Windows XP and Xbox push Microsoft sales up 18%

18 January 2002 Sales of the new Windows XP operating system and the launch of the Xbox games console helped push Microsoft revenues up by 18% in its fiscal second quarter to the end of December 2001.

The announcement comes at a time of falling revenues and profitability at many of Microsoft’s competitors.

The software giant posted revenues of $7.74 billion (€8.79bn), up from $6.55 billion (€7.44bn) in the same period a year earlier. However, net income fell by 13% to $2.28 billion (€2.59bn) from $2.62 billion the year before.

Microsoft attributed the fall in net profit to its decision to set aside $600 million (€681.1m) to cover the cost of settling the anti-trust class action law suit brought by a number of consumers. Also eating into profits were the costs of the Xbox launch, which will not generate a return for some time.

However, the headline figures masked a number of surprising trends. Channel revenues, while rising sharply in the US, actually fell in Europe. The company said that this was due to the introduction of new licensing agreements in Europe, which will defer revenue to future quarters. The rise in revenue from the America’s region was largely attributed to the introduction of the Xbox and the acquisition of financial software vendor Great Plains.

Revenues from the sale of enterprise software reflected the slow down in corporate IT spending. Sales of enterprise software and services grew by just 3.5% to $1.3 billion (€1.48bn). Increases in revenues from two previously fast growing product lines – the SQL Server database and Exchange email server package – fell from 40% and 50% respectively to just 15% and around 9%.

Desktop application revenue fell marginally to $2.45 billion (€2.78bn), compared to $2.49 billion (€2.83bn) in the same period a year earlier.

The impact of the Xbox launch was revealed by the more than doubling of sales in its consumer software, services and devices division, from $506 million (€574.3m) to $1.2 billion (€1.36bn). That accounts for more than half Microsoft’s rise in revenues.

Robertson Stephens analyst Eric Upin also expressed concern at the level of investment write-offs that the company has taken – $5.8 billion (€6.59bn) in the last three consecutive quarters.

With the results announcement, the company also released its forecasts for the fiscal year to the end of June 2002. It expects revenue to weigh in at between $28.8 billion (€32.7bn) and $29.1 billion (€33bn). That would represent an increase of between 14% and 15% compared to the $25.3 billion (€28.73bn) posted in fiscal 2001.

Avatar photo

Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

Related Topics