SQL Server drives Microsoft's record quarter

Record sales power $3.65bn net profit, despite drop in operating income

Alun Williams
27 Jan 2006

Record sales have powered Microsoft's latest quarterly financial results, with SQL Server gaining the garlands.

The headline figures - for the third quarter ended 31 December 2005 - are record sales of $11.84 billion, a nine per cent increase over the same period a year ago, with profits reaching $3.65 billion, a year-on-year increase of five per cent. What this has all translated to is diluted earnings per share of $0.34.

Microsoft highlighted the strength of back-office software sales, reporting that Server and Tools revenue grew 14 per cent year-on-year, with SQL Server in particular seeing 20 per cent growth (a major update - SQL Server 2005 - was also released in November 2005).

The only downside was a two per cent decline in operating income which Microsoft attributed to 'sales, marketing and product development expenses' associated with a wide range of major product launches.

'The growth in our core businesses was healthy during the quarter driven by strength in Server and Tools and the success of our Windows Client products in a robust PC market,' said Chris Liddell, chief financial officer of Microsoft. 'The quarter also marked the beginning of an important product cycle for Microsoft with the launches of Xbox 360, SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0, all of which were extremely successful and well received by our customers.'

How did Wall Street react to the figures? They were largely in line with analysts' expectations - they had forecast a profit of $0.33 per share, based on revenues of $11.96 billion, reports The New York Times.

Among the dry facts and figures, a light was shone on the number of Xbox 360s that have been successfully shifted. The total now stands at 1.5 million. Microsoft had originally hoped to sell three million Xbox 360s in the first 90 days of the gaming console's life (it first appeared 22 November), but it is now hoping the hit a target of between four and five-and-a-half million by the end of its financial year, at the end of June.

Microsoft also reports that during the quarter it returned $8.5 billion to shareholders in the form of dividends and share repurchases.

In terms of outlook, for the quarter ending in March, revenue is expected to be in the range of $10.9 billion to $11.2 billion with operating income in the range of $4.5 billion to $4.6 billion, which translates to diluted earnings per share being $0.32 or $0.33.

Read more about: