Microsoft Posts a 48% Increase in Profit

By ASHLEE VANCE
Published: July 22, 2010

Microsoft stands as the latest company to benefit from rejuvenated interested in business technology, as the company topped Wall Street expectations for its fourth quarter and reported record sales.

On Thursday, Microsoft posted a 48 percent rise in net income to $4.52 billion, or 51 cents a share, from the $3.05 billion, or 34 cents a share in the comparable period last year.

Revenue in the period, which ended June 30 and was the fourth quarter of Microsoft’s fiscal year, jumped 22 percent to $16.04 billion on the back of improved sales of its flagship Windows and Office software products.

Analysts surveyed by Thomson Reuters predicted that Microsoft would earn 46 cents a share on revenue of $15.27 billion.

Large businesses, Microsoft executives said, have started to buy more of its core PC products.

“We saw strong sales execution across all of our businesses, particularly in the enterprise with Windows 7 and Office 2010," Kevin Turner, the chief operating officer at Microsoft, said in a statement.

For the full year, Microsoft reported a 29 percent rise in net income to $18.76 billion and a 7 percent rise in revenue to $62.48 billion.

Apple put added pressure on Microsoft earlier this week when the company reported $15.7 billion in revenue for its most recent quarter. Technology industry veterans and Wall Street analysts wanted to see if Apple’s sales would surpass those of its longtime foe, marking a shift in the computing landscape toward mobile devices and Apple’s meteoric rise since the unveiling of the iPhone.

Microsoft’s place ahead of Apple is secure for at least another three months as a result of healthier PC and corporate technology markets.

Large companies have increased their purchases of business software that runs in data centers and bought new computers capable of running Microsoft’s Windows 7 operating system.

Sales of Windows rose to $4.55 billion from $3.17 billion in the comparable period last year, while sales of Office and other business products rose to $5.25 billion from $4.57 billion.

Intel, the world’s largest chip maker, recorded the highest revenue in company history earlier this month, as its executives delivered a similar, optimistic message about the technology market.

Microsoft’s profits remain the envy of the business world, as its Windows and Office franchises perform well.

Analysts, however, remain critical of Microsoft’s efforts in the mobile device and entertainment arenas. During the fourth quarter, Microsoft’s online services group lost $696 million, while its entertainment and devices group lost $172 million.

In an embarrassing turn, Microsoft just scrapped its Kin smartphone line that had been under development for almost two years. The company sold fewer than 10,000 of the devices, which were meant to attract a younger crop of customers with flashy social networking software.

Such blunders have been exacerbated in the public eye by Apple’s success with the iPhone and by Apple’s soaring share price.

Steven A. Ballmer, Microsoft’s chief executive, has come under heavy criticism in recent weeks for Microsoft’s stumbles.

“The hardest thing for Microsoft is not coming up with the right products but rather coming up with the right business models,â€