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Microsoft Earnings Up 24 Percent

Microsoft on Thursday reported growth in earnings of 24 percent and a revenue increase of 6 percent in its fiscal first quarter on strong demand for PCs.

Microsoft's net income for the three months ended Sept. 30 was $3.14 billion compared to $2.53 billion for the year-ago quarter.

Net income amounted to 29 cents a share, a penny below analysts' expectations. Like the year-ago quarter, the earnings per share included an antitrust penalty. This time it was two cents a share from the $761 million settlement with RealNetworks this month. Last year it was three cents a share from a settlement with Novell Inc.

Quarterly revenue hit $9.74 billion for the quarter, compared against $9.19 billion in last year's quarter.

The strongest performers were the Windows client division and the server and tools division. Windows clients, which go out pre-bundled on new PCs, benefited from a healthy PC market. Analysts at IDC and Gartner both reported recently that 53-55 million PCs shipped in the quarter were a 17 percent increase over the year-ago quarter. Windows revenue increased 7 percent to $3.19 billion.

The server and tools division, which has been a steady performer for Microsoft over the last few years, rose 13 percent to $2.53 billion. Microsoft saw a 15 percent increase in revenues for SQL Server within the division, even ahead of the Nov. 7 launch of the next version of the product. Microsoft formally released SQL Server 2005 to manufacturing on Thursday.

The Home and Entertainment division lagged this quarter ahead of the Nov. 22 launch of the Xbox 360. The division lost $141 million on revenues of $525 million. Amid a booming online advertising market, MSN grew only modestly to $564 million from $559 million. Profits were also flat for MSN -- $83 million versus $80 million the previous year.

About the Author

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

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