Microsoft profits up 60% as Windows 7 demand soars

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Microsoft profits up 60% as Windows 7 demand soars

Microscope contributor

Microsoft has seen its profits jump 60% on the back of strong consumer demand for Windows 7, masking business customers continued reluctance to spend.


In a dramatic turnaround on fiscal Q2 last year when profits sunk 11% and a redundancy programme - its first ever - was unveiled in the midst of a global recession, the firm has made a $6.6bn profit on a 14% rise in sales to $19bn.


Excluding the $1.7bn of revenue recognised from the Windows 7 upgrade programme and Windows 7 licenses sold in advance of general availability, group turnover grew 4%.


"These results were driven in large part by strong consumer demand for Windows 7 in PCs," said Microsoft CFO Peter Klein, "while consumer demand remains healthy we have not a return on enterprise spending growth,"


He said that during the end of the second quarter it sold more than 60 million Windows 7 licenses, making it the fastest selling OS in history


Revenues at the Windows and Windows Live division soared 72% to $6.9bn as OEM unit sales grew 22% and OEM revenues went up 21%, growing faster than PC shipments for the first time in 8 quarters.


The picture was different in all other units; sales at the Server and Tools division were flat at $3.8bn, Online Services fell 4.5% to $581m, the Business Division went down 2.8% to $4.75bn and E&D dropped 9% to $2.9bn.


The general conditions in the business market remained largely unchanged from fiscal Q1 said Microsoft though it noted Enterprise Agreement sales cycles had lengthened while multi-year annuity revenues were flat on a year earlier.


However Klein, like his OEM partners, is banking on a refresh cycle "to begin this calendar year occurring gradually for a couple of years."


"From a macro perspective IT spending should improve from the recessionary levels of 2009," he said, "We expect server shipments to show year-on-year growth in the third and fourth quarters for the first time in several quarters."


Operating expenses increased 1% during the quarter to $6.9bn and included approximately $290m of legal expenses. The firm continues to execute its cost cutting plans and shed 800 jobs worldwide in the period.


It has got rid of 8% of the global workforce since the process begun twelve months but it could have been even more if Windows 7 has not been the success it has.


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