Revenue for Microsoft Business Solutions rose 40 percent for the December quarter. The results left MBS resellers dancing in the streets and placing orders for new luxury cars.
Well, not quite.
It was a good quarter for most resellers and MBS, which racked up $190 million in revenue. MBS resellers are happier than they’ve been in a couple of years. But the suspicions are that it wasn’t quite that good. That would mean the average business for MBS resellers was up 40 percent, and some did better to make up for those that did worse. So what’s at work?
The company’s press release attributes the rise simply to Navision, no other elaboration. Microsoft CFO John Connors, in a conference call with analysts yesterday, said, “We do expect we will continue to outgrow the application market we will compete in.” New license sales for MBS outpaced the market. However, whether analysts accept the 40 percent rise at face value is hard to say. Some probe for information. Others feed at the company trough.
In the United States at least, it’s clear that most resellers did not see a 40 percent hike in sales. What they did see was a quarter inflated by a change in maintenance policies for Navision, a revenue spike.
Navision had a different model of just about everything when compared to Great Plains. So during 2003, MBS put Navision on the Great Plains/Microsoft diet, raising maintenance fees to 16 percent of current retail license pricing. Beyond that, users on Navision 3.x versions had to get on a maintenance plan or lose the ability to buy new modules of those versions. That meant users spent tens of thousands of dollars to be able to upgrade the software they already owned. There was December 31 deadline, although a Navision reseller said that, under a flood of user protests, MBS gave the installed base six months. But there are some suspicions that some VARs probably kept pushing. This source said that the maintenance gave his Navision revenue a 60 percent pop for the December quarter, roughly the size of the increase to the 16 percent rate.
MBS had $604 million in revenue for the trailing four quarters, and Microsoft has previously said the division will top $700 million for the fiscal year. Profits, however, are not expected until fiscal 2005.
So, MBS can certainly enjoy the numbers and will continue to do well. But 40 percent in the current quarter? Bill Gates will need a title higher than “Sir” to gain that.
