The New York Times got it right when they said, “It turns out someone does like Windows Vista, along with Office and the other stuff Microsoft sells.” Sure Windows Vista is getting bashed left and right, but people are buying it. In fact, consumers bought $1.1 billion dollars more in software than what analysts had originally projected. After Microsoft announced yesterday that their revenue for the first quarter (which ended September 30, 2007) was $13.76 billion, Microsoft shares went up 12 percent which added around $30 billion to its market value. Not a bad day in Microsoftland!
Their revenues of $13.76 billion was a 27% increase from the same quarter the previous year. What helped them with that giant swell was software like Vista and Office as well as the increase in sales of Xbox 360 consoles and the launch of Halo 3. Some of you may be thinking that the jump in revenue had more to do with an increase in the sales of Windows XP instead of Vista, but Kevin Johnson, president of the platform and Services Division said “Customer demand for Windows Vista this quarter continued to build with double-digit growth in multi-year agreements by businesses and with the vast majority of consumers purchasing premium editions.”
While software gave Microsoft a huge boost in revenue, their Internet sites lost pretty big. In all, they lost $264 million thanks in part to development of their Live line of services as well as their advertising business. This loss was a big increase compared to their loss of $102 million during the same quarter a year prior. They launched a lot of different online services this year though, and they’re just starting to get their advertising business off the ground (hopefully that acquisition of aQuantive will help) so the loss is somewhat understandable.
Losses in the Internet Sites division aside, the overall message here is that Microsoft had a huge quarter! Now that they’ve got aQuantive on board and an investment in Facebook, we’ll be keeping an eye out for how these investments turn into value for Microsoft. If Microsoft’s chief Steve Ballmer is correct, those investments will add huge value. He said that online advertising would grow to make up 25 percent of the company’s total revenue! Think it’s possible?