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7/20/2006
07:44 PM
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Microsoft Will Invest $900 M In Vista, Office 2007 Sales And Marketing In FY '07

Strong multiyear licensing renewals suggest strong demand for the new software, Microsoft says.

Goldman Sachs analyst Rick Sherlund took kindly to the growing pot of deferred revenues lining Microsoft's pockets.

"Microsoft reported a bit better than expected results for their fourth fiscal quarter and a big $2 billion increase in deferred revenues," according to a Goldman Sachs report, authored by Sherlund, that was issued after Microsoft's earnings were released Thursday. "The large increase in deferred revenues of $2 billion was above our $1.3 billion estimate and likely reflects strong contracting activity for enterprise agreements to be recognized as revenue over time."

Microsoft reported a $2.83 billion profit and diluted earnings per share of 28 cents during its fourth fiscal quarter, which ended June 30, 2006. Excluding a three cent charge for legal fees (to cover a fine imposed by the European Commission ), Microsoft would have reported earnings of 31 cents per share. The analyst consensus was 30 cents per share for the quarter.

For the fiscal year ended June 30, 2006, the company reported revenue of $44.28 billion, an 11% increase over the prior year. Net income for the 2006 fiscal year was $12.6 billion. Earnings per share were $1.20.

Though profit fell last quarter (from $3.7 billion during the same quarter in FY05) and increased only slightly year over year (from 12.3 billion in FY05), Microsoft was very optimistic and offered a healthy forecast for its current fiscal year " to between $49.7 billion to $50.7 billion.

If the numbers tip to the higher end of that scale, it would mark a major milestone for the 31-year-old company: breaking the $50 billion mark.

One Microsoft system builder and solution provider that sells Microsoft licensing predicted it would be a good quarter " and year " for the company, hours before the release was posted. But he noted the big numbers don't always translate into good news for the channel.

"Their forward looking statements will be somewhat rosy because they have such a huge new slate of products they'll be releasing in the next year," said Todd Swank, vice president of marketing at Nor-Tech, Burnsville, Minn. "We've seen our Microsoft numbers increase over the past couple of quarters, but I've never seen a great correlation between our numbers and Microsoft's."

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