Redmond, Washington — Bolstered by an “exceptional demand” for its recently released operating system Windows 7, Redmond, Wash., software giants Microsoft last week said that profits soared 60% in the last three months to US$ 6.66 billion for the second quarter ended December 31, 2009.
Microsoft earned a record revenues to the tune of $19.02 billion from $16.6 billion for the fiscal quarter that ended December 31, 2009. The Redmond Vole’s earnings represents a jump of 14% as compared to the same period a year ago, a new set of Windows made a huge difference.
“Exceptional demand for Windows 7 led to the positive top-line growth for the company,” Microsoft’s Chief Financial Officer Peter Klein said in a statement on Thursday.
Microsoft launched its Windows 7 operating system in late October, replacing Vista..
“Our continuing commitment to administering costs allowed us to drive earnings performance ahead of the revenue growth,” Klein added.
Although the delayed gratification is a blessing in disguise for the company, but had resulted in disappointing sales for its previous operating system, Windows Vista.
“Everyone thought Vista, when it came out, would be the driver of an upgrade cycle and it was not,” said Kim Caughey, a senior analyst at Fort Pitt Capital Group. “But it seems now is the time.”
Windows 7 introduced Oct. 22 in many different configurations — Microsoft said it distributed 60 million licenses of the software in the quarter. That accounted for a 60% jump in profit to $6.7 billion, or 74 cents a share, compared with a previous years when the Redmond, Wash., company had net income of $4.17 billion, or 47 cents.
“We witnessed record revenue and record profit, driven by strong demand for Windows 7 and PCs (personal computers),” Klein said during a conference call with analysts.
“What we are finding is people want Windows 7 on all devices in all form factors,” he said.
However, while consumers have made the move to upgrade their home computers, tough economic times had forced businesses to operate using older computer systems for longer rather than finance costly roll-outs of new technology, Microsoft said.
“With Windows 7 we have tremendous consumer momentum and a great product for the enterprise market when it recovers,” said Microsoft’s general manager of investor relations Bill Koefoed.
The pre-sales were far better than expected at brokerage Canaccord Adams in Vancouver, Canada, where analyst Peter Misek said $700 million was forecast.
“Looks like pent-up demand,” Misek said.
“As the recession hit, 2009 was virtually a destruction and enterprises were pulling in the reins,” Misek said. “Our view is that business spending has really just started again.”
Server and Tools, a division of Microsoft dealing with the information technology side of business operations, saw an increase of about $100 million in sales, to $3.8 billion, compared with the previous year.
“That is an important $100 million,” Caughey said. “For the last few years, Microsoft’s story has really been about consumer products.”
“This is a record quarter for Windows units. We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7,” Microsoft’s Chief Operating Officer Kevin Turner said.
Before its earnings were announced, Microsoft shares closed at $29.16, down 51 cents.