The fiscal third quarter was very kind to software giant Microsoft. The company witnessed a 32 percent increase in revenue to $14.4 billion
USD, operating income of $6.59 billion USD and net income of $4.93 billion USD.
Earnings per share also jumped 72 percent to $0.50.
"I am extremely pleased that we delivered a quarter of
strong double-digit growth for revenue, operating income and EPS," said
Microsoft CFO Chris Liddell, chief financial officer at Microsoft. "And I
am looking forward to a very good finish to this fiscal year with strength
continuing into fiscal 2008."
The strong performance from Microsoft in Q3 can be
attributed to the launch of Windows Vista and Office 2007. The two products
were heavily promoted and launched on January 30.
But while Microsoft did well overall, the Entertainment and
Devices Division (EDD) saw its revenue fall
during the quarter. The EDD’s operating loss dropped from $402 million USD
to $315 million USD. Revenues, however, also dropped 21 percent during
the quarter to $929 million USD.
Poor sales of the Xbox 360 were blamed for the lower
performance. "EDD revenue decreased during the three months ended March
31, 2007 primarily because of decreased Xbox 360 console sales," Microsoft
reported in its 10-Q filing. "During the quarter, we shipped 0.5 million
Xbox 360 consoles as compared to 1.7 million consoles in the third quarter of
fiscal year 2006, which was the first full quarter of Xbox 360 console sales.
Xbox and PC game revenue decreased $393 million or 44% during the three months
ended March 31, 2007 due to the decrease in console sales." Microsoft has
shipped over 11 million Xbox 360s since its November 2005 launch.
The Xbox 360, however, wasn't the only culprit during Q3.
Microsoft cited expenses related to its Zune launch as adding
to the operating loss. Microsoft's Zune -- its first home-brewed competitor for
the iPod -- was launched in November and is expected to pass the one million shipped
mark in June. The company also attributed some of the blame to
"increased Xbox 360 console warranty expenses." The company boosted the console's
warranty to one-year in December 2006 and just recently announced a more flexible warranty
program for owners.
Microsoft forecasts that EDD revenue for fiscal 2007 will be
up year-to-year thanks to increased Xbox 360 shipments and increased Zune
sales. The company’s rumored
flash-based Zune could be instrumental in such gains.
quote: A fiscal year (or financial year or accounting reference date) is a 12-month period used for calculating annual ("yearly") financial reports in businesses and other organizations. In many jurisdictions, regulatory laws regarding accounting require such reports once per twelve months, but do not require that the twelve months constitute a calendar year (i.e. January to December). The financial results presented to shareholders are therefore a "photograph" of company's accounts at the accounting reference date. Although Sept. seems to be the most popular ending month, it must be understood that the end date varies between businesses and countries.
quote: Often the fiscal or tax year is specifically established not to match the calendar year so that accounting year-end work does not coincide with periods of high activity (e.g., the Christmas shopping rush for retailers -- see below) or with holiday periods when employees may prefer to take vacation.