Microsoft revenues up 12pc

22 Oct 2004

Microsoft’s first quarter revenues were up 12pc on the year to reach US$9.1bn. Operating income during the quarter was up 29pc to US$4bn. Expecting strong growth in its consumer business going forward, the software giant is anticipating second quarter revenues to reach over US$10.3bn.

Microsoft said last night that demand for its core platform products from business customers and growth in shipments and PCs and servers drove strong growth in its Client, Information Worker and Server and Tools groups. In particular, Server and Tools revenue grew 19pc driven by broad platform strength led by Windows Server, SQL Server and Exchange Server.

“We’ve had a strong beginning to what we expect will be a very good year with continued growth in both our commercial and consumer businesses,” said John Connors, chief financial officer at Microsoft. “This quarter we had a very healthy commercial server and desktop business driving double digit revenue growth, and we expect to continue the trend of growing revenue faster than expenses as we work to make each of our businesses more efficient and profitable.”

Microsoft’s consumer-focused businesses also performed well. MSN, which recently opened an Irish portal, achieved segment profitability while growing revenues by over 10pc over the first quarter last year on continued strength in its internet advertising business.

Home and Entertainment revenue grew 9pc driven by increased sales of Xbox consoles and games. Operating loss in this division narrowed by more than 47pc compared with last year as a result of higher than expected sales of Xbox games. Halo 2, for example, is one of the most widely anticipated video games on any games platform and has already breached a pre-order level of some 1.5m.

“Xbox continues to be the only platform to show year-over-year growth and has now outsold Sony PlayStation 2 for two months in a row in the US,” said Robbie Bach, senior vice president, Home and Entertainment group. “With a robust portfolio of games and cornerstone titles like Halo 2 and Fable – which was the top selling video game across all platforms in September – our holiday lineup is the strongest in Xbox history. Moreover, with 150 Xbox Live titles available this holiday, we expect the market momentum around the Xbox business to continue to accelerate.”

Looking ahead to the second quarter ended 31 December, Microsoft said that revenue is expected to be in the range of US$10.3bn and US$10.5bn, with an operating income in the region of US$4.2bn and US$4.3bn.

For the full year ended 31 June 2005, Microsoft said it expects total revenue to be in the range of US$38.9bn and US$39.2bn, with an operating income of US$16.4bn and US$16.7bn expected.

By John Kennedy