Update: Microsoft Reports Record Revenues

Microsoft reported record revenue for its fiscal fourth quarter plus substantial growth in profits. The company's revenue also topped rival Apple, which was considered a possibility to overtake Microsoft in revenue this week.

Microsoft said its strong results were predicated on the launch of Office 2010, but did not provide sales figures for the new suite. Peter Klein, Microsoft's chief financial officer, called the results "broad and deep," in a conference call with analysts, with double-digit growth enjoyed by every division.

Klein, however, refused to comment on the overall business cycle. When asked about the corporate PC refresh many expect for this year, Klein responded that "it is early in the refresh cycle, so we should watch it".

Microsoft reported net income of $4.52 billion on revenue of $16.04 billion for the fourth quarter, an increase of 48 percent and 22 percent from a year ago. Those numbers reflected overall OEM license growth of 26 percent, and PC unit growth of between 22 and 24 percent.

"This quarter's record revenue reflects the breadth of our offerings and our continued product momentum," said Klein said in an earlier statement. "The revenue growth, combined with our ongoing cost discipline, helped us achieve another quarter of margin expansion."

During the quarter, Microsoft launched Office 2010, its next version of its flagship Office product. Microsoft's Business Division reported revenue of $5.25 billion, up from $4.57 billion a year ago, where Microsoft reported a 51 percent improvement in consumer growth. Klein called that a "great start" and a "very strong number".

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Microsoft's Business Division continued to outperform its other segments, including the Windows and Windows Live Division, which recorded $4.55 billion in revenue, a sharp jump compared to the $3.17 billion in revenue the division recorded a year ago. Microsoft's total OEM revenue for the Windows division grew by 31 percent; Microsoft executives characterized its Windows business as "thriving".

Microsoft's Business Division grew 15 percent, with 51 percent growth in consumer and 8 percent in business.

Microsoft's Server and Tools business recorded $4.01 billion versus $3.52 billion for the same period a year ago. The division saw record growth of 14 percent, with annual annuity growth of 15 percent. Windows Server, SQL Server, and System Center all grew by double digits. Microsoft said the number of virtualization suites nearly doubled, with the Windows Server premium mix hitting 25 percent.

Entertainment devices reported $1.6 billion versus $1.26 billion, as Microsoft sold 1.5 million Xboxes. Membership within Microsoft's Xbox Live service now stands at over 25 million. The amount consumers spent within the Xbox Live Digital Marketplace revenue exceeded subscription revenue, Microsoft said; 23 percent of revenue came from titles other than games, or TV and movies. Windows Phone 7, Microsoft Kinect, and the Xbox game "Halo:Reach" are all on the horizon, the company said.

Microsoft's lagging online services business reported $565 million, versus $501 million a year ago, as online advertising revenue grew by 19 percent. The market share of Microsoft Bing has grown by 4 points since its launch, Microsoft said.

"We saw strong sales execution across all of our businesses, particularly in the enterprise with Windows 7 and Office 2010," said Kevin Turner, chief operating officer, in a statement. "Our transition to cloud services is well underway with offerings like Windows Azure and our Business Productivity Online Services, and we look forward to continuing our product momentum this fall with the upcoming launches of Windows Phone 7 and Xbox Kinect."

Microsoft has recorded 175 million licenses for Windows 7 to date, the company said.

For the fiscal year ended June 30, 2010, Microsoft reported record revenue of $62.48 billion, a 7 percent increase from the prior year. Net income was $18.76 billion, 26 percent higher than the prior year.

Microsoft declined to offer revenue guidance for the company as a while, saying only that it planned to record $26.9 billion to $27.3 billion in operating expenses for the full year ending June 30, 2011. But it said that its Windows division would record revenue in line with PC sales, minus the Windows 7 launch "spike" as well as some deferred revenue. Microsoft's business division will track annuity costs with low- to mid-single digits, and non-annuity sales will track hardware sales, as Microsoft said it would for its server division as well. Microsoft predicted its Entertainment and Services division would grow in the "mid-teens," while online ad sales would outgrow the market.

Report: Microsoft To Launch Windows TV

Perhaps taking advantage of Apple's absence from CES, Microsoft is reportedly announcing a Windows-based set-top box, according to the Seattle Times

The set-top boxes will cost $200 and use Windows Media Center, the platform for its desktop TV capacity, as its primary interface.
CES 2011

"Microsoft's going to make a splash in this market with a stripped-down version of Windows tailored for set-top boxes and connected TVs," writes ST's Brier Dudley. "The software is a version of its embedded device software, overlaid with the Windows Media Center interface, with media streaming and remote-control capabilities."

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It's no secret that Microsoft wants to integrate Windows software into the lucrative TV market for years. Microsoft recently flirted with the idea by adding live-streaming ESPN content to an Xbox Live 2010 update.

In November, Reuters, citing unnamed Microsoft employees, said Microsoft was launching an IPTV service "in a year".

If Windows TV does happen, it will face stiff competition from earlier movers Google and Apple.

Last month Apple said it expected Apple TV sales to top 1 million in 2010.

Meanwhile Google TV has been available on Sony TV and Blu-ray players, but the company reportedly asked manufacturers like Toshiba and LG Electronics to delay launching their new Google TV sets at CES this week. That didn't stopped Vizio, a nascent Google TV partner, from showing off its ultra-widescreen HDTVs and even a 71-inch 3D model.

Should You Upgrade?

Through some readers may not know it, Microsoft isn't the only company building suites these days (we review some alternatives here). But in reality, Microsoft Office 2003's biggest competitor is Office XP and earlier versions of the Office suite.

Data FlexibilityMost people already have a version of Office installed. So the big question is: Do you really need to buy this latest iteration? The short answer for the vast majority is no, you don't need to upgrade. Office has been a very competent suite for many years, and you'll get along just fine with whatever version you have. (Of course, the more recent the version the better.) With Office 2003, most of the major enhancements to the core applications, such as Word and Excel, involve improved collaboration capabilities in conjunction with the Office system. These changes have to do with Windows SharePoint Services and SharePoint Portal Server, as well as Office 2003's ability to read and write XML and integrate with Web services to help improve business processes.

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These are great features and are generally well executed in Office 2003. Most businesses should at least consider the upgrade, as the enhancements will improve productivity in any organization that relies on Office applications. For individual users, however, and those without the necessary support to run SharePoint or take advantage of XML, the Office 2003 advantage boils down to some handy new features and interface tweaks.

Even individuals will find that Office 2003 offers some nice personal productivity enhancements. Nearly every change in Word, Excel, PowerPoint, and Access is for the best. The new Reading View in Word, for example, makes it significantly easier to read documents. But few of these refinements will justify rushing out and purchasing the new Office.

What might make you rush out, however, is the new version of Outlook, which has had a major overhaul and now makes navigating and reading mail, combating spam, and working remotely much easier. It's a huge step up from an already good mail client.

Microsoft is offering several flavors of Office 2003, so pick the one that best suits your needs. And if you are a home user and do decide to purchase Office 2003, don't ignore the $149 Student and Teacher Edition. If you've ever stepped foot in a classroom, you can buy this version. And business users buying at retail should note that they're eligible for upgrade pricing if they use any version of the suite going back to Office 97 or if they use a fairly recent version of Microsoft Works.

Bear in mind that buying into the Office 2003 system makes you also buy into Microsoft's latest server technology. Many of the new tools in Office 2003, especially those that provide improved collaboration capabilities, will work only in a Microsoft environment.

Microsoft Office 2003 Editions
Pricing
(click on a price to
check the latest prices) List Price Upgrade price
Basic N/A(1) N/A(1)
Standard $399 $239
Student and Teacher $149 N/A(2)
Small Business $449 N/A(2)
Professional $499 $329
Professional Enterprise Volume Licensing Volume Licensing
N/A(1)--Not applicable: The product is preinstalled on some PCs and is not available as an upgrade.
N/A(2)--Not Applicable: Upgrades for this edition are not available.


What's Included Word 2003 Excel 2003 Outlook 2003 Outlook 2003** Power-
Point 2003 Access 2003 Publisher 2003 InfoPath 2003
Basic • • •
Standard • • • •
Student and Teacher • • • •
Small Business • • • • • •
Professional • • • • • • •
Professional Enterprise • • • • • • • •
** With Business Contact Manager