Profits at Microsoft's Irish section fall 58%

PRETAX PROFITS at Microsoft’s main Irish subsidiary fell by 58 per cent last year to €593 million despite an 18 per cent jump in revenues to €13.37 billion.

Microsoft declined to comment on the accounts for Microsoft Ireland Operations Limited (MIOL) which have just been filed with the Companies Office and seen by The Irish Times.

The increase in revenues was offset by MIOL’s cost of sales increasing from €770 million to €1.15 billion, while administrative expenses jumped from €9.13 billion to €11.61 billion.

It is understood that the weak euro during the financial year in question, which ended on June 30th, 2011, affected profit levels.

MIOL is the subsidiary of the software giant which sells, distributes and markets software globally from Dublin. The world’s biggest software company established an Irish manufacturing facility in 1985 and now employs just over 1,000 staff directly at its operations in south Dublin. About 700 contract staff also work there.

MIOL did not pay a dividend to its parent during the 2011 financial year but, subsequently, a payment of €4.95 billion was made.

MIOL sells Windows, Office and other Microsoft software in about 120 countries worldwide, including Ireland. Revenues in the Republic came in at €151 million up from €129.4 million in 2010.

The corporation tax bill came in at €76.5 million, down from €150.3 million in 2010. This is still higher than the headline Irish corporation tax rate of 12.5 per cent due to the effect of interest charges and expenses which are not deductible for tax purposes.

MIOL had retained profits of €3.9 billion as of last June 30th, up from €3.4 billion a year previously.

MIOL directors said the company had a “strong performance” in 2011 “notwithstanding the continuing challenging economic environment”. The MIOL entity employs 661 staff of the total in Ireland and had payroll costs of €82.2 million.

MIOL’s performance does not give a complete picture of Microsoft’s Irish operations as it also operates a number of unlimited companies here. Such entities are not required to file their accounts publicly. These include Microsoft Ireland Research, whose primary activities are research and development based in Dublin; Round Island One, a vehicle for research internationally; and Flat Island Company, which licenses Microsoft software for use in Europe, the Middle East and Africa.