Microsoft (MSFT)

Strong momentum of new products drives 13% revenue growth

REDMOND, Wash. — April 27, 2006 — Microsoft Corp. today announced third-quarter revenue of $10.90 billion for the period ended March 31, 2006, a 13% increase over the same quarter of the prior year. Operating income for the quarter was $3.89 billion, or a 17% increase compared with $3.33 billion in the prior-year period. Operating income for the third quarter included $397 million, compared with $768 million in the prior-year period, for certain legal charges. Net income and diluted earnings per share for the third quarter were $2.98 billion and $0.29 per share, which included $0.03 of legal charges. For the same quarter of the previous year, net income and diluted earnings per share were $2.56 billion and $0.23, which included $0.05 per share of legal charges.

“We are pleased with the increasing pace of revenue growth throughout this fiscal year fueled by strong demand for our new consumer and business offerings,” said Chris Liddell, chief financial officer of Microsoft. “We are now accelerating our investments in the business to drive future growth, which is reflected in our financial guidance. We believe next fiscal year will deliver even stronger double-digit revenue growth than this year. Given our confidence in the future, we have also continued our momentum on buyback execution, acquiring $4.9 billion of our stock during the quarter.”

Demand for Microsoft’s recently released products for business and consumer customers drove robust performance during the quarter in the Home and Entertainment, Microsoft Business Solutions and Server and Tools groups. Home and Entertainment revenue was up more than 80% due to strong demand for the Xbox 360™ system; Microsoft Business Solutions delivered 21% revenue growth due to continued customer interest in the

Microsoft Dynamics™ line of business management solutions. This quarter marked the fifteenth consecutive quarter of double digit revenue growth for Server and Tools. “The Windows Server™ platform value proposition is truly resonating with customers, as shown by growth in Microsoft^® SQL Server™ revenue of over 30% this quarter,” said Kevin Johnson, co-president, Platforms & Services Division. “Enterprise customers are increasingly selecting SQL Server to run their mission-critical applications because of its high performance, security and business intelligence capabilities.”