Personal computer and business sales boost Microsoft revenues to €7.3bn

MICROSOFT had good news for shareholders yesterday as first quarter revenues surged 12% to €7.3 billion on the back of renewed IT spending among businesses and higher sales of personal computers.

Profits for the three months to September rose 11% to $2.9bn, but the share price slipped back 2%. Analysts blamed the fall on a change to the accounting treatment of share-based pay packages, which made profits seem lower than expected even though they beat market expectations.

Operating income grew 29%. Chief executive John Connors said the first quarter had been a strong beginning to what he expected would be a good year. He predicted growth in sales to consumers and businesses.

“This quarter we had a very healthy commercial server and desktop business driving double digit revenue growth, and we expect to continue the trend of growing revenue faster than expenses,” he said.

Strong sales of the Xbox gaming console were a key driver of revenues in the group’s home and entertainment division.

The company said pre-orders of video games in advance of the critical pre-Christmas sales period were encouraging. Demand for the new Halo 2 game had broken records with pre-orders totalling more than 1.5 million units.

Second quarter revenues were expected to be in the region of $10.5bn, just shy of market expectations. The company also said full-year revenues would come close to $40bn.

The results mirror a general pick-up in the computer sector that has seen other industry giants report improving sales figures. Dell reported a 20% increase in second-quarter revenues to the end of July, while Intel’s third-quarter revenues, announced earlier this month, were 8% ahead.

But analysts warn growth will be more restrained than in the golden age of the late 1990s. Microsoft is however, expected to see a strong boost with the launch of new Windows-based operating systems and server offerings in 2006 and 2007.