The world's largest software company continued its strong financial gains last quarter, despite generally poor economic conditions across the industry. Microsoft announced yesterday a net profit of $2.79 billion on revenues of $7.84 billion in its fiscal third quarter ended March 31, beating analyst estimates. The company's revenues were up 8 percent year-over-year. Additionally, Microsoft announced Tuesday that it will pay up to $202 million to settle a class-action lawsuit against the company in Florida.
"We reported another quarter of strong revenue and operating income results in a very tough environment," said Microsoft Chief Financial Officer (CFO) John Connors. "While there is obviously a great deal of economic uncertainty ahead, our ongoing investment in R&D has resulted in a broad product pipeline, including upcoming releases of Windows Server 2003, Visual Studio .NET 2003, Exchange 2003 and Office 2003. We believe that these innovative products will enable our customers to get more productivity and value out of their IT investments."
Connors credited strong sales of Microsoft Office XP and other information worker products, and its server products for the gains. Sales of Office XP were up 9 percent, year-over-year, despite the fact that the company will soon launch a major new version of the application productivity suite. Server product sales jumped 21 percent, the company noted. Much of Microsoft's revenue success, however, came from controversial changes to its corporate licensing terms. Despite complaints and threats from customers, Microsoft now reports that most of its largest customers did commit to multiyear licensing contracts with the software giant. These contracts will help Microsoft ride out otherwise financially troubled times because it's basically guaranteed money for the company.
Looking forward, Microsoft Connors issued the company's now-standard caution about future quarters being uncertain, and he discussed the threat from Linux, an open source operating system that threatens Microsoft's server sales. However, Connors said the economy was a bigger threat to Microsoft than Linux.
In related news, Microsoft also announced Tuesday that it had settled a consumer class-action lawsuit in Florida. The company was accused of violating that state's antitrust and unfair competition laws by overcharging consumers there for Windows and Office. Under terms of the settlement, the software giant will issue vouchers to class action members that "may be used to buy any manufacturer's desktop, laptop or tablet computers running any operating system, or any software used with those computer products," the settlement reads. Also, Microsoft says it will provide one-half of any unclaimed settlement proceeds to Florida's most needy public schools in the form of vouchers. Those schools can use the vouchers to purchase a wide range of computer equipment, software and training from any manufacturer. The settlement was given preliminary approval by the Miami-Dade Circuit Court.
"We're pleased by the opportunity to help hundreds of schools all across Florida get the computers and software they need," said Microsoft General Counsel Brad Smith. "This settlement allows us to focus on the future and building great software, and avoids the cost and uncertainty of a lengthy trial."