Irish unit makes 10% of Microsoft's profits

MICROSOFT'S MAIN operating company in Ireland, Microsoft Ireland Operations Limited, accounted for over 10 per cent of Microsoft's overall $20.1 billion pretax profit reported for its 2007 financial year.

Microsoft Ireland Operations Limited (MIOL) paid its parent €1.485 billion, which using the exchange rates in operation at the end of June last, when Microsoft closed its financial year, is just over 10 per cent of Microsoft Corporation's pretax profit.

The 2007 financial year produced record revenues and profits at the world's biggest software company, which is currently considering a hostile takeover of Yahoo following the rejection of a $44.6 billion offer.

MIOL runs Microsoft European Operations Centre, which is based in south Dublin and employs about 1,100 staff. Its main activity is providing back-office and supply-chain services to Microsoft operations in 126 countries in Europe, the Middle East and Africa.

MIOL had a turnover of €10.6 billion in the 12 months to the end of June 2007 and it booked a pretax profit of €2.37 billion, according to accounts just filed with the Companies Registration Office.

It paid Irish corporation tax of €234 million. The accounts note that this is a lower rate than the standard rate of Irish corporation tax, but gave a detailed breakdown of the reliefs and allowances claimed that reduced the tax bill.

The 1,100 staff shared wages and salaries of €97 million. The accounts note that the availability of skilled staff and wage inflation are "two factors which may affect the company's performance in the short to medium term". Microsoft is providing training to staff and also has "a number of schemes linked to company results that are designed to retain key individuals".

Foreign exchange fluctuations are also seen as having a significant impact on results. The company lost €2.1 million on foreign exchange in 2007 and €5.4 million in 2007. Currency hedging is carried out for MIOL by its ultimate parent, the Microsoft Corporation.

The direct parent of MIOL, Microsoft Ireland Research, which is also Irish registered, booked a pretax profit of $1.906 billion before tax in the same year and paid a dividend of $1.9 billion.

Microsoft operations in the Netherlands, Italy, Britain, Germany, Israel, France, Ireland and India paid $1.903 billion to the Irish-registered company. This was down significantly from 2006 when it received distributions of $3.733 billion from its subsidiaries. MIOL paid it a dividend of €1.485 billion, which was down from €2.986 in 2006.

The two shareholders in Microsoft Ireland Research are MPM Holdings, a Bermuda registered entity and Round Island One, an unlimited company registered at the offices of Dublin law firm Matheson Ormsby Prentice. As an unlimited company, Round Island One does not have to file account details with the CRO.

Microsoft employs about 1,700 people directly and indirectly in Ireland. As well as a local sales operation, it has a development centre that localises products.