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Microsoft posted a record $16.4 billion in revenue during the company's second business quarter, shattering its previous record by $2 billion. The software giant also blew away Wall Street expectations by recording a 92 percent rise in quarterly earnings in comparison with the year-earlier period.
Despite widespread predictions of an impending recession, the software giant remained upbeat with respect to its prospects over the next six months. Microsoft CFO Chris Liddell predicted fiscal-year revenue growth of 17 to 18 percent, together with a 30 to 32 percent rise in earnings.
"No company is immune from macroeconomic factors," Liddell told analysts. "But overall we believe our business is extremely well-positioned in the technology industry with diversification across a broad set of products, channels, geographies, currencies and customer segments, supported by excellent product value and sales execution."
Vista Hits Its Stride
Demand from enterprise customers -- together with robust consumer spending for Windows Vista and the 2007 edition of Microsoft Office over the holidays -- drove revenue for Microsoft's business group up by a combined 18 percent in the quarter. Moreover, sales of Windows Vista surpassed 100 million licenses well in advance of the anniversary of its launch in late January of last year.
"We've hit our stride with partners and customers and are looking forward to the release of our first Vista service pack later this quarter," explained the president of Microsoft's platforms and services division, Kevin Johnson.
Vista's success was driven in part by unexpectedly strong PC sales during 2007's year-ending quarter. Liddell said he expects PC hardware unit shipments to grow by 11 to 13 percent for the company's June-ending fiscal year -- an increase of one percentage point from his prior outlook.
License growth for Microsoft's Windows Server and SQL Server products also grew at healthy double-digit rates in the quarter, an upward trend that the software giant expects will continue following the joint launch of Windows Server 2008, SQL Server 2008 and Visual Studio 2008 on Feb. 27.
"Together these products will allow IT departments to be more productive by providing them with a secure, trusted and manageable platform, and which will underpin growth in the server and tools business over the next several years," Liddell said.
Brisk Xbox Sales
Sales of Microsoft's Xbox 360, which reached a cumulative 17.7 million units by year's end, were particularly brisk during last year's holiday shopping season, said Microsoft's general manager of investor relations, Colleen Healy. Microsoft's popular gaming console also "had four titles that sold over 1 million copies in the quarter, compared to three for the Wii and none for PS3," Healy told financial analysts.
Overall, more than 60 percent of the software giant's sales in the quarter came from customers located outside of the United States. "The investments we've made, including in our sales force and new product offerings, have positioned us well to offer the right product in the right markets worldwide," Liddell said.
In particular, growth in the emerging markets was especially strong, noted CFO Kevin Turner. "Looking across Brazil, Russia, India and China, our field revenue reached a combined growth rate of over 65 percent this quarter," Turner said.
