Microsoft rediscovers the path to growth

By Tom Sanders

Oct 29 2007 7:16AM

Microsoft posted a 27 percent growth in revenue, making for the fastest single growth quarter since 1999.

Microsoft rediscovers the path to growth

Sales reached US$13.76 billion and net profit US$5.92 billion for the quarter that ended on 30 September.

The earnings report provided a major morale booster for the firm's stock price, which is still trading 45 percent below its all-time peak from December 1999. Company stock has been largely flat since the end of the dotcom boom in 2001.

The introduction of Windows Vista provided a 22 percent boost in sales for the Windows division. The Office business also demonstrated strong growth, increasing sales by 20 percent. Microsoft introduced Office 2007 last January on the same day as Windows Vista.

Microsoft keeps struggling to compete with Google. Advertising revenues reached US$487m, a mere 11 per cent of Google's advertising income.

The online division that includes the live.com search engine and the MSN dial up internet provider posted a 25 percent growth in revenues to US$671 million.

However, the group saw its losses increase by 165 percent to US$262 million. Microsoft attributed the loss increase to increased data centre costs, added expenses for online content and expenses related to the acquisition and integration of aQuantative.

The firm remains boastful about the potential for the group, especially after the US$5.9 billion acquisition of aQuantive that closed in August.

Microsoft's endeavours into the gaming space also are beginning to bear fruit. The entertainment group that includes the Xbox 360 game console, a game studio as well as the Zune media player increased sales by 91 percent to US$1.9 billion and posted a US$165 million profit. Microsoft attributed the spike to increased Xbox 360 sales and the introduction of Halo 3.