Microsoft’s new licensing scheme, Software Assurance, may have caused controversy among technology buyers, but has taken the software giant’s finances into rude health.

For the company’s third quarter to September 30, 2002, its revenues surged by 26% to $7.8 billion from $6.1 billion in the same quarter in 2001. However, analysts swiftly attributed Microsoft’s stellar third-quarter performance to the impact of the new licensing scheme, rather than a sudden sharp increase in IT spending.

Under the Software Assurance scheme, customers pay a regular subscription to use Windows XP, receiving software updates as soon as they become available. However, some industry experts believe this will end up costing corporations as much as 30% more for their desktop applications.

Before its July 31 deadline Microsoft received a rush of orders for Windows XP under its historical licensing terms, which in turn bumped up its revenues. In late 2001, chairman Bill Gates warned customers and analysts that he did not foresee the slowdown in technology spending picking up soon – perhaps an indication that Microsoft’s current level of performance cannot be sustained.