Vista Drives ‘Record Profits’ at Microsoft

What a difference a year makes. Last year at this
, Microsoft CEO Steve Ballmer was forced to explain away a
disappointing quarter. Not this year.

Microsoft  announced “record profits” and revenue of
$14.40 billion for the quarter ended March 31, 2007, 32 percent better than
the $10.90 billion performance for the same period last year. This revenue surge
drove 41 percent growth in operating income, to $6.59 billion, compared to
$3.89 billion for the same period last year. Net income rose by 40 percent
to $4.93 billion (compared to $2.98 billion).

Diluted earnings per share (EPS) for the quarter rose by a mind-boggling 72
percent to $0.50 (versus $0.29).

Microsoft CFO Chris Liddell noted that earnings and revenue growth were
boosted by deferred recognition of coupons related to its technology
guarantee programs for Vista and Office 2007. Nevertheless, “revenue growth
would have been a very robust 17 percent without the coupon program,” he said
during a conference call to discuss the results.

Microsoft had offered its technology
last October in order to help retailers offset the delay in
the launch of Vista, which missed the busy holiday season.

Liddell said he expects “a strong finish to what has been an excellent year” and
predicted 15 percent revenue growth and 16 percent growth in EPS for the
full year ending June 30, 2007.

Colleen Healy, general manager of investor relations at Microsoft, said the
revenue growth was driven in particular by a strong consumer response to
Office 2007, yielding “better than expected” retail sales. She also said
that Microsoft Dynamics, its mid-market ERP  product,
enjoyed a 20 percent climb in billing.

This earnings report comes barely two months after Ballmer tried to temper
analysts’ expectations for short-term revenue and earnings growth at the
Redmond, Wash.-based software behemoth.

But Vista and Office 2007 sales proved Ballmer expectations were too conservative.

Microsoft shares closed at $29.10, up 0.8 percent ahead of the report
released after the market close.

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