Microsoft feasts on Vista coupons for record quarter
Profits up 65 per cent
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Microsoft posted a 65 per cent boost in its third-quarter net income thanks in large part to revenue from major new releases and upgrade coupons that promoted them. Both profit and sales for the period that ended in March surpassed analyst estimates.
Shareholders welcomed the results by driving shares up almost five per cent in extended trading. They had already risen 11 cents, or about 0.4 per cent in regular trading before the results were released. With Microsoft in the midst of two major product releases, investors have been eager for signs how Vista and Office 2007 are faring.
"We are delighted with the positive customer response these products have received," Microsoft Chief Operating Officer Kevin Turner said in a statement. There was no mention from Redmond of Dell's recent move to sell PCs running Windows XP due to customer complaints about the new OS.
Profit was $4.9bn, or 50 cents a share, compared with about $3bn or 29 cents in the same period last year. Sales grew 32 per cent to $14.4bn from $10.9bn.
Analysts on average had forecast profit of 46 cents on revenue of $13.9bn.
About $1.7bn of revenue, or 12 cents profit, actually came from the previous quarter when computer buyers snapped up coupons allowing them to upgrade to Vista and Office 2007 once they were released in January.
Microsoft forecast earnings for fiscal 2008, ending in June of next year, of $1.68 to $1.72 on revenue of $56.5bn to $57.5bn, well within the range of analyst expectations. ®
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COMMENTS
Vista - What Vista???
After long delays and numerous e mails - payment of postage charges still no software.
I checked the status of my order this morning only to find that they have cancelled the order.
No e mail or communication in any way as to why the order was cancelled even after the order had been confirmed.
Just waiting to hear from them after the e mail I sent this morning asking why the order was cancelled and pointing out the fact that what they have done would possibly be classed as fraud or theft.
..but last quarter's Vista revenue is a scam.
Of course, if you pay me up front for an aeroplane I haven't even started building, I mustn't recognise the revenue as sales until the plane has been delivered. But 40 milion XP buyers who didn't say no to a Vista voucher did not recceive no value in the prior quarter. Rather than receiving the entire value when they were able to upgrade, I suggest they only really received the difference in selling price of the Vista and XP OEM licences, especially since exercising the upgrade voids the "temporary" XP license. In other words, they received approximately zero additional value when Vista was released! This is confirmed by the continuing greater popularity of XP at amazon.com. I say scam. But Microsoft and Wall Street love a scam, and it's a monopoly anyway, so everybody's happy.
Deferred revenue isn't a scam...
... it is _required_ under Generally Accepted Accounting Principles (GAAP).
Joe user bought an XP system with a coupon for a vista "upgrade," all for X dollars. MS is not allowed to book the full (wholesale) price as revenue, as they have not delivered all of the value. To wit: The Vista upgrade, included as part of the purchase.
They defer that portion of the total revenue, and book it later when when they deliver the final component of value offered in the product. The breakdown of that portion of the value is theirs to determine, but it must appear reasonable to auditors based on pre-coupon sales, the value of the upgrade, and perhaps other factors.
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