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Enterprise carries Microsoft until Windows 8 launch; Q3 strong

SQL Server and enterprise products more than hold Microsoft over ahead of the Windows 8 launch as company delivers strong third quarter.
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Written by Larry Dignan, Contributor on

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.

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