Thanks largely to the Windows 7 launch, Microsoft on Thursday reported a strong increase in net income and revenue for its second quarter of fiscal 2010.
The company rang up US$6.66 billion in net income, an increase of 60 percent from the same period a year earlier. Revenue totalled $19.02 billion for the quarter ending Dec. 31, a 14 percent increase from the prior year.
Part of the boost came from deferred revenue earned earlier this year, from pre-sales of Windows 7 to PC makers and retailers. This revenue amounted to $1.71 billion.
Even without the deferred revenue, the results were in line with analyst expectations, with second-quarter revenue totaling $17.31 billion, and earnings of $0.60 per share. In a poll of analysts, Thomson Reuters showed an expected revenue of $17.9 billion and earnings per share of $0.59.
This quarter saw the release of Windows 7, of which more than 60 million licenses were sold, the most Windows licenses ever sold in a single quarter, explained Bill Koefoed, Microsoft general manager of investor relations. The company also released Windows Server 2008 R2.
Windows-related sales brought in the largest chunk of revenue, at $6.9 billion, up 72.5 percent from $4 billion in the second quarter of fiscal 2009. Server and tools enjoyed a more modest increase, with $3.8 billion in revenue, up from $3.75 billion in the prior year.
Online Services, Other Divisions Lag
Not all of Microsoft's businesses sidestepped the recessionary doldrums, however. Online services revenue slumped in the quarter, to $581 million, down from $609 million the year before. The business division and the entertainment and services division also had lackluster revenue.
This was the last quarter overseen by Microsoft Chief Financial Officer Chris Liddell, who left Microsoft Dec. 31. Peter Klein has taken the CFO role.
"These results were driven in large part by strong consumer demand for PCs," Klein said during a conference call to discuss the results. Business spending, he explained, has not picked up from the recessionary lull of the past year.
Microsoft estimated that the consumer PC market grew by more than 20 percent year over year, while business PC sales were flat, Koefoed said. Netbooks represented about 11 percent of the PC market, about the same as last quarter and last year.
Eventually, enterprise sales will pick up as businesses resume their hardware refresh cycles. "Although the timing is uncertain, we'll be well-positioned to capitalize on the business pending recovery when it returns," Klein said.
Klein pointed to the June release of Microsoft Office 2010 as a major income driver, and looking ahead, new offerings such as Microsoft's cloud platform Azure and the introduction of the next-generation Xbox control system, now code-named Natal.