Microsoft Profits, Revenues Up

Microsoft reported Thursday a 5 percent boost in profits for the financial quarter ended Dec. 31 compared to its second quarter a year ago. The company credited strong performance by its server and tools and Windows client products.

Earnings for the quarter hit $3.65 billion, compared to $3.46 billion for the same period last year. Revenues hit $11.84 billion, up 9 percent over the year-ago quarter.

Earnings per share were 34 cents, a penny above analysts' expectations as reported by the Thomson Financial poll.

The server and tools business led the way with 14 percent revenue growth, year over year, including 20 percent growth for the SQL Server product. Microsoft also credited a robust PC market for fueling strong growth in the Windows client business.

At the same time, costs associated with significant product launches late in the year provided a minor drag on earnings. Near the end of the quarter, Microsoft launched SQL Server 2005, Visual Studio 2005 and the Xbox 360.

Microsoft blamed a 2 percent slide in operating income, which was $4.66 billion, on the sales, marketing and product development expenses surrounding the launches.

Prior to Microsoft's close-of-market announcement, financial analysts had appeared most concerned about the effects of the Xbox 360 in terms of disruption in demand for older Xbox games and the supply crunch it experienced due to overwhelming demand. But as Microsoft reportedly sells each console at a loss, lowered sales had not been expected to hurt earnings per share.

This article has been updated with Microsoft's earnings. Scott Bekker contributed to this report.

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Dan Hong is the associate Web editor of,,, and