Microsoft Preps for Another Big Quarter?

Microsoft looks to be readying another record sales and earnings report for the first quarter of fiscal 2011.

Given the signs, chances appear good that Microsoft will once again break records for the first quarter of the company's fiscal 2011 when it announces revenue and earnings on Thursday.

Part of what's likely to drive Microsoft (NASDAQ: MSFT) to another record quarter is significant consumer demand for Windows 7, which was launched a year ago, as well as growing adoption of the system among large corporate technology buyers.

The company has repeatedly credited Windows 7 sales as buoying its results since its release to consumers on October 22, 2009.

In fact, the company revealed last week that it has already sold 240 million licenses for Windows 7 -- that's up from 175 million licenses that Microsoft officials said had been sold by the end of fiscal 2010 on June 30.

Indeed, last quarter -- the fourth quarter of fiscal 2010 -- Microsoft turned in another stellar quarter when it broke sales and earnings records again, bringing in $16.04 billion in revenues and $4.52 billion in net income. Sales were up 22 percent over a year earlier, while diluted earnings per share (EPS) gained 50 percent to $0.51.

That was also true for Microsoft's third fiscal quarter of 2010, when it turned in $14.5 billion in revenue -- up 6 percent over a year earlier -- and $4.01 billion in earnings. EPS came in at $0.45, a gain of 36 percent.

This time around, financial analysts polled by Thomson Reuters are expecting sales to come in at approximately $15.81 billion and EPS of $0.55.

Besides Windows 7, Microsoft also had a full quarter of sales for Office 2010, the company's cash cow applications suite. Office 2010 began selling to corporate customers in mid-May.

Additionally, a recent survey by Dimensional Research of nearly a thousand IT decision makers found that 60 percent of them plan to upgrade to the new version of the best-selling applications suite by the end of calendar 2011.

Historically speaking, Office 2010 sales figures are also liable to be bolstered by sales of servers that connect up to Office 2010, including SharePoint 2010 -- itself a billion-dollar-a-year business -- Exchange 2010, and Lync 2010.

In the area of cloud computing, Microsoft is also likely to show record sales but negative income from the cost to build the massive data centers the company is constructing worldwide in order to support them.

Last spring, senior executives said they had already signed up more than 40 million paying customers for their cloud services. Many of those users are buying into Microsoft's Business Productivity Online Suite (BPOS) which provides e-mail, collaboration, and unified communications all via a subscription in the cloud.

Just over a week ago, Microsoft took the next step when it announced a cloud subscription package that combines the components of BPOS with the company's Office Web Apps and ties into Office 2010 -- called Office 365.

How the financial markets respond to Microsoft's presentation, though, is always somewhat of a surprise, often built on expectations about upcoming products. In this case, two of those are Windows Phone 7, which is set to begin shipping in early November, and the Kinect controllerless game controller for the Xbox 360 game console.

Microsoft will announce its first fiscal quarter 2011 numbers Thursday after the financial markets close.

Stuart J. Johnston is a contributing writer at InternetNews.com, the news service of Internet.com, the network for technology professionals. Follow him on Twitter @stuartj1000.






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