Microsoft posts record quarter, says it will pay dividend

Microsoft on Thursday thumped its own and forecasters’ earnings projections for its fiscal second quarter and posted a record quarter for revenue. The company also announced a two-for-one stock split and its first-ever dividend of $0.16.

Microsoft on Thursday thumped its own and forecasters’ earnings projections for its fiscal second quarter and posted a record quarter for revenue. The company also announced a two-for-one stock split and its first-ever dividend of $0.16.

The company posted revenue of $8.54 billion for the quarter that ended Dec. 31, 2002, a 10% increase over the $7.74 billion for the same period last year. Net income was $2.55 billion, or $0.47 a share, compared to net income of $2.28 billion in the prior year. 

Microsoft had forecast a profit of $0.45 or $0.46 per share, while Thomson First Call had been expecting $0.46 per share.

Microsoft said that despite flat IT spending it posted growth in many important enterprise business units, including strong revenue increases from its controversial Licensing 6.0 annuity-licensing program.

“Windows and Office both benefited from bill backs from previous contracts as part of our transition to Licensing 6.0,” said John Connors, CFO for Microsoft.

He said the company would continue to see revenue gains over the next two years from customers who scrambled to sign Upgrade Advantage agreements before Licensing 6.0 took effect late last year. Connors said the company would be challenged to convert those Upgrade Advantage customers to Licensing 6.0 when their contracts expire over the next 24 months. He said Microsoft must deliver strong products and articulate the benefits of Licensing 6.0.

Many users have reacted negatively to Licensing 6.0 saying it increases their licensing costs and forces them to pay for software they may not need or want.

Microsoft said the quarter was driven by successful performances from every business unit, including Server Platforms where Windows 2000 Server and Windows 2000 Advanced Server sales helped spur 12% growth to $1.76 billion. The growth also was driven by sales of SQL Server 2000 Enterprise Edition, which grew by more than 40%. The server revenue also included a 17% growth in client access license sales led by Windows server licensing.

Despite the numbers, Connors acknowledged that Linux continues to be a threat to Microsoft’s business.

Revenue from Microsoft’s client business was $2.54 billion, compared to $2.55 billion in the second quarter of the prior year that included the launch of Windows XP. Microsoft said XP is the most successful product in its history and has currently sold 90 million copies.

For the Information Worker unit, which includes Office, revenue was $2.29 billion in the second quarter of fiscal 2003, increasing 8% over the same quarter last year.

The revenue growth was driven by Licensing 6.0 changes associated with Office, and a 40% growth in revenue of Microsoft Project.

In the Business Solution unit, which Microsoft expects to generate significant revenue in the future from sales of customer relationship management and enterprise relationship management software, revenue was $135 million compared to $73 million in the prior year’s second quarter.

In the CE/Mobility unit, Microsoft reported revenue of $22 million, compared to $17 million in the second quarter last year.

Microsoft reports its business in seven segments: Client; Server Platforms; Information Worker; Business Solutions; MSN; CE/Mobility; and Home and Entertainment.

Microsoft also said that it expects revenue for its fiscal third quarter, which ends March 31, 2003, to be in the range of $7.7 billion and $7.8 billion.