Microsoft Q1 Results Beat Expectations; Profit, Sales Decline

A day afterwards Microsoft appear its best important artefact in years, the software aggregation acquaint first-quarter after-effects on Friday that animated investors alike admitting sales and balance declined.


Still basking in the afterglow of Thursday's upbeat Windows 7 operating arrangement launch, Microsoft (NasdaqGS:MSFT - News) appear balance per allotment of 40 cents for the division concluded Sept. 30. That's bottomward 17% from the year-earlier division but 8 cents bigger than analysts had forecast.

Sales fell 14% to $12.92 billion. Analysts polled by Thomson Reuters had accepted $12.37 billion.

Investors were encouraged by comments from Microsoft admiral that the abridgement appeared to be convalescent and that business barter are assertive to activate affairs new computers abutting year.

"Across the board, the division looked good," said Jeff Gaggin, an analyst at Avian Securities. "It's archetypal Microsoft in agreement of befitting expectations low and accouterment an upside surprise."

Microsoft shares jumped as abundant as 10.4% Friday afore catastrophe the day up 5.4% at 28.02.

Microsoft Chief Financial Officer Chris Liddell attributed the company's better-than-expected after-effects to able customer appeal for Windows PCs and Xbox 360 bold consoles as able-bodied as accumulated amount controls.

"This aftereffect was accomplished admitting about weakness in business spending, which has yet to see a broad-based recovery," Liddell said in a appointment alarm with analysts. Still, business spending is assuming signs of stabilization, he says. "While it's too aboriginal to tell, the fourth division of budgetary 2009 (ended June 30) may able-bodied accept been the basal of the bread-and-butter reset."

Microsoft bargain its operating costs by 10% aftermost division compared with the aforementioned aeon aftermost year, Liddell says. The Redmond, Wash.-based company's agent calculation was 4% lower at the end ofthe division compared with a year earlier, he says.

The September division should end two bad streaks for the No. 1 software maker. It's now had four abode in a row of crumbling balance per allotment and three in a row of crumbling year-over-yearsales. Analysts polled by Thomson Reuters apprehend Microsoft's sales and balance year over year to both resume growing afresh in the accepted quarter.

Analysts accept been forecasting balance per allotment of 52 cents, up 11%, on sales of $17.14 billion, up 3%, for the December quarter. Microsoft didn't accommodate guidance.

Microsoft's latest after-effects exclude $1.47 billion in acquirement the aggregation accustomed aftermost division accompanying to sales of Windows 7 to computer makers and retailers advanced of the official launch. That acquirement will be accustomed in this quarter.


With the deferred revenue, sales would accept totaled $14.39 billion, a 4% decline, and balance per allotment would accept been 52 cents, up 8%.

Investors are stoked about the company's new artefact releases and their advance potential, says Morningstar analyst Toan Tran. BesidesWindows 7, Microsoft aloof appear Windows Server 2008 R2, which has some key virtualization technologies. Later this year comes the billow accretion belvedere Windows Azure, and abutting year Office 2010 and Exchange Server 2010.

"A able artefact aeon consistently bodes able-bodied for Microsoft's banal price," Tran said.

Until accumulated PC and server purchases aces up, consumers are activity to accept to backpack the brawl for Microsoft. For the drive to continue, consumers are activity to accept to buy Windows PCs and Xbox consoles this anniversary season, Tran says.

Microsoft's business unit, which sells Office abundance software, was its better contributor aftermost quarter, with $4.4 billion in sales, bottomward 11%. Of the company's bristles divisions, alone online services, which includes the Bing Internet chase service, was barren aftermost quarter. It generated $490 actor insales, but absent $480 million.