New Windows helps Microsoft profit jump 60%

For Microsoft Corp.’s earnings, a new set of Windows made a huge difference.

Boosted by the arrival of its Windows 7 operating system, Microsoft had a 14% rise in sales in its fiscal second quarter that ended Dec. 31, the software giant said Thursday.

That helped make for a 60% jump in profit to $6.7 billion, or 74 cents a share, compared with a year earlier when the Redmond, Wash., company had net income of $4.17 billion, or 47 cents.

Revenue increased to $19 billion from $16.6 billion.

It was delayed gratification for the company, which had disappointing sales for its previous operating system, Windows Vista.

“Everyone thought Vista, when it came out, would be the driver of an upgrade cycle and it wasn’t,” said Kim Caughey, a senior analyst at Fort Pitt Capital Group. “But it seems now is the time.”

Windows 7 debuted Oct. 22 in several configurations -- Microsoft said it sold 60 million licenses of the software in the quarter.

That includes pre-sales before the quarter began. The deferred revenue amounted to $1.7 billion. Without those sales, Microsoft would have reported net income of 60 cents a share on revenue of $17.3 billion.

The pre-sales were far better than expected at brokerage Canaccord Adams in Vancouver, Canada, where analyst Peter Misek said $700 million was forecast.

“Looks like pent-up demand,” Misek said.

Consumers and businesses upgrading to Windows 7 should continue throughout the year, he said.

“As the recession hit, 2009 was virtually a wipeout and enterprises were pulling in the reins,” Misek said. “Our view is that business spending has really just started again.”

Server and Tools, a division of Microsoft dealing with the information technology side of business operations, saw an increase of about $100 million in sales, to $3.8 billion, compared with the previous year.

“That’s an important $100 million,” Caughey said. “For the last few years, Microsoft’s story has really been about consumer products.”

Before its earnings were announced, Microsoft shares closed at $29.16, down 51 cents.

nathan.olivarezgiles

@latimes.com