Google Hasn't Put Microsoft Out of Business Yet

Mister Softee Proves It's Still the Old Money Machine

May. 1, 2007 05:15 PM

Well, Google hasn’t put Microsoft out of business yet. Redmond is still a money machine.

It posted record profits up 65% to $4.93 billion, or 50 cents a share, Thursday on revenues up 32% to $14 billion for the March quarter, its might-as-well-call-it Vista quarter when the software finally came out.

Microsoft’s operating profits came to a staggering $6.59 billion. The numbers beat the Street.

Contrary to all the badmouthing of Vista, it seems to be delivering for Microsoft. Now if only its stock would stop being a dog.

Microsoft said the results reflected $1.67 billion in revenue and operating income and $1.41 billion, 12 cents a share, in net income that were deferred because of its coupons programs for Vista and Office 2007 instituted after the software slipped into January – okay, way into January – to get them to buy PCs during the holidays and then upgrade.

Without the deferrals, revenues would have only been up 17%.

Microsoft is now in its fourth fiscal quarter and said it expected revenue to be $13.1 billion-$13.4 billion with an operating income of $5 billion- $5.2 billion and earnings of 37 cents-39 cents. Microsoft of course is notoriously conservative.

Next year it expects revenues of $56.5 billion-$57.5 billion, an operating income of $22 billion-$22.5 billion and earnings of 1.68-$1.72. That’s a $5.5 billion increase (11%-12%) in revenue, which as it reminded analysts during its conference call is the size of many a substantial company.

In the March quarter, its Windows business was up 67% to $5.3 billion, realizing a $4.2 billion operating profit, and servers and tools less handsomely – only 15% – to $2.7 billion and returning $979 million.

Vista is supposed to have beat Microsoft’s own forecast by $300 million- $400 million and Office by $200 million.

Microsoft’s poor benighted online business, its suffering rival to Google et al, did $623 million, up 11%, losing $200, up from a operating loss of only $20 million. Microsoft’s online ad sales were up 23% year-over-year, it said. It’s monetizing more than in the days when it was going through Overture, By comparison Google just did $2.53 billion, up 66%.

Its so-called Business Division did $4.8 billion, returning an operating profit of $3.4 billion, and entertainment and devices, stuff like xBox and Zune, down 21% year-over-year from $1.2 billion to $929 million lost $315 million, down from a loss of $402 million

Microsoft said growth is coming from emerging markets and the consumer.

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