Monday, January 28, 2013

Microsoft shares slip as profits dip despite record revenues


The company reported that its profit dipped slightly in the final three months of last year despite revenues boosted by the release of new-generation Windows software tailored for the world of smartphones and tablet computers.


Profit was down 3.7pc from the same quarter a year earlier to $6.38bn (£4bn), better than most forecasts, while revenues rose 2.7pc to $21.5bn, a record for the US tech giant.


Microsoft said the boost in revenues came from pre-sales and upgrades of Windows 8, recognized in the quarter, and gains in business software and other segments.


Shares in the technology firm were down more than 1pc at $27.25 in after-market trading that followed release of the earnings figures for its second fiscal quarter.


Microsoft did not provide specific sales data for the Surface tablet launched late last year or its new Windows Phone 8 system, two keys to the company's future. 


Chief executive Steve Ballmer said the company's "big, bold ambition to reimagine Windows as well as launch Surface and Windows Phone 8," had sparked "unprecedented opportunity and creativity with our partners and developers."

The profit amounted to 76 cents per share - one cent better than the Wall Street consensus.

Citi analyst Walter Pritchard said Microsoft was on target. "This was the first time in memory we haven't seen disappointment in the Windows line," he said in a research note, maintaining a buy rating.

Raimo Lenschow at Barclays said the results were "essentially in line with investors' low expectations".


The Windows division saw revenues jump 24pc to $5.88bn, while revenue was up 11pc to $869m at Microsoft's online services division. To date, more than 60 million Windows 8 licenses have been sold.


The growth in Windows sales was driven by operating system upgrades, sales of Surface tablets, and businesses licensing Windows 8, Microsoft chief financial officer Peter Klein said in a conference call with analysts.


"We learned a lot this quarter; we saw some really great demand for some of the touch devices we brought to market," Mr Klein said.

Microsoft is working with device and chip makers to field a variety of Windows 8 touch-screen devices "at the right price points," he noted.


Microsoft is also beginning to see a pay-off from years spent working to "finely tune" its search engine that powers queries at Yahoo! websites.

Gains in online services, server and enterprise software helped offset a decline in the entertainment division which produces the Xbox console and games.

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