Microsoft Rides Windows 7 To Another Solid Quarter

first quarterly revenue decline

As expected, Microsoft's results were buoyed by Windows 7. The Windows & Windows Live division reported revenue of $4.4 billion, up 28 percent from the $3.4 billion it reported in last year's quarter. Given the Microsoft's OEM channel accounts for about 80 percent of total Windows revenue, this jump is linked to sales of new PCs.

"Business customers are beginning to refresh their desktops and the momentum of Windows 7 continues to be strong," Microsoft COO Kevin Turner said in a statement.

For the quarter ended March 31, Microsoft's net income rose 35 percent to $4.01 billion, or 45 cents per share, compared to $2.98 billion and 33 cents per share in the year-ago quarter. Overall revenue during the quarter was $14.5 billion, up six percent from the $13.6 billion the company pulled in during the year-ago quarter.

Despite the strong numbers, Microsoft investors were apparently not satisfied, as Microsoft shares were trading down 40 cents at $30.98 in after-hours trading.

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Microsoft's Server and Tools division revenue was $3.5 billion, up two percent from last year, while Microsoft Business Division revenue dropped six percent to $4.2 billion during the quarter, which the company attributed to $305 million in deferred revenue for its Office technology guarantee program, which allows customers that buy Office 2007 in advance of the Office 2010 launch to upgrade to the new version.

Online Services division revenue grew 12 percent to $566 million due to a 19 percent jump in online advertising revenue, according to Microsoft. This number includes a $154 million charge for "transition expenses" stemming from Microsoft's search partnership with Yahoo. Microsoft's Entertainment and Devices division revenue was up slightly at $1.66 billion.

"Windows 7 continues to be a growth engine, but we also saw strong growth in other areas like Bing search, Xbox LIVE and our emerging cloud services," Microsoft CFO Peter Klein said in a statement.