On the back of strong sales of its new Windows 7 operating system, Microsoft (NSDQ: MSFT) posted big increases in net income and revenue Thursday. The company said that revenue jumped 14 percent to $19 billion from $16.6 billion during the same period a year ago; analysts had expected revenue of $17.8 billion. Net income increased 60 percent to $6.7 billion. And earnings per share came in at 74 cents, up from 47 cents during the same period a year ago. That figure too beat analyst expectations of 59 cents a share — and even chatter that it would come in as high as 66 cents.
It was the first time in nine months that Microsoft had reported increases in both net income and revenue. Certainly contributing to the strong showing: A comparison to an extremely poor quarter a year ago, as well as the contribution of deferred revenue from pre-release sales of Windows 7. Still, the numbers have to be a relief to a company that just concluded ithe worst calendar year in its recent history, which was complete with three rounds of layoffs and seemingly constant gloomy remarks on the state of the economy from CEO Steve Ballmer.
The big winner in Microsoft’s results was its flagship Windows division, which posted a 70 percent increase in sales to $6.9 billion. Sales were up about 30 percent, excluding the effect of the deferred revenue. That was well above most analyst estimates and reinforces the notion that the PC market is back. (IDC said recently that worldwide PC shipments jumped 15 percent last quarter and 24 percent in the U.S.).
The company’s other units reported less shiny numbers. The growing market share of Microsoft’s Bing search engine didn’t seem to have contributed very much to the performance of the company’s online services division. Revenue there dipped 4.6 percent to $581 million, while operating losses jumped to $466 million from $320 million. In its quarterly filing with the SEC, Microsoft said that while search revenue had increased, display advertising sales had dropped.
And, during the crucial holiday quarter, Microsoft’s entertainment and devices division — which includes Xbox and Windows Phones — failed to impress, posting an 11 percent drop in sales. Sales of the Xbox 360 were down, as were sales of the Zune and Windows Mobile. The division did manage to boost operating income by 188 percent to $375 million, however. Sales at the company’s server and tools division were flat at $3.8 billion and down slightly at Microsoft’s business division.