Software subscriptions boost Microsoft earnings

Microsoft reported a year-on-year increase in sales and net profit for its fourth financial quarter as it benefited from...

Microsoft reported a year-on-year increase in sales and net profit for its fourth financial quarter as it benefited from multiyear software subscription deals.

Net profit for the quarter ending 30 June was $1.92bn, compared with $1.53bn for the same period last year. This year's figure was reduced by $533m in post-tax lawsuit settlement charges, while last year's result included a write-off charge of $806m.

Revenue was $8.07bn, up 11% from $7.25bn last year. Growth was driven primarily by multiyear licensing deals for server products and applications such as Office in Microsoft's Information Worker unit, as well as a 25% revenue jump at the MSN Internet division.

"The past year was another tough one for our industry. It was characterised by tight IT spending budgets, geopolitical uncertainty and generally weak economic conditions, particularly in the euro zone and Japan," said Microsoft chief financial officer John Connors.

"Despite all of the challenges we had a very solid year on an absolute basis and very good results relatively speaking. Additionally, I would characterise our fourth-quarter sales results as encouraging," he said.

Besides profiting from its Licensing 6.0 scheme and the associated Software Assurance plan, Microsoft also benefited from a strong euro and Japanese yen. International revenue would have been about $255m less if exchange rates had remained the same as a year ago, the company said.

Revenue at Microsoft's Server Platforms segment rose 17% year on year to $1.93bn, led by 24% growth in Windows Server revenue and 34% growth in SQL Server revenue.

In the past quarter, Microsoft launched Windows Server 2003 and introduced the 64-bit edition of SQL Server.

The Information Worker group reported fourth quarter revenue up 8% year-on-year to $2.35bn, fuelled by a $102m increase in revenue from software subscription deals for Office and a $75m revenue increase for other products in the group, including Visio and Project.

Quarterly revenue at the Client group grew 4% to $2.53bn from $2.43bn, driven by PC buyers who opt for Windows XP Professional edition over the cheaper Home edition. 

At MSN, increased advertising and subscription revenue pushed segment revenue up 25% to $559m compared with last year's fourth quarter.  At the same time, increased Xbox game console sales helped push revenue at the Home and Entertainment unit up 8%  to $483m.

Aided by the acquisition of Navision A/S last year, revenue at Microsoft Business Solutions rose to $179m from $86m last year.

Revenue at the Mobile and Embedded Devices segment was up to $44m from last year's $36m as a result of increased Pocket PC shipments and licensing fees from its MapPoint online mapping service.

Geographically, Microsoft revenue was up 3% in the Americas to $2.99bn; up 43% to $1.75bn in Europe, the Middle East and Africa, and up 7% to $835m in Japan and the Asia-Pacific region.

Microsoft expected revenue for its first quarter, which ends 30 September, to be between $7.9bn and $8.1bn. Last year, the company reported first-quarter revenue of $7.75bn.

Joris Evers writes for IDG News Service

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