Server Group Lifts Microsoft Revenue

Microsoft has released its quarterly financial statements, reporting $9.62 billion in revenue and $3.33 billion in operating income. Net income was $1.32 billion and earnings per share are listed as $0.12. Microsoft credits growth in its Servers and Tools business for its quarterly growth.

The Server and Tools segment grew 12 percent when compared to the same period last year, namely the SQL Server and Exchange Server product lines. Revenue from Mobile and Embedded Devices rose 31 percent.

"Despite a mixed enterprise software environment, the quarter played out largely as we expected and operating income and earnings per share results were in line with our expectations," said Scott Di Valerio, corporate vice president and corporate controller at Microsoft.

"Given our optimism about the future with our strong product pipeline and the growth opportunities from our investments in innovative products and services, we expect increased revenue growth in fiscal 2006," Di Valerio added.

Of note, 600,000 Windows Media Center Edition units shipped, doubling within the past six months. Coincidentally, Microsoft has modified the TV tuner requirements for Windows XP Media Center Edition 2005 beneath the high end, which opened up the OS to "white box" system builders, and expanded availability internationally.

Jupiter Research senior Joe Wilcox weighed in saying, "To be clear, shipments aren't the same thing as sell through. Many of the 600,000 units could be sitting on store shelves somewhere. That said, I see the doubling of shipments in about six months to be significant signs of growing Windows Media Center momentum."

"In a September 2003 report, Jupiter Research predicted that Media Center would 'become the standard OS offering for mid-level PCs and various desktop replacement notebooks over the next 12 to 18 months.' I would say that transition is well underway," Wilcox added. "For some perspective, during the 2005 first calendar quarter, Apple shipped 608,000 desktop Macs, or about the same as Windows Media Center PCs."