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Microsoft surprises Street with double-digit growth

Windows downturn masked by Office and giddy game gains

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Amid mumblings and grumblings that it had lost its mojo, Microsoft surprised Wall Street by reporting revenues and earning for its fourth fiscal 2011 quarter that exceeded the moneymen's expectations.

"Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion," said Microsoft CFO Peter Klein in a prepared statement. "Our platform and cloud investments position us for long-term growth."

Revenue for the quarter, which ended June 30, came in at $17.37bn; analysts had expected $17.2bn, according to FactSet Research. Microsoft beat earnings-per-share predictions, as well, bringing in 69 cents a share when the analysts had predicted 59 cents.

For the full fiscal year, Redmond's revenues totaled $69.94bn, a 12 per cent increase over fiscal 2010's $62.48bn. Net income for the year was $23.15bn, up 23 per cent from the previous year's $18.76bn.

Despite this overall growth, revenue for the company's flagship Windows and Windows Live Division dropped by 1 per cent in the fourth quarter, and 2 per cent for the full year.

That slippage was more than compensated for by growth in other sectors. Revenue for the Business Division popped up by 7 per cent for the quarter and 16 per cent for the year, largely due to Office sales topping 100 million thanks to the fastest growth rate in that software suite's history. Server & Tools grew 12 per cent in the quarter and 11 per cent for the year.

The Online Services Division – read, "Bing" – grew 17 per cent in the quarter and 15 per cent year-on-year. In its statement, Microsoft asserted that Bing's search market share is now 14.4 per cent.

The star of Microsoft's 2011 growth story, however, was its Entertainment & Devices Division. Revenue in that group rose 30 per cent in the fourth quarter and a comfy 45 per cent for the full year "due to the ongoing momentum of the console, Kinect, and Xbox Live," Microsoft explained.

If only that laggardly Windows and Windows Live Division would join the party. We're assuming that Ballmer & Co. are crossing their collective fingers for that to happen with the release of the multiple-platform Windows 8. ®

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