Premier, and Professional product support services revenue increased $404 million or 24% primarily due to higher demand for Premier services in corporate enterprises. Foreign currency exchange rates accounted for a $165 million or a two percentage point increase in revenue. 

Server and Tools operating income increased reflecting the increased revenue, partially offset by growth in headcount-related costs and cost of revenue for services. Headcount-related costs increased 12%, driven by an 11% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation expense. Cost of revenue increased $243 million or 13% reflecting growth in services provided. 

 

Fiscal year 2006 compared to fiscal year 2005 

 

Server and Tools revenue increased mainly driven by growth in SQL Server, Windows Server, and Visual Studio. SQL Server 2005 and Visual Studio 2005 were launched in the second quarter of fiscal year 2006 and produced revenue growth in these product lines. Server and Server applications revenue (including CAL revenue) and developer tools, training and certification revenue increased $1.07 billion or 16% during fiscal year 2006. The results reflect broad adoption of Windows Server products, especially SQL Server, which grew over 30% for the year. Consulting, Premier and Professional product support services revenue increased $217 million or 15% primarily due to higher demand for services. 

Server and Tools operating income increased primarily reflecting the increased revenue, partially offset by increased sales and marketing expenses related to supporting long-term strategies and the launches of SQL Server 2005 and Visual Studio 2005. Headcount-related costs increased 5%, driven by an 11% increase in headcount and an increase in salaries and benefits for existing headcount, partially offset by a decrease in stock-based compensation expense. 

 

Online Services Business 

 

 

The Online Services Business (“OSB”) provides personal communications services, such as e-mail and instant messaging, online information offerings, such as Live Search, and the MSN portals and channels around the world. OSB also provides a variety of online services such as MSN Internet Access, MSN Premium Web Services and OneCare. We earn revenue primarily from online advertising, from consumers and partners through subscriptions and transactions generated from online paid services, and from MSN narrowband Internet access subscribers. We have transitioned to adCenter, our own platform, for online delivery of advertising in the U.S. and certain international markets. We continue to launch new online initiatives and expect to do so in the future. In fiscal year 2007, we launched Windows Live Search and Live.com in 54 international markets, Live Local Search in the U.S. and U.K., beta versions of MSN Soapbox (our expansion of the MSN Video experience), Virtual Earth™ 3D, Windows Live Hotmail, and other offerings. 

 

Fiscal year 2007 compared to fiscal year 2006 

 

OSB revenue increased driven primarily by advertising revenue which grew $314 million or 21% to $1.84 billion. This increase