Windows Vista Helps Microsoft Report Record Growth - InformationWeek

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1/24/2008
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Windows Vista Helps Microsoft Report Record Growth

Significant public griping over Windows Vista hasn't held back the new operating system, as it has finally become the cash cow the company had hoped it would be.

Microsoft reported its second-quarter earnings Thursday, bucking the financial slump by smashing its previous quarterly revenue record by $2 billion and growing its revenue in every business unit.

The company reported that revenue increased 30% year over year to $16.37 billion in the second fiscal quarter of 2008, slightly beating analyst expectations, while net income almost doubled, skyrocketing 87% to $4.7 billion.

Significant public griping over Windows Vista hasn't held back the new operating system, as it has finally become the cash cow the company had hoped it would be. Microsoft's Windows client business grew 20% since last year. "We are pleased with the progress of Windows Vista in the market," Kevin Johnson, president of Microsoft's platform and services division, said in a statement. "We've hit our stride." The premium enterprise version of Windows Vista grew by 35%.

Meanwhile, the Microsoft Office line of products continues to grow steadily, with 23% growth over last year. SharePoint continued its blockbuster uptake. It and Office Communications Server both grew more than 50% in the last quarter.

Despite the upcoming release of Windows Server 2008 next month, Microsoft's server and tools business has remained strong, growing in double digits. SQL Server and Windows Server grew enough that Microsoft credited growth in those products, along with Vista and Office 2007, as the primary drivers of the company's growth.

Microsoft's online services business, which has long been in the red, continued the trend in part because of heavy investments in building new data centers, but revenue there -- much of it in advertising -- increased from $625 million last year during this period to $863 million. The entertainment and devices division, meanwhile, saw its profit numbers flip from a year ago, turning a $306 million loss into a $334 million profit, despite a relatively negligible 3% revenue increase.

Unlike many of its colleagues and despite a pessimistic financial sector, Microsoft expressed high hopes for "great momentum" the rest of the year and increased its forward-looking guidance.

"In the U.S. markets, although the risk of an economic slowdown clearly exists, we haven't seen any evidence of a spillover into our business," Microsoft CFO Chris Liddell said on an earnings call with investors, while pointing to the company's worldwide strength.

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