APPLICATIONS

Microsoft Thursday announced revenue of $14.40 billion for the quarter ended March 31, 2007, a 32% increase over the same period of the prior year. This revenue drove record profits with operating income of $6.59 billion and net income of $4.93 billion. Diluted earnings per share for the quarter grew 72% to $0.50, and included $0.02 in tax benefits and $0.01 in legal charges. These results reflect $1.67 billion of revenue and operating income, $1.14 billion of net income and $0.12 of diluted earnings per share that were previously deferred primarily related to the technology guarantee programs for Windows Vista and the 2007 Microsoft Office release. “I am extremely pleased that we delivered a quarter of strong double-digit growth for revenue, operating income and EPS,” said Chris Liddell, chief financial officer at Microsoft. “And I am looking forward to a very good finish to this fiscal year with strength continuing into fiscal 2008.” Net cash flow from operations was $7.29 billion and Microsoft returned $7.72 billion in cash to shareholders through share buybacks and dividends this quarter. “This quarter marked the consumer launches of Windows Vista and the 2007 Microsoft Office system, and we are delighted with the positive customer response these products have received,” said Kevin Turner, chief operating officer at Microsoft. “We continue to deliver on our compelling product cycle and build upon strong field sales and marketing execution in order to drive revenue and profit growth for the company.” Microsoft's server and tools division continued as a key driver of Microsoft's overall growth as operating income jumped 32% to $979 million on sales of $2.7 billion, a 15% increase from the same quarter a year earlier. Microsoft said sales of Windows Server, the SQL Server database software and Visual Studio software development program boosted the results. Business Outlook Microsoft management offers the following guidance for the quarter ending June 30, 2007:

• Revenue is expected to be in the range of $13.1 billion to $13.4 billion.
• Operating income is expected to be in the range of $5.0 billion to $5.2 billion.
• Diluted earnings per share are expected to be $0.37 to $0.39.

Management offers the following preliminary guidance for the full fiscal year ending June 30, 2008:

• Revenue is expected to be in the range of $56.5 billion to $57.5 billion.
• Operating income is expected to be in the range of $22.0 billion to $22.5 billion.
• Diluted earnings per share are expected to be in the range of $1.68 to $1.72.

Additional details on fiscal year 2008 guidance will be provided in the fourth quarter earnings announcement and during the company’s Financial Analyst Meeting on the 26th of July.