CRM Online, and Windows Azure," said Kevin Turner, chief operating officer at Microsoft, in a statement.

Sales of Microsoft's enterprise support server software -- including Lync, SharePoint, and Exchange -- enjoyed double-digit growth, according to the company. Revenue from the company's Dynamics business grew 17 percent. For the back office, the Server and Tools Division generated $4.25 billion in revenue during the quarter, a 10 percent increase year on year.

Sales of Microsoft's flagship product, Windows, grew as well, although less spectacularly. The Windows and Windows Live Division revenue was $4.87 billion for the period, a 2 percent increase.

Starting next quarter, Microsoft will include financial results of Skype, whose acquisition it completed earlier this month. Because of the successful quarter and the Skype acquisition, Microsoft increased its revenue forecast for its full 2012 fiscal year, from $28.6 billion to $29.2 billion.

During a conference call after the results came out, Bill Koefoed, Microsoft general manager for investor relations, noted that consumer purchases of PCs and netbooks were flat, resulting in the sluggish Windows sales. Overall, business sales of PCs outpaced consumer sales, and sales in emerging markets outpaced those in mature markets.

Microsoft expects to see a rebound in growth with the arrival of the first generation of Intel-based ultraportable laptops, or ultrabooks, which have just started to ship. Thus far, more than 450 million copies of Windows 7 have been sold since its launch.

Another area of concern for the company is its 10-year search and advertising partnership with Yahoo, signed in 2009. The teaming has not produced the expected income for Microsoft or Yahoo, which reported its own financial results Tuesday.

"The number-one priority is to resolve the monetization challenges of the combined ad platform," said Peter Klein, Microsoft chief financial officer, adding that the company is working "very closely" with Yahoo to improve the results. Microsoft's Online Services Division generated $625 million in revenue for the quarter, up from $527 million a year ago.

Joab Jackson covers enterprise software and general technology breaking news for The IDG News Service. Follow Joab on Twitter at @Joab_Jackson. Joab's e-mail address is

Copyright © 2011 IDG Communications, Inc.

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