Microsoft: licensed to bill

By Matt Whipp

Posted on 18 Oct 2002 at 13:06

'Licensing 6' program pushes Microsoft revenues above expectations

Microsoft has announced results for the financial quarter ending 30 September with revenues of $7.75bn. This exceeds the company's July upper estimate of $7.1bn and is a 26 per cent increase over the $6.13bn revenues for the corresponding quarter last year.

Net earnings weighed in at $2.73bn (50 cents a share), compared with $1.26bn (23 cents a share) for the same quarter the previous year. The company took a hoit, however, with a $291m charge for 'investment impairment'.

John Connors, CFO at Microsoft, said: 'Results for the first quarter were exceptionally strong, exceeding our expectations. During the quarter, we saw broader customer adoption of our licensing programs than we anticipated, as customers recognized the value of entering into long-term licensing agreements for our products.'

This will hardly come as a surprise for any companies licensing Microsoft software. Microsoft introduced its Licensing 6 program in the summer, with a deadline of the end of July for customers to either upgrade or renew existing licences. From that point customers could no longer license Select version 5, Upgrade Advantage (UA) and Software Assurance (SA) licences.

The other plus point of Licensing 6 is that, as customers pay for their licences on an annual basis, Microsoft counts this as deferred income. In this quarter's results, 'unearned income' added up to $9.13bn, up from $5.85bn a year earlier.

This quarter's results mark a departure from Microsoft's traditional way of reporting its earnings, splitting up its business into seven divisions. For the first time MSN reported results for its own division of $427m, down from the previous year's $430m.

For the coming second quarter, ending 31 December, Microsoft's guidance runs as follows: revenues up to $8.6bn, operating income up to $3.3bn and earnings of 45 to 46 cents a share.