Microsoft 3rd-quarter net income rises 35 percent, helped by strong Windows sales
By APThursday, April 22, 2010
Microsoft 3Q net income up 35 percent
SEATTLE — An improvement in corporate spending on computers helped Microsoft increase its net income 35 percent in the most recent quarter, but investors wanted even stronger signals of a recovery and sent Microsoft shares down sharply in after-hours trading Thursday.
For the January-March fiscal third quarter, Microsoft earned $4.01 billion, or 45 cents per share. That was higher than the 42 cents per share forecast by analysts surveyed by Thomson Reuters. It was an increase from $2.98 billion, or 33 cents per share, a year ago.
Revenue rose 6 percent to $14.5 billion, slightly more than the $14.4 billion analysts were expecting. Microsoft had $13.6 billion in revenue in the same quarter a year ago.
Investors looking at the optimistic reports issued recently from Intel Corp., IBM Corp. and other big technology companies may have wanted more from Microsoft, said Edward Jones analyst Andy Miedler. He noted that revenue from the group that makes server software crept up just 2 percent.
The division responsible for Windows increased revenue 28 percent to $4.4 billion. Microsoft’s general manager of investor relations, Bill Koefoed, said during a conference call that sales of copies of Windows for consumers rose 35 percent. Business licenses for Windows, which are more profitable for Microsoft, grew 15 percent.
Businesses may have begun replacing aging computers and software, but it’s early in the process, said Chief Financial Officer Peter Klein. He called the business spending environment still “challenging.”
Microsoft’s online business, which includes Web search and online advertising, saw revenue rise 12 percent to $566 million, but it still posted a wider operating loss of $713 million.
Microsoft has started making payments to Yahoo Inc. as part of a Web search deal that the two forged last year. This quarter, the payments amounted to $78 million. But Microsoft is not operating the technology behind Yahoo’s search right away, and it doesn’t expect the partnership to contribute to revenue until the second half of fiscal 2011.
Revenue in the business software group, which makes Office and other programs, fell 6 percent to $4.2 billion. Microsoft is waiting to report $305 million in Office revenue until after the upcoming Office 2010 launches in the current quarter.
Revenue from Microsoft’s entertainment division, which makes the Xbox 360 game system and the Windows mobile operating system, edged up 2 percent to $1.7 billion.
Microsoft didn’t give revenue or earnings guidance for the next fiscal year, which starts in July. But Klein said he expects sales of Windows 7, the new Office 2010 and updates to SharePoint and SQL Server, two business products, to drive revenue. Klein also said he expects the Web advertising market to improve in fiscal 2011.
Microsoft shares fell $1.08, 3.4 percent, to $30.31 in extended trading Thursday. Before results were released, the stock gained 6 cents to close at $31.39.
Standard and Poor’s said Apple Inc. surpassed Microsoft in market value Thursday to become the second-largest company listed on the S&P 500 index, after Exxon Mobil Corp. The S&P values companies based on the number of shares available for public trading, so it only counts 87 percent of Microsoft’s value. Counting total market capitalization, Microsoft is still bigger than Apple.
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