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Microsoft Reports Profitable Quarter

The third quarter of Microsoft's fiscal 2003 brought the software giant flat profits on increased revenues compared to the year-ago quarter, the company reported late Tuesday.

Revenues for the three months ending March 31 amounted to $7.84 billion, up 8 percent from the same quarter in 2002. Net income came to $2.79 billion, a 2 percent increase over the $2.74 billion in net income for Q3 2002.

"We reported another quarter of strong revenue and operating income results in a very tough environment," said John Connors, Microsoft's chief financial officer.

The company's management discussion of the results in its quarterly SEC filing shows that the results for the quarter were driven in part by recognizing multi-year licensing revenues from previous quarters due largely to Licensing 6.0. That caveat applied to all three of Microsoft's major business segments that involve the enterprise -- client, server and information worker.

The client segment, which includes Windows desktop operating systems, brought in $2.54 billion in revenues, up 10 percent from the $2.3 billion in Q3 2002. The quarterly revenue growth was driven in part by a 9 percentage point increase to 56 percent of the mix of the higher priced Windows Professional operating systems.

Revenues for the server segment, which includes Windows servers and most other Microsoft server products other than SharePoint and the Great Plains products, grew 21 percent to $1.83 billion compared with the year-ago quarter. In addition to the licensing revenues, Microsoft attributed the growth to increases in Windows server shipments and in SQL Server and Exchange revenues.

Information worker, a segment that includes Office and SharePoint products, grew 9 percent from the 2002 quarter to $2.33 billion, although Microsoft reported a decline in new organizational licensing for Office suites.

About the Author

Scott Bekker is editor in chief of Redmond Channel Partner magazine.

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