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Microsoft Reports Fiscal Q1

REDMOND, Wash. -- Microsoft Corp. today announced first quarter revenue of $10.81 billion for the period ended September 30, 2006, an 11% increase over the same quarter of the prior year. Operating income for the quarter was $4.47 billion, an 11% increase compared with $4.05 billion in the prior year period. Net income and diluted earnings per share for the first quarter were $3.48 billion and $0.35 per share. For the same quarter of the previous year, net income and diluted earnings per share were $3.14 billion and $0.29, including a $0.02 per share charge for certain legal charges.

"The solid revenue results for the quarter were at the top end of our expectations and represent a very good start to the fiscal year," said Chris Liddell, chief financial officer at Microsoft.

Server & Tools revenue increased 17% over the comparable quarter in the prior year, reflecting healthy performance for offerings such as SQL Server(TM) 2005, Windows Server(R), Visual Studio(R) 2005 and BizTalk(R) Server. SQL Server experienced revenue growth of over 30%, as customers are increasingly deploying SQL Server for their mission critical, transaction- oriented databases. Entertainment and Devices Division revenue growth of 70% over the prior year was driven by demand for Xbox 360(TM) consoles, software, peripherals, and Xbox Live(R). Xbox 360 has sold 6 million consoles worldwide life to date and achieved record cumulative attach rates for software and peripherals in the United States, while Xbox Live passed the four million member mark during the quarter.

The company has made considerable progress toward delivering two highly anticipated products to customers with the forthcoming releases of Windows Vista(TM) and the 2007 Microsoft(R) Office system. During the quarter, the first release candidate for Windows Vista was made available to nearly 5 million customers worldwide, and the beta 2 version of the 2007 Microsoft Office system was in use by over 3 million customers.

"The strong results are a reflection of our solid execution and ongoing focus on operational excellence," said Kevin Turner, chief operating officer at Microsoft. "As we look to the upcoming releases of Windows Vista, the 2007 Microsoft Office system and Exchange Server 2007, we are excited about these products and believe they will deliver unprecedented levels of business value to our customers."

Microsoft Corp. (Nasdaq: MSFT)

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