Q4'07 Results Show Volume Licensing Strength

Strong sales of business software helped Microsoft post year-over-year revenue growth of 13% in the quarter ending June 30, 2007 (Q4’07), although operating income growth was much lower-only 3%-because of a US$1.06 billion charge related to defective Xbox 360 game consoles. However, unearned revenue grew by 16% from the year-ago quarter, reflecting exceptionally strong sales of multiyear license agreements, particularly Enterprise Agreements (EAs). Thanks to the strong unearned revenue figure, Microsoft raised its guidance for FY’08, and now expects revenue to grow between 11% and 13%, coming in around US$57 billion.

In an unusual occurrence, revenue actually decreased from Q3 to Q4, but this was a result of a one-time deferral of US$1.7 billion in revenue from Q2 to Q3 related to upgrade programs for Windows and Office; without that deferral, revenue patterns would have been normal.

(For a chart detailing Microsoft’s recent financial performance, see “Microsoft Financials for the Last Five Quarters.”)