Q1 Sees Server Strength, More Investment Losses

In spite of a difficult economic climate, Microsoft reported revenues of US$6.13 billion in the first quarter of fiscal 2002 (ending Sept. 30, 2001). The 6% improvement over the same quarter last year was good news, but was tempered by a US$980 million loss on investments—the second big investment loss in a row. Microsoft Chief Financial Officer John Connors credited the revenue growth to strong business desktop and server sales and better-than-expected growth in volume licensing agreements, but adjusted net income expectations for FY’02 downward because of the investment loss.

Server Revenues Grow

Microsoft reported its strongest revenue growth in enterprise applications and services (including Windows servers and all the .NET Enterprise Servers), which grew US$156 million (15%) year-over-year to US$1.19 billion. More businesses than expected signed up for or renewed volume licensing agreements this quarter, a gain that may be partly attributable to licensing changes that made it advantageous for corporations to purchase volume licensing agreements in the first quarter, although Microsoft corporate controller Scott Boggs denied this had a material effect on this quarter’s revenues. (See “Customer Complaints Delay Licensing Changes“.) In addition, sales of SQL Server (up 40% from last year) and Exchange Server (up 50%) remained high, a trend that has continued through several consecutive quarters. Finally, sales of Windows 2000 Advanced Server—which costs about three times as much as Windows 2000 Server—more than doubled from last year, further bolstering results in this segment.