Microsoft revenue climbs 15%

Microsoft has reported a 15% increase in revenue for the final quarter of its 2004 financial year.

Microsoft has reported a 15% increase in revenue for the final quarter of its 2004 financial year.

The world's largest software supplier reported net income of $2.69bn (£1.47bn) on revenue of $9.29bn for the fourth quarter of its 2004 financial year which ended 30 June. That compared with net income of $1.48bn on revenue of $8.07bn in the same period the previous year.

All of Microsoft's groups met or exceeded company expectations, said Microsoft chief financial officer John Connors.

"All of our seven businesses are growing and in aggregate they generated revenue growth of $4.6bn, or 14%, for the year," Connors said.

Encouraged by its fourth quarter results, Microsoft raised its revenue guidance for its 2005 financial year to between $38.4bn and $38.8bn. In April, Microsoft predicted 2005 revenue of between $37.8bn and $38.2bn.

Revenue growth for the fourth quarter was primarily driven by continued strong PC and server shipment growth, Microsoft said.

The MSN Internet group also saw an increase in advertising revenue and Microsoft benefited from the weak US dollar.

Microsoft also appears to be doing well in selling its much-critiqued Software Assurance (SA) software maintenance programme and enterprise agreement licences, which tie customers to a multiyear contract that includes software updates. For Microsoft such annuity licences mean guaranteed revenue.

Microsoft projected that between 10% and 30% of customers with expiring Upgrade Advantage (UA) contracts would buy SA. "So far we are tracking to the high end of that range," Connors said.

Many Microsoft customers are nearing the end of their two-year UA contracts, purchased just before Microsoft retired that option on 31 July 2002.  Because the next big wave of Microsoft products is not expected before 2006, many customers may skip the SA maintenance plan, one of the most expensive in the industry.

Of Microsoft's seven businesses , the Windows client and Office groups continue to generate by far the most profit. The client segment reported operating income of $2.06bn for the quarter, up from $1.87bn last year. The information worker segment, which includes Office, grew its operating profit from $1.48bn to $1.96bn.

Microsoft's Server and Tools segment increased its profit substantially, benefiting from increased Windows Server sales.  The group's quarterly operating profit came in at $567m, up from $307m last year.

An increase in revenue from online advertising and paid search listings helped MSN turn a $35m operating profit in the fourth quarter, compared with an $83m loss last year. 

Microsoft's remaining four groups reported quarterly operating losses.

Microsoft Business Solutions, which sells software that helps companies run their business, narrowed its loss from $73m to $42m.

While, Mobile and Embedded Devices, which includes Windows Mobile software, reported a loss of $42m, an improvement over $68m last year.

Microsoft's Home and Entertainment group, which includes the Xbox game console, booked a higher loss of $339m compared with $245m last year.

Joris Evers writes for IDG News Service

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