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‘Hey, This Windows Thing is Working’: Microsoft

Evidently 7 is Microsoft's lucky number

Evidently 7 is Microsoft's lucky number. It knocked one out of the park when it reported its calendar Q4 results Thursday.

Revenues steamed past everybody's expectation by like a billion dollars on the back on Windows 7 sales, netting earnings of $6.7 billion, or 74 cents a share, up 60%. It captured record revenues of $19.02 billion, up 14% year-over-year. Operating income came in at $8.51 billion, up 43%.

Microsoft said it recognized $1.71 billion in deferred revenue from its Windows 7 Upgrade Option Program and Win7 pre-sales to OEMs and retailers before general availability on October 22. That contributed 14 cents to earnings. Without those deferred revenues, it did a light-ish $17.31 billion in total revenues and earned 60 cents a share.

In a statement CFO Peter Klein pointed to the "exceptional demand for Windows 7." He added that "managing costs allowed us to drive earnings performance ahead of the revenue growth."

Microsoft said it moved upwards of 60 million Windows 7 licenses through its second fiscal quarter, describing the code as "the fastest-selling operating system in history."

It's still mostly talking consumer sales here (reportedly worth ~$500 million at retail) and improved PC sales (up 15%-17%); the enterprise, well, maybe the SMB, is starting to contribute a little bit. OEM revenue was up 21% ahead of the general market. It dominates netbooks. Windows revenues came to $6.9 billion, up 70%, and income close to doubled at $5.39 billion.

Servers and tools were stronger-than-expected but still flat with revenues of $3.8 billion, returning $1.49 billion. Microsoft figures it's doing slightly better than server shipments.

It described Office profits as off 3% at $3 billion because of enterprise weakness on sales of $4.7 billion versus $4.8 billion last year. Office is going to be under pressure until Office 2010 debuts in June, it said.

It also said search was improving but international rates declined. The online unit did $581 million, down from $609 million, and lost $466 million, more than the $320 million it lost a year ago, and was the only division that lost money.

Microsoft is still waiting for the great promised refresh cycle to kick in. The current quarter is generally weaker than the December quarter.

More Stories By Maureen O'Gara

Maureen O'Gara the most read technology reporter for the past 20 years, is the Cloud Computing and Virtualization News Desk editor of SYS-CON Media. She is the publisher of famous "Billygrams" and the editor-in-chief of "Client/Server News" for more than a decade. One of the most respected technology reporters in the business, Maureen can be reached by email at maureen(at) or paperboy(at), and by phone at 516 759-7025. Twitter: @MaureenOGara

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