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Microsoft net falls 18% but beats views

26 октября 2009

Microsof t Corp. added to the view that recovery is taking hold across the technology sector, as its fiscal first-quarter earnings beat estimates even as profit declined 18% from last year.

Shares of the world's largest software maker jumped 7.4% to $28.55, as improved demand for the Windows operating system software and the company's Xbox video game systems offered cause for optimism, one quarter after Microsoft's first full year of declining sales as a public company.

"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," Microsoft Chief Financial Officer Chris Liddell said.

Analysts welcomed the results."This is a strong endorsement of consumer recovery and also points to the stabilization of the Windows business," Katherine Egbert, an analyst with Jefferies & Co., said.

The slump in global PC sales and broad economic weakness have battered Microsoft's results over the last year, compounding already weakened demand for the unpopular Windows Vista operating system, and revenue in the comany's latest quarter declined in all but one of Microsoft's business units. But on Thursday, the company moved to recharge revenue growth with the launch of its next-generation operating system, Windows 7.

After seeing revenue drops across all five of its businesses last quarter, Microsoft saw growth in its server and tools division, while its entertainment unit remained roughly flat with last year.

Revenue for its Windows unit, Microsoft's largest division, was still down 39% from last year, and earnings for the division fell 52%. But after stripping out the impact of a deferral of revenue which Microsoft announced in conjunction with the launch of Windows 7, revenue declined by around 4%, beating analysts' expectations.

Signs that the Windows business is beginning to stem declines is a key reason for Wall Street optimism, analysts said.

"The stability in their Windows business for the first time in a year and obviously the fact that they are able to defer a lot more Windows revenue going forward bodes very well," said Broadpoint AmTech analyst Yun Kim."It was the first time in a year that it came in in line with consensus."

Windows 7 is already beginning to show signs of strength. Deferred revenue for pre-sales of the new software totaled $1.47 billion, exceeding Microsoft's estimate of around $1.2 billion. With deferred revenue, earnings would have been 52 cents a share.

For the quarter ended Sept. 30, Microsoft reported earnings of $3.57 billion, or 40 cents a share, down from $4.37 billion, or 48 cents a share, a year earlier. Revenue declined 14% to $12.92 billion.

Analysts polled by Thomson Reuters expected earnings of 32 cents a share on revenue of $12.37 billion.

The company's server and tools division was the only segment to post revenue growth, with 0.5% growth, while sales at the business division fell 11%.

In online services, a small but important division, revenue decreased 5.8%.

In addition to its updated Windows software, Microsoft is also looking to broaden its relevance beyond the desktop personal computer into newer types of devices like the light-weight netbook and a new line of smartphones.

Meanwhile, Microsoft reduced its full-year operating expense estimate by $300 million to $26.2 billion.

"We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions," Liddell said.

Источник: Total Telecom

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