Microsoft Q2 profits down 28 per cent

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Microsoft yesterday announced its second quarter results, which revealed a 28 per cent drop in net income, showing that its bank balance is smarting from the financial injuries created by its technology guarantee programme for Windows Vista and Office 2007 and as yet sluggish take up of the new products with businesses.

But despite the decline in profit, which included a deferral of $1.13 billion to the next fiscal quarter, the Redmond giant chose to focus on the positive and was upbeat about what it described as a record quarter which generated $12.54 billion in revenue.

During the financial accounting period ending December 31, Microsoft launched Exchange Server 2007, Office 2007 and the business version of Windows Vista, the latter of which had been beset by delays and was long overdue as far as the corporate world was concerned.

But pre-empting any sceptical suggestions that the company's most recent launches are unlikely to have a massive impact on the next quarter's balance sheet if they haven't done so thus far, Microsoft responded with a history lesson.

It paralleled the last quarter with the same period in 2005, which saw the launch of Xbox 360, Microsoft SQL Server 2005, Visual Studio 2005 and Microsoft Dynamics CRM 3.0. A year after their respective births, they have generated more than $1 billion in revenue for the software giant.

"Results this quarter exceeded our expectations across the board, with revenue growth at or above our high end guidance for all divisions," said Chris Liddell, chief financial officer at Microsoft.

"Healthy PC and server markets as well as broad-based business and consumer demand for Microsoft offerings fueled revenue growth this quarter."

"The execution of our field sales and marketing teams were a major contributor to this quarter's extremely positive results," added Kevin Turner, Microsoft's chief operating officer.

"Customers have responded positively with strong contract renewals and license sales. We are pleased with such strong financial results and look forward to making Windows Vista and the 2007 Microsoft Office system widely available to all customers next week."

For its next quarter, which ends on March 31, Microsoft expects to report revenue of $13.7 billion, with operating income in the region of $6.1 billion to $6.3 billion.

Full year revenue, when the software closes its books on June 30 this year, is expected to top $50 billion, with operating income of up to $19.7 billion.

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