Microsoft sales reach �25bn for first time
SOFTWARE titan Microsoft has posted another rise in annual profit as sales burst through the $50 billion dollar mark for the first time.
The company said demand for new operating software Vista Windows and its Office 2007 product helped drive profit over the year up to �6.88bn, from �6.82bn the year before as sales hit �24.93bn ($51.1bn), up from �24bn the year before, just ahead of Wall Street estimates.
The profit performance would have been even better, Microsoft said, had it not had to fork out �500 million to cover the cost of "general hardware failure" faults with its Xbox 360 computer games console.
Microsoft, which was co-founded by billionaire Bill Gates, said its core businesses were "healthy" and it would continue to invest in growth opportunities.
Over the final quarter to June 30, earnings climbed to �1.48bn, from �1.38bn in the same period the year before. Excluding charges related to Xbox, Microsoft said it would have banked a profit of �1.84bn during the final three months of its last trading year.
"Surpassing $50bn in annual sales is a testament to the innovation and value that our product groups delivered into the marketplace," said chief operating officer Kevin Turner.
And Mr Turner said that over the current year, sales were expected to rise to between �27.33 and �27.81bn.
Microsoft is counting on several big product launches, including updated server software and the much-anticipated "Halo 3" video game, to spark double-digit growth next year.
Sid Parakh, a technology analyst at McAdams Wright Ragen, said Vista and Office 2007 were "doing well" with lots of corporate buyers taking to the products.
Analysts were particularly pleased with an increase in Microsoft's "unearned revenue", or money businesses have pledged to spend in coming years on licenses for software.
"It suggests that the wave of business products released in 2007 and the forthcoming products in fiscal 2008...are really going to help the company convince enterprises to sign multiyear agreements," said Matt Rosoff, of independent researchers Directions on Microsoft.
Strong contract sales bode well for Microsoft's plans to roll out server, database and communications software that tie into Vista and Office 2007 in coming months.
"We're having very good success re-signing contracts that are coming up for expiration," said Charly Tracy, Microsoft's senior finance manager, adding that corporations are buying Vista and Office in anticipation of the new server programs.
Mr Tracy shrugged off the Xbox woes. "We've taken the charge and done the right thing for the customer. Now it's all about the great game lineup we've got going into next holiday season," he said.
Microsoft said it estimated the personal computer market to have grown between 11 per cent and 13 per cent in the past three months. The company forecast PC market growth of nine percent to 11 per cent this year with Windows sales expected to move in line.
"Many of the same factors that helped us be successful in 2007, such as a healthy PC hardware market, customer acceptance of our new versions of Office and Windows...will help propel us in 2008," Microsoft chief financial officer Chris Liddell said.