Seattle: Microsoft Corporation said on Thursday its fiscal fourth-quarter profit jumped 42 per cent, helped by strong sales of its Office and Windows software, but the company offered a softer-than-expected outlook for the current quarter.
Earnings for the three months ended June 30 rose to $4.3 billion, or 46 cents per share, missing Wall Street's expectations by a penny per share.
In the year-ago quarter, Microsoft reported earnings of $3.0 billion, or 31 cents per share, but the comparison isn't completely fair. Last year, Microsoft took a $1 billion charge related to defective Xbox consoles. Taking the charge into account, operating income grew 13 per cent from last year.
Revenue increased 18 per cent to nearly $15.8 billion from $13.4 billion last year, just ahead of Wall Street's average forecast of $15.7 billion, according to a Thomson Financial survey. The revenue rise would have been 14 per cent if not for weakness in the dollar.
"Those are very good numbers for a company of our size, in what many companies are finding challenging conditions," Microsoft's chief financial officer, Chris Liddell, said in an interview.
But Sid Parakh, an analyst for McAdams Wright Ragen, wasn't buying it.
"The bottom line was disappointing," he said. "Across board, they are investing more in growth, which is hurting the bottom line. That's been a concern about Microsoft that investors have felt for a long time."
Microsoft also offered guidance short of Wall Street's expectations for the current first quarter. The company said it expects to earn 47 to 48 cents per share on $14.7 billion to $14.9 billion in sales.
Analysts had been looking for a profit of 49 cents per share on $15.1 billion in revenue.
Microsoft's shares sank $1.66, or 6 per cent, to $25.86 in after-hours trading, after rising 26 cents to close at $27.52.
Liddell explained the shortfall by saying analysts didn't accurately model first-quarter results from the full-year guidance Microsoft offered in its last quarterly report in April. Indeed, Microsoft's full-year guidance for fiscal 2009 was essentially unchanged Thursday.
The division responsible for Microsoft's longtime sure-fire profit engine, the Windows operating system, posted a 16 per cent rise in earnings to $3.22 billion in the quarter.
Liddell said the company sold more than 40 million Vista licenses in the quarter, for a total of more than 180 million since the operating system's January 2007 launch.
Strong PC sales, up more than 15 per cent from a year ago, helped bolster results for both Windows and Microsoft's Office productivity software. Earnings for the segment that produces Office and other business software gained 12 per cent to $3.34 billion.
The unit responsible for the Xbox 360 lost money in the quarter, but ended the full fiscal year in the black, a milestone analysts have been watching for two years.
Microsoft's online division, which makes money primarily from selling advertising on the Web, lost $488 million, more than double its year-ago loss. Its ongoing woes are a major reason for Microsoft's on-again, off-again pursuit of Yahoo Inc.
"This is the area where we're seeing direct impact from the economic slowdown," Liddell said. He said the unit's revenue rose 24 per cent, which he described as "still strong, but it wasn't as strong as we had hoped for."
During a conference call, Liddell told analysts the company would invest hundreds of millions of dollars more than expected in the online business next year. He also forecast revenue growth for the unit would slow to between 7 per cent and 11 per cent in the quarter, and 18 to 20 per cent for the full year, citing the tough economy.
"At pace they're investing, they should be able to grow faster," said Walter Pritchard, an analyst for Cowen and Co. "You could go back three years ago and say, these guys are still in the same situation. (They have a) quasi-strategy in online that isn't really clearly defined. They keep throwing money at it, and they're not getting any results."
For the full fiscal year, Microsoft's earnings rose 26 per cent to $17.7 billion, or $1.87 per share, from $14.1 billion, or $1.42 per share in fiscal 2007.
Sales for the year surged 18 per cent to $60.4 billion.
Microsoft's full-year guidance for fiscal 2009 was much the same as three months ago. The company forecast a profit of $2.12 to $2.18 per share on $67.3 billion to $68.1 billion in revenue.
Wall Street currently expects the company to earn a more modest $1.88 per share on $60.2 billion in sales.
Source: AP
