Revenue increased primarily due to strong sales of the 2010 Microsoft Office system and Server and Tools products. Revenue for the three months ended September 30, 2011 included a favorable foreign currency impact of $409 million.
Operating income was up slightly reflecting increased revenue, offset in part by increased operating expenses. Key changes in operating expenses were:
• Cost of revenue increased $638 million or 20%, primarily reflecting higher Xbox content royalty costs, higher headcount-related expenses, primarily related to Enterprise Services, and increased costs associated with our online offerings, including traffic acquisition costs.
• General and administrative expenses increased $225 million or 24%, due mainly to Puerto Rican excise taxes, increased legal costs, and higher headcount-related expenses.
Headcount-related expenses increased across the company reflecting annual increases in pay and bonuses, changes in our employee compensation program, and a 3% increase in headcount from September 30, 2010. Diluted earnings per share increased reflecting increased net income and the repurchase of 323 million shares during the 12 months ended September 30, 2011.