Enterprise carries Microsoft until Windows 8 launch; Q3 strong

Summary:SQL Server and enterprise products more than hold Microsoft over ahead of the Windows 8 launch as company delivers strong third quarter.

Microsoft delivered a strong fiscal third quarter as the software company's enterprise line-up---SQL Server, System Center and products like Lync and Dynamics CRM---carried the team.

The company reported third quarter earnings of $5.11 billion, or 60 cents a share, on revenue of $17.41 billion.

Wall Street was expecting Microsoft to report earnings of 57 cents a share on revenue of $17.18 billion.

As for the outlook, Microsoft said it is cutting its operating expense guidance.

Overall, the quarter played out about the way analysts projected---Microsoft's business tools carried the quarter. Microsoft's server and tools unit saw revenue jump 14 percent from a year ago to $4.57 billion. SQL Server revenue was up double digits and System Center sales surged 20 percent. Operating income for the servers and tools unit was $1.74 billion.

Microsoft's business division delivered third quarter revenue of $5.81 billion, up 9 percent from a year ago. Office upgrades continue and Dynamics revenue jumped 11 percent. Operating income for the business division was $3.77 billion.

Windows revenue also held its own with sales of $4.62 billion, up 4 percent from a year ago. Microsoft said that enterprise upgrades continue. Indeed, Gartner recently reported that PC sales weren't as bad as originally thought. Windows operating income was $2.95 billion.

In a statement, Microsoft CEO Steve Ballmer touted a series of product launches leading up to Windows 8 and the next-generation Office.

As expected, Microsoft's online unit continues to lose money, but the software giant cut its losses. For instance, Microsoft's online unit lost $479 million in the third quarter on revenue of $707 million. That's still a big chunk of change, but an improvement on the $776 million lost in the third quarter a year ago.

Here's a snapshot of Microsoft's units and the profit and loss statements:

By the numbers:

  • Microsoft ended the quarter with $6.38 billion in cash and equivalents.
  • The entertainment and device division reported a third quarter operating loss of $229 million on revenue $1.61 billion. Xbox remains the top gaming console.
  • Research and development spending was $2.517 billion in the quarter, up from $2.27 billion a year ago. For the nine months ended March 31, Microsoft spent $7.2 billion on R&D.

Topics: Windows, Banking, Enterprise Software, Microsoft


Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CN... Full Bio

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