Microsoft has seen net income increases 51% compared to same quarter prior year. It has reported revenue of $16.20bn for the quarter ended 30 September 2010, an increase of 25% compared to $12.92bn in the same period of the prior year. The increase in sales has been attributed to the robust consumer and corporate demands for the company’s Windows, Office and other products.

Operating income of $7.12b has been reported in the third quarter, which is an increase of 59% compared to $4.48bn in the same quarter prior year.

The deferred revenue of $1.47bn in the prior year was related to the Windows 7 Upgrade Option programme and sales of Windows 7 to OEMs and retailers before general availability in October 2009.

Without the deferral in the prior year, first-quarter growth rates for revenue and operating income were 13% and 20%, and growth in net income and earnings per share were 16% and 19%, respectively.

Microsoft chief financial officer Peter Klein said this was an exceptional quarter, combining solid enterprise growth and continued strong consumer demand for Office 2010, Windows 7, and Xbox 360 consoles and games.

Microsoft chief operating officer Kevin Turner said the company is seeing improved business demand and adoption, and its enterprise agreement rates were strong, reflecting business commitment to Windows 7, Office 2010, and server and database products.

I guess Open Office and Google Apps still have some way to go before they impact the Microsoft juggernaut.

Rentokil Initial has become one of the largest users of Google Apps, rolling out the cloud-based office suite to 35,000 users globally. Rentokill plans to use Google to consolidate 40 email systems including open source products and Microsoft Exchange, into a single email system. Last year, Rentokil Initial deployed handheld computers. It installed a new network in the UK and is in the process of virtualising servers, rationalising data centres, standardising its PC infrastructure and moving to a single mobile telephony provider. The company aims to rollout Google Mail to 35,000 during 2010. Earlier this year, manufacturer Valeo became the first company to use Google Apps globally after it signed a deal to use the SaaS for three years.

While these two deals may only show as a miniscule dent in Microsoft’s vast sales revenues, it is the thin end of a growing wedge of businesses that are looking beyond Microsoft products for robust global apps and solutions. Alternative products ramp up competitive pricing pressures on Microsoft and give users a chance to demand better deals and better pricing. Silver Bullet Associates encourages everyone to watch this space; Rentokil and Valeo will not be the last to replace Microsoft products for alternative solutions.

Microsoft’s CEO Steve Ballmer has ruled out reviewing its user licences, despite acknowledging the fine print and complexity can cause headaches for customers.“I don’t anticipate a big round of simplifying licences. The last round of simplification was done six years ago” he said. Ballmer has also said that the supplier was working hard to ensure the launch of Windows 7 was more successful than Vista. “My hope is that in the first three to six months [after launch on 22 October 2009] any new PC you buy will come with Windows 7. It would be a shame to see people acquire Windows XP machines in 2010,” he said. Whether Windows 7 takes off quickly or stumbles like Vista remains to be seen. It would be nice if Microsoft were to simplify its licencing terms; but don’t hold your breath. And it would be great if Microsoft were to acknowledge their pricing policy was unreasonable too. The next few years will become increasingly tougher for Microsoft as competitive products such as Open Office and Google Apps take chunks out of their revenues. Maybe Windows 7 will be the last great revenue hurrah for Microsoft before a long slow revenue decline sets in.