Microsoft's Q2 Sales Score Record Again
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Microsoft delivered record revenues and earnings for the second quarter of its fiscal 2011, a busy period that saw the introduction of the new Kinect game controller, as well as preliminary sales of its last best shot at becoming a serious mobile player, Windows Phone 7.
During the quarter, which ended Dec. 31, 2010, Microsoft (NASDAQ: MSFT) brought in $19.95 billion in revenues and diluted earnings per share of $0.77, with operating income of $8.17 billion and net income of $6.63 billion.
However, due to deferred recognition of $1.71 billion put into reserves a year earlier, the adjusted numbers for the second quarter of 2011 were $17.31 billion in sales, and $0.60 EPS, the company said.
Analysts surveyed by Thomson Reuters were expecting the company to report revenues of $19.14 billion and EPS of $0.68 for the quarter.
Revenue and earnings growth rates for the quarter came in at 5 percent and 4 percent, respectively, the company said. "Without the deferred recognition in the prior year, second-quarter growth rates for revenue and earnings per share were 15 percent and 28 percent, respectively."
For the second quarter last year, Microsoft delivered revenues of $19.02 billion and $0.74 EPS.
The holiday sales season, of course, helped fuel Microsoft's numbers.
Indeed, Microsoft had a breakout hit on its hands with the Kinect controller-less game system, selling 8 million units instead of the 5 million the company had anticipated.
"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," Microsoft CFO Peter Klein said in a statement.
For the first fiscal quarter of 2011 -- traditionally the company's weakest sales period -- which ended on Sept. 30, Microsoft also set an all-time high for revenue.
In fact, for the past four quarters, Microsoft has delivered record revenues. Microsoft also had a blow-out in its first fiscal quarter of 2011, which closed at the end of September.
Additionally, Microsoft officials said that they have now sold some 2 million licenses for Windows Phone 7 to carriers and handset makers. That's up from 1.5 million in late December.
Anchoring the bottom line, as usual, were Microsoft's trifecta of business offerings -- Windows 7, which has taken off with corporate customers, Office 2010, which began selling last May, just before the beginning of fiscal 2010, and Microsoft's array of infrastructure servers and developer tools.
In that light, the company said that 20 percent of the installed base of PCs are now running Windows 7, and that 90 percent of enterprises have begun a "formal" migration to Windows 7. In fact, the company now claims to have sold 300 million licenses for Windows 7.
Similarly, Microsoft's Server and Tools Division business grew 10 percent year-over-year to $4.39 billion. Meanwhile, the Microsoft Business Division, which has purview over the Office suite, as well as products like SharePoint, Lync and Dynamics CRM, also grew 24 percent over the same quarter last year with $6.03 billion in revenues.
One product still missing from Microsoft's lineup is the plethora of Windows 7-powered tablet PCs that Microsoft has been talking up for the past year. As with Microsoft's smartphone strategy, that clearly puts the company a step behind in the nascent markets for new Web clients.
For instance, in October, researcher Gartner estimated that in 2010 alone, customers -- both consumers and businesses -- would buy 19.5 million "media tablets." Virtually none of those offerings was running on Windows 7.
Microsoft's stock was trading at $28.66, down $0.21 in after-hours trading.