Enterprise carries Microsoft until Windows 8 launch; Q3 strong

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

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  • Amazing how a captive audience

    is treated by their overlord. Want to make up lost $$, just jack up corporate licensing fees. They likely won't do anything but b!tch and moan and will pay the MS goons anyway....
    • Re:

      Poor chap, posting negative comments on MS articles each day. Are you really that bitter? You must suffer a lot inside. All that negativity is bad for your heart :(
      • I agree. He obviously leads a very sad life

        if all he can do is hate for hate's sake. I do agree it's not good for his heart, but that's not the part of him we're worried about. ;)
        William Farrel
      • LOL - perfect BTW

        the it in itguy... is the 1st and last letter in IdioT...
    • So true

      It's no wonder MsSQL is cleaning up. Last year MS went from charging by the socket to charging by the core on the MSSQL server. That means companies that were paying for a 2 socket license are now forced to pay 8 times more because that 2 socket system has 16 cores. There are many companies moving their products to Oracle and PostgresSQL because MSSQL has been priced out of many markets.
      These companies are captive because they can't change the SQL engine over night, and many have lost deals because their product is now uncompetitive. Expect that MSSQL income to be in decline soon.
      • Well, at least you present some facts

        This change in licensing has royally pi$$ed off some of my Windows sys admin friends.
    • congrats ITguy, so far 4 wintards and minus 22

      you're good, man
  • Microsoft is more profitable and more diversified

    Microsoft is more profitable and more diversified across multiple market segments than at any other point in its history. This is a good thing. It is build the tools that customers and businesses want.
    Your Non Advocate
  • Microsoft is making MASSIVE investments

    All to come in the next year - Windows 8 across all form factors, Windows Phone 8, the next XBox and more cloud offerings. Bing is still losing money but less then before.
  • Enterprise carries Microsoft until Windows 8 launch; Q3 strong

    Kudos to Microsoft! Not that I had any doubts about this quarter's earnings.
    Loverock Davidson-
    • No doubt

      If you read the figures you will see there are more than one or two problems. MS is now moving into being a mid life cycle company. It now either has to find a big product to kick start major growth again or it chnge from an ibm into a lenovo.
  • But Richard Flude said MS wasn't performing well

    $6 billion in operating income for 3 months, a growth of about 10% is, according to Richard Flude, poor performance.

    I seem to remember a huge amount of commotion being made about another company that Richard Flude believes is performing really well. Oh yeah, Red Hat. Red Hat's operating income for 3 months was $0.055 billion, a growth of about 10%. To put that into perspective, MS's 10% growth of $0.6 billion exceeds Red Hat's entire profit by 10 times.

    To recap: it is better (according to Richard Flude) to grow 10% to $0.055 billion than it is to grow 10% to $6 billion. It is better to have $0.005 billion in growth than to have $0.6 billion in growth.

    Disclaimer: I don't care about MS's financial results. I like Windows 7 and I like Xbox. I also like my iPhone and my iPad. I'm not saying these financial results make people who use Windows "better" than people who use Linux. I'm not even going to say this proves Windows is better than Red Hat. I just have to point out how ridiculous it is that yet again, for the 20th year in a row, we are hearing from people like Richard Flude about how poor MS's performance is. Sometimes it helps to see real figures, side by side. $6 billion vs $0.055 billion. It doesn't get any more clear than that.
    • First of All, Good Quarter

      Now, what intrigues me. Year over year (9 months results) shows an increase of 581 million for Operating income. Online Services Division reduced its losses by 463 million while posting 205 million in revenue gains.

      Indeed, cost cutting was deservedly identified as a significant cause for the good results. Looks to me that Online Services' loss reduction was (463 - 205) / 581 or 44% of the gain.

      Windows and Windows Live Division had a decline in operating income of 240 million and a revenue decline of 62 million. Oooch. Well, maybe that's R&D and/or costs affiliated with Windows 8 and not a problem. One more stalwart than me would look at 3Q numbers for 2009 and 2006 (pre Vista and Win7) and see how they compare for the division, or its analog.

      For Entertainment and Devices, a decline in operating income of 597 million matched up against a revenue increase of 386 million. We know there is no successor to the XBox 360 on the horizon. Zune, the music player, has been shuttered. Are those results indicating the kind of money being spent to develop and market the phone os? I think the phone marketing department just had a leadership change, so somebody wasn't pleased with how quickly results were being achieved.

      Added by Edit: Clearly, I am focusing on the parts of the business that look to be floundering a bit. Since overall results were very good, the other divisions must be going like gangbusters. The question I've been asking since Google became a household name is does going into other businesses, buying share, paying out oodles until they get their legendary version 3, does this really work for them or their shareholders? The XBox used to be the counter-argument, but what if the XBox is the battleship in an aircraft carrier world? (Mobile devices as game platforms seem to have the buzz and sales growth, which is another point about how bad it is that Microsoft fumbled mobile and now spending and spending seems to be their biggest hope as a way to establish themselves in the space.) Last year there was residual excitement over Kinect. This year? XBox as TV portal. Really? I am skeptical. Not dismissive. Skeptical.
      • Good questions

        "We know there is no successor to the XBox 360 on the horizon."

        No, but MS has been adding a lot of functionality and content to Xbox Live.

        "Are those results indicating the kind of money being spent to develop and market the phone os?"

        I think it is a safe bet to say MS is losing a ton of money on WP7.
      • To your edit

        "Mobile devices as game platforms seem to have the buzz and sales growth"

        Apple still believes that the living room is important since they keep trying over and over again with Apple TV. I would love to see the DoJ step in and tell Apple what MS was told when they tried to use their desktop OS advantage to help them in the server OS market by keeping Active Directory a proprietary advantage of the Windows ecosystem. Wouldn't it be great for consumers if the DoJ told Apple that AirPlay and iTunes can't be used as a club against Xbox, allowing Xbox to be the only "computer" you need in the living room? iPhone won because no one wants to carry around an MP3 player and a smartphone. Likewise, Apple is hoping that no one wants to connect 2 boxes to their TVs.

        Xbox and Apple TV are meeting in the middle to duke it out where Apple TV is getting more gaming capabilities (through AirPlay and perhaps natively?) and Xbox is getting more content and streaming capabilities. I think the DoJ should help consumers by preventing Apple from using its tremendous iOS and iTunes ecosystem to shut MS out of the market, much like the DoJ prevented MS from using its tremendous Active Directory ecosystem to shut Linux out of the market.
      • Need to work on your reading comprehension

        Prediction yesterday was spot on; profit generators, profit growth inline with PC market, talked of revenue growth other areas, "pipeline" comment, and swooning MSCEs.

        Why Red Hat, ignoring the obvious competitor?

        I'd like you to post where I've said MS profitability was poor, rather than poor growth.
        Richard Flude
      • Richard and his reading comprehension

        "profit generators"

        You completely missed on SQL Server, SharePoint, Exchange, Dynamics, and Lync.

        "profit growth inline with PC market"

        If by "inline" you mean "outperformed by 5X". PC growth was 2%. MS revenue growth was more than 5%, profit growth about 10%.

        "swooning MSCEs"

        There is no such thing as an MSCE.

        "Why Red Hat, ignoring the obvious competitor?"

        Because you thought Red Hat was doing fantastically well so I figured you had set the bar between "poor performance" and "fantastically well" somewhere around where Red Hat sits. MS is crushing Red Hat so MS, using your standards, is doing fantastically well.

        "I'd like you to post where I've said MS profitability was poor"

        First I never accused you of stating that, nice strawman. You made a claim yesterday that people kept apologizing for MS's performance:
        "Yet still they apologise for MS's performance (or lack of)."

        MS is outperforming Red Hat by a long shot, a company you believe is performing well.

        You are done here Richard. All of your points have been shown to be false. Goodbye.
      • Just because the old dinosaurs like you are becoming

        irrelevant Richard Flude, doesn't mean you should devote your life to spinning every positive MS story you read.

        Embrace the future, don't prejudice everything you come across, give it all a chance.

        your kind of thinking is old.
        William Farrel
  • Another flop in the making

    Windows 8 = Windows 7 w/ Metro = Vista 2.0

    No one's gonna use it.
    • Good Analysis

      Except it wasn't. Nearly everyone is going to use it. Just like nearly everyone uses Windows 7, and Windows Vista before that, and Windows XP before that. Get past the Metro interface (which I love) and go watch some of the Building Windows 8 videos on their blog. This is going to be a massive update.
      Fan Of Everything