Q3'03 Profit Beats Record

Recognition of unearned revenue booked in previous quarters and slow sales of Xbox consoles (on which Microsoft loses money) helped Microsoft post its highest-ever profit—US$2.79 billion—in the third quarter of fiscal year 2003, which ended on Mar. 31, 2003. Quarterly revenues were also strong at US$7.83 billion, although they fell short of the previous quarter’s record of US$8.54 billion.

(For an overview of Q3’03 financial results and how they compare with previous quarters, see the chart “Microsoft Financials for the Last Five Quarters“.)

Server Shines, Xbox Declines

Of the company’s seven business segments, Server Platforms showed the strongest results, with revenue growing 21% over the same quarter a year ago. This growth was primarily driven by recognition of unearned revenue booked in previous quarters, stemming from companies rushing to take advantage of new licensing rules that took effect on July 31, 2002. In addition, according to Chief Financial Officer John Connors, the Server Platforms business benefited from growth in Windows Advanced Server and SQL Server Enterprise Edition as companies upgraded from the less-expensive Standard versions of these products.