In Microsoft's Record 3rd Quarter Earnings, Dynamics Strength in Lagging Business Division

Microsoft Corp. today announced record third-quarter revenue of $14.50 billion for the quarter ended Mar. 31, 2010, a 6% increase from the same period of the prior year.

And in spite of a relatively strong 3% increase in revenue from Microsoft Dynamics in Q3 compared to the same period of 2009, the Microsoft Business Division (MBD) saw revenue and operating income in the third quarter and first nine months of the year decline significantly. 

Dynamics revenue was also down 1% for the first 9 months of 2010 compared to the same period in 2009.

The company attributed the MBD revenue decrease to the deferral of $305 million of revenue relating to the Microsoft Office 2010 Technology Guarantee program, as well as a decline in Microsoft Office 2007 licensing.  The 3% increase in Dynamics revenue couldn't stop the overall 6% decline compared to third quarter 2009.

Within MBD the company also noted decreased sales and marketing expenses and a 13% decrease in R&D expenses, which they attributed to "capitalization of certain Microsoft Office system software development costs," among others items.

As a whole, Microsoft's operating income, net income and diluted earnings per share for the quarter were $5.17 billion, $4.01 billion and $0.45 per share, which represented increases of 17%, 35% and 36%, respectively, when compared with the prior year period.

Adjusting for the revenue deferral, third-quarter revenue totaled $14.81 billion, an increase of 8% over the prior year period.

Windows revenue was up 28%, compared with the same quarter a year earlier, driven by strong demand for Windows 7. More than 10% of all PCs worldwide are running Windows 7 today, making Windows 7 by far the fastest-selling operating system in history.

"Business customers are beginning to refresh their desktops and the momentum of Windows 7 ...