Microsoft Business Solutions Turns Profitable

All interest pointed to reports that total company net income reached $3.65 billion, or 34 cents per share, up from 3.46 billion or 32 cents per share, in the year-ago quarter. Quarterly revenue rose to $11.84 billion compared with $10.82 billion in the year-earlier period.

But the enterprise applications division, which some skeptics began to doubt would ever deliver, handed over significantly stronger results than in past years. MBS delivered strong revenue growth for the quarter. The group posted an operating profit of $10 million vs. a loss of $17 million for the same quarter in the prior year.

MBS revenue rose 17 percent to $242 million driven by strength in Microsoft Dynamics solutions sales, particularly Microsoft Dynamics CRM 3.0 (customer relationship management software), which launched in December 2005.

MBS attributed revenue and license growth, in part, to Dynamic CRM. AMR Research Inc. senior vice president Jim Shepherd sees a "tremendous amount" of interest in CRM products. There are three things in MBS's favor, he said, the product is easy to use, it's better integrated into the Microsoft office Suite than others and relatively inexpensive.

"There was nothing in the business model that made MBS unprofitable, it was just Microsoft didn't need the profits from MBS so they made the decision to spend more than what they were taking in on the business," Shepherd said. "MBS has been making steady progress. They had a hiccup last year where revenue's were disappointing. Clearly, growing faster than the market is always a good thing."

In a survey conducted by AMR Research Inc. in November, approximately 271 IT executives said they would choose MBS above other technology providers, such as Oracle Corp. and SAP AG, which came in second and third, respectively.

When asked in the AMR Research Inc. study to name the top enterprise resource planning (ERP) applications vendor they would most likely consider deploying this year, 58 percent of survey participants said MBS.

The report indicated more than 70 percent of organizations plan to increase their ERP spending in 2006, reflecting demand that follows years of tighter IT budgets.

Enventure Global Technology, a company created by Shell Technology Ventures and Halliburton Energy Services to develop solid expandable tubular technology, is one of those that chose Microsoft Dynamics AX (formerly Microsoft Axapta), an ERP platform, rather than Oracle or SAP. Both Shell and Halliburton run "highly customized" SAP ERP platforms.

"We considered SAP as a potential ERP solution, but the cost benefit analysis was heavily weighted toward Axapta," said Chris Krummel, Enventure's chief financial officer. "SAP license costs were covered under our Shell's license agreement, but configuration costs in early estimates was almost double what we paid to install, configure and license Axapta."