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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

October 23, 2008 at 12:42 PM

Microsoft earnings: A few jaw-droppers

— Consumer sales of Office 2007 grew 36 percent. It was back to school season, but still. Microsoft said the gain “reflects increased sales primarily due to promotional pricing programs for the 2007 Microsoft Office system.”

— Consulting and support services rose 19 percent, “primarily due to higher demand for consulting and support services by corporate enterprises.”

— Xbox platform sales fell 22 percent, compared with a year ago when it was releasing “Halo 3.” Other products, including Zune, Office for Macs and mobile products, grew 51 percent.

— Research and development spending grew 15 percent to $2.3 billion, reflecting a 24 percent increase in head-count related costs.

— Windows Vista sales grew 22 percent in the quarter. Microsoft estimates total PC shipments grew 10 percent ot 12 percent, and will grow 8 percen to 12 percent through the rest of its 2009 fiscal year, despite the downturn.


Microsoft expects the current economic situation to continue through its fiscal year, ending in June:

“We are monitoring economic conditions and have three major areas of focus: continuing to provide high value products at the lowest total cost of ownership, increasing focus on our expense management, and prioritizing our investment dollars in key strategic opportunities to enable us to manage our business for the long term.”

Microsoft also disclosed a huge IRS payout — $3.1 billion — during the quarter, to settle its 2000-2003 tax audit. That pushed cash flow down.
Another item: The interest rate Microsoft is paying on the $2 billion worth of bonds it issued: 1.42 percent.
Details:

“In September 2008, our Board of Directors authorized debt financings of up to $6.0 billion. Pursuant to the authorization, we established a commercial paper program providing for the issuance and sale of up to $2.0 billion in short-term commercial paper. As of September 30, 2008, substantially all of the commercial paper was issued and outstanding with a weighted average interest rate, including issuance cost, of 1.42%, and maturities of seven to 14 days.”

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