Microsoft operating income rises 13% to $3.72 billion in Q3

Redmond: Microsoft's operating income for the third quarter grew 13 per cent to $3.72 billion, compared to operating income of $3.30 billion reported in the prior year. The net income for the quarter was $2.79 billion, compared to $2.74 billion reported in the previous year. Diluted earnings per share for the March 2003 quarter were $0.26.

"We reported another quarter of strong revenue and operating income results in a very tough environment," says John Connors, chief financial officer at Microsoft. "While there is obviously a great deal of economic uncertainty ahead, our ongoing investment in R&D has resulted in a broad product pipeline, including upcoming releases of Windows Server 2003, Visual Studio .NET 2003, Exchange 2003 and Office 2003. We believe that these innovative products will enable our customers to get more productivity and value out of their IT investments."

Information worker revenue was up 9 per cent compared to the same period last year, driven by positive customer demand for Office XP. Customers acquiring Office this quarter included Air Products and Chemicals Inc, Northern Trust Corporation and Pier 1 Imports. Also during the quarter, the company announced the broad availability of Beta 2 for Office 2003. With initial customer demand exceeding expectations, the company now plans to issue more than 600,000 copies of the Beta 2 kits.

Server Platforms revenue grew 21 per cent compared to the third quarter of last year, reflecting continued strong performance across a breadth of server products, including Microsoft Exchange, Microsoft SQL Server 2000 and the Windows 2000 Server family of products. Customers acquiring Microsoft server software this quarter include H&R Block, ING Group and Nextel Partners Inc.

Revenue growth for Windows 2000 Server was driven by continued market share gains of Intel-based server hardware over proprietary Unix products. Microsoft SQL Server 2000 posted healthy revenue growth of nearly 40 percent, driven by strong demand for SQL Server Enterprise Edition among companies deploying mission-critical applications.

Microsoft Business Solutions posted year-over-year revenue growth of 96 per cent, benefiting from the inclusion of revenues from Navision, acquired by Microsoft in July 2002. During the third quarter, Microsoft Business Solutions introduced the highly anticipated Microsoft Customer Relationship Management (CRM) product.

"We are pleased with the initial customer and partner enthusiasm for Microsoft CRM. At the end of the quarter, we already had over 1,000 authorised partners and more than 150 ISVs for Microsoft CRM," says Doug Burgum, president, Microsoft Business Solutions. "Microsoft CRM represents a key component in our overall mission to deliver transformational solutions that enable businesses in the mid-market to enhance and deepen the relationships they have with customers."

The management offers the following guidance for the quarter ending 30 June 2003:

• Revenue is expected to be in the range of $7.8 billion and $7.9 billion.
  
• Operating income is expected to be in the range of $3.1 billion and $3.2 billion.
  
• Diluted earnings per share is expected to be either $0.23 or $0.24.
  
• Management offers the following guidance for the full fiscal year ending 30 June 2004.
  
• Revenue is expected to be in the range of $33.1 billion and $33.8 billion.
  
• Operating income is expected to be in the range of $14.8 billion and $15.1 billion.
  
• Diluted earnings per share is expected to be in the range of $1.04 and $1.06.