Microsoft beats forecasts
Microsoft beat Wall Street expectations for both revenue and earnings per share for its fiscal 2008 second quarter, attributing its strong quarter to sales of core client products such as Windows Vista and Office 2007, as well as Exchange and SharePoint server software.
For the quarter ended December 31, Microsoft reported revenue of $16,37bn, an increase of 30% year over year and a number that solidly beat the $15,95bn that Thomson Financial analysts had estimated. Last year for the same period Microsoft reported $12,54bn in revenue.
Diluted earnings per share were $0,50, an increase of 92% over the $0,27 per share reported last year, and 0,04 higher than Thomson Financial estimates of 0,46. Operating income for the quarter was $6,48bn, an increase of 92% from the $3,47bn reported for the same period last year.
Microsoft’s year-over-year percentage growth is higher than normal due to a deferral of $1,64bn in revenue and operating income, as well as $0,11 of diluted earnings per share from the second to the third quarter of fiscal 2007.
Without the deferrals, second-quarter growth rates for revenue, operating income and earnings per share would be 15%, 27% and 32%, respectively, for the quarter reported on Thursday.
Analysts had been expecting the company to report a strong quarter even among economic uncertainty and fears that the US economy is entering a recession.
Microsoft’s client business, on sales of Windows Vista, was especially strong in the quarter, with $4,34bn in revenue compared to $2,59bn a year ago. According to Microsoft, its client business has grown 20% on average since Windows Vista was made available nearly a year ago, and the company believes Vista began hitting its stride for adoption in the second quarter. According to Microsoft, it has sold more than 100m licences for Vista.
Looking ahead to the next quarter, which ends March 31, Microsoft said it expects revenue in the range of 14,3bn to $14,6bn; operating income in the range of 5,6bn to $5,7bn; and earnings per share in the range of 0,43 to $0,45.
For the full fiscal year ending June 30, Microsoft expects revenue in the range of $59,9bn to $60,5bn; operating income in the range of $24,2bn to $24,4bn; and earnings per share in the range of $1,85 to $1,88.
Chief Financial Officer, Chris Liddell, notes that 60% of Microsoft’s revenue in the second quarter came from outside the US, and said emerging markets are becoming increasingly important to the company’s revenue. In the past several years, Microsoft has made significant investments in selling its technology in developing countries such as India, Brazil and China.
Microsoft’s online business, which analysts are watching closely, grew by 38% in the quarter to $863m in revenue, with $154m of that being attributed to Microsoft’s $6bn purchase of digital media services firm aQuantive last year. Online advertising revenue grew by 38%.
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