A year ago Microsoft was struggling. The world's largest software firm had built up a massive user base, but it was losing their respect. Its current (at the time) operating system Windows Vista brought many innovations, but also frustrations that led to an icy public reception. So Microsoft decided to do something unprecedented -- it would allow the public to try its latest version of Windows, and then take their advice and use it to produce something people could truly get excited about.
That gamble paid off handsomely and it reversed the fortunes of struggling Microsoft, returning it to dynamic growth. Windows 7 launched in October of last year and proved a commercial smash. All the Apple commercials in the world couldn't damper the public enthusiasm about the new operating systems. And Microsoft stepped up its own populist ads featuring average Joes and Janes experiencing (or suggesting) the improvements, fueling further growth.
Now Microsoft's brand image is at a new high and Microsoft just reported its best quarter in its history. Microsoft reports a net revenue of $19.02B USD, a 14 percent increase from the previous year. Microsoft also reported operating income, net income and diluted earnings per share of $8.51B USD, $6.66B USD and $0.74 USD per share, up 43 percent, 60 percent and 57 percent, respectively from a year ago. The revenue was boosted by $1.71B USD in deferred revenue on Windows 7 preorders, among other things.
The key factors in Microsoft's rejuvenation were Windows 7 and Windows Server 2008 R2. Since October 22, Microsoft sold 60 million Windows 7 licenses, the fastest sales pace of any operating system in Microsoft history -- or world history for that matter.
Peter Klein, chief financial officer at Microsoft comments, "Exceptional demand for Windows 7 led to the positive top-line growth for the company. Our continuing commitment to managing costs allowed us to drive earnings performance ahead of the revenue growth."
Kevin Turner, chief operating officer at Microsoft adds, "This is a record quarter for Windows units. We are thrilled by the consumer reception to Windows 7 and by business enthusiasm to adopt Windows 7."
Looking ahead Microsoft does have some key areas it needs to improve on. Currently its phone offerings are in shambles (though a surprise early release of Windows Mobile 7 could change that) and its search business still trails Google, despite recent gains. Still, Windows 7 has been such a huge hit, even if all of Microsoft's other units fail to post gains, the company will still be in pretty good shape. Windows 7 has truly delivered Microsoft a comeback for the ages.
Microsoft stock opened slightly up this morning on the good news, opening at $29.89 a share, about 2 percent up. Since it has slid slightly to about $29.29 a share.
