Microsoft Results Unimpressive

Microsoft Corp. (NASDAQ: MSFT) reported fiscal 2013 first-quarter results after markets closed today. For the quarter, the world's largest software company posted diluted earnings per share (EPS) of $0.53 on adjusted revenues of $17.36 billion. In the same period a year ago, the company reported EPS of $0.68 on revenues of $17.37 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.56 and $16.42 billion in revenues.

On a GAAP basis, excluding deferred revenue on Windows upgrade offers, Windows 8 pre-sales and an Office offer, revenues totaled $16.01 billion.

The company's CFO said:

While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income. Multi-year licensing revenue grew double-digits across Windows, Server & Tools, and Microsoft Business Division products as businesses commit to our technology roadmap.

Microsoft reaffirmed fiscal 2013 operating expense guidance of $30.3 to $30.9 billion. The company offered no other comments on guidance, but the consensus estimate for EPS in the second fiscal quarter is $0.87 on revenue of $23.01 billion, a sharp increase due to the coming release of Windows 8 and related software. For the full-year Microsoft is expected to post EPS of $2.99 on revenue of $80.06 billion.

The company noted that its online services division revenue rose 9% and that online advertising revenue rose 15%. In its entertainment and devices division, which includes the Xbox, revenue fell 1% year-over-year, but Microsoft offered no explanation for the decline.

In the Windows & Windows Live division, GAAP revenue fell 33%, though adjusting for the Windows Upgrade offer and presales, the decline was reduced to 1%. Windows 8 will become generally available next Friday, October 26th.

Operating income for the first quarter came in at $5.31 billion, down 36% from $7.2 billion in operating income in the same period a year ago.

The deferred revenue adjustment the company took this quarter made a lousy quarter look a little better. But the consensus revenue forecast for next quarter is a third higher than first quarter revenue. Sure Microsoft will sell truckloads of Windows 8, but the business doesn't look so hot anywhere else. And lots of those Windows 8 sales will be the cheap upgrades, which won't help revenues either.

Microsoft's shares are down about 2.6% in after-hours trading at $28.75 in a 52-week range of $24.30 to $32.95. Thomson Reuters had a consensus analyst price target of around $35.58 before today's report.

Paul Ausick

Read Full Story

Markets

DJIA 21,310.66 -98.89 -0.46%
NASDAQ 6,146.62 -100.53 -1.61%
S&P 500 2,419.38 -19.69 -0.81%
NIKKEI 225 20,225.09 71.74 0.36%
HANG SENG 25,839.99 -31.90 -0.12%
DAX 12,671.02 -99.81 -0.78%
USD (per EUR) 1.13 0.02 1.39%
USD (per CHF) 0.96 -0.01 -1.22%
JPY (per USD) 112.30 0.46 0.41%
GBP (per USD) 1.28 0.01 0.70%

Can't get enough business news?

Sign up for Finance Report by AOL and get everything from retailer news to the latest IPOs delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.