Microsoft delivers strong quarter on Windows 7, Office upgrade cycle

Microsoft's first quarter handily topped expectations as the company continued to ride an upgrade cycle for Windows 7 and Office.

Microsoft's first quarter handily topped expectations as the company continued to ride an upgrade cycle for Windows 7 and Office.

The company reported fiscal first quarter net income of $5.41 billion, or 62 cents a share, on revenue of $16.2 billion, up 25 percent from a year ago. The year-ago figure includes deferred revenue though so revenue growth was more like 13 percent. Wall Street was expecting earnings of 55 cents a share on revenue of $15.8 billion.

Nevertheless, the software giant reported a strong quarter across the board. Like most quarters, Microsoft rode its twin cash cows (right): Office and Windows. The Entertainment and Devices division also performed well courtesy of Xbox.

As for the outlook, Microsoft reiterated its operating expense targets.

The company sees the following for the fiscal second quarter:

  • Windows demand in line with PC growth after adjusting for the Windows 7 spike.
  • Server and tool multi-year licensing should grow high single digits.
  • The business division (Office) will grow in line with PC market. Multi-year licenses in the mid-to-high single digit range.
  • Online advertising revenue is projected to outperform the overall ad market.
  • Entertainment and device revenue will grow 30 percent in the second quarter and in the mid-20 percent range for fiscal 2011.

In a statement, the company said that it continued to ride the Windows 7 and Office upgrade cycles. Office 2010 revenue was up 15 percent in its first full quarter. Microsoft added that it continued "to see a healthy and sustaining business PC refresh cycle."

Microsoft chief operating officer Kevin Turner also talked up demand for the company's cloud services and new customer wins. Those efforts are too early, however, to be material.

By the numbers and other key points:

  • PC unit growth in the first quarter was 9 to 11 percent.
  • Microsoft said that Windows Azure had 40 percent sequential subscriber growth.
  • 70 percent of Business Productivity Online Services customers were new to Microsoft.
  • Xbox unit growth was up 38 percent in the quarter.
  • The online services unit delivered revenue growth of 8 percent in the first quarter compared to a year ago. The unit continues to lose money.

Among the key slides:

Newsletters

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
See All
See All