With growth across its home and entertainment division, which achieved profitability, mobile and embedded, gaming and servers, CFO John Connors summed up the previous three months as a record and unique quarter.
Microsoft’s only black spot was Office, which saw sales down by $85 million, or 3%, and Business Solutions group (MBS), reporting directly to chief executive Steve Ballmer. MBS revenue was flat at $221 million.
The departing Connors conceded Microsoft had made tactical errors at MBS during the last 18 months integrating Great Plains and Navision. We didn’t do a great job in the channel, marketing an R&D Connors told Wall Street analysts.
Promising growth that would beat competitors during fiscal year 2006 and reach profitability with anticipated revenue of $830 million, Connors told analysts: [MBS Growth] isn’t as high as was expected. Expectations are appropriately set now.
Away from MBS, Microsoft reported a powerful quarter. Microsoft saw a 123.5% jump in net income to $3.4 billion on sales that increased 6.5% to $10.8 billion for the three months to December 31. Diluted earnings per share grew 18 cents to $0.32.
For the six-month period, Microsoft reported a 43.9% jump in net income to $5.9 billion on revenue of $20 billion, up 8.9%, and EPS of $0.55, up from $0.38.
Microsoft saw a 5% growth in its client business to $3.2 billion, on PC sales that exceeded initial expectations, 12% growth compared to an estimated 9%, and with growth in consumer and business in established and emerging markets. Meanwhile, the server and tools business, which includes SQL Server, grew 18% to $2.5 billion.
Home and entertainment, not expected to become profitable until 2007, reached profitability buoyed by seasonal sales of the Xbox and associated Halo 2 game.
The unit grew 11% with $1.4 billion in revenue driven by $300 million in Halo 2 sales and a total of 19.9 million Xbox consoles now sold, since the system’s launch by Microsoft.
But Connors warned the unit is likely to slip into the red again for the rest of the year.
