Record Q2 Revenues Meet Lowered Expectations

Microsoft reported record revenues of US$6.59 billion in the second quarter of fiscal 2001 (ending Dec. 31, 2000), representing an 8% increase over the same quarter last year. Although this falls short of the US$6.8 billion figure originally predicted for the quarter, it slightly beats the company’s lowered expectations, announced Dec. 14, 2000, of US$6.4 to US$6.5 billion. Microsoft Chief Financial Officer John Connors credited strong demand for Windows 2000 and the .NET Enterprise Server line for the continued growth, but expressed caution about the economic climate in the near term, predicting that the next two quarters’ results would reflect slowing growth in PC sales.

Revenues Driven by Enterprise Products

Microsoft’s revenues were up significantly from Q1’01’s US$5.80 billion figure, reflecting the usual pattern of peak revenues during the holiday buying season.

This growth was driven primarily by Enterprise Software and Services, revenues of which were up 21% from a year ago. (See the chart “Revenues by Product Line“.) Increased corporate adoption of .NET Enterprise Servers, including the latest versions of SQL Server 2000 and Exchange 2000 Server, was the main driving factor here (revenues from licenses of Enterprise Servers were up 26% from the same time last year), although the company also pointed to strong adoption of Windows 2000 Servers (Enterprise Platforms revenues are up 19%). These numbers alleviate some concerns that the complexity of certain Windows 2000 technologies, particularly Active Directory, was hampering adoption of Windows 2000 and the .NET Server line in enterprises.