Microsoft profit rises on Windows
SEATTLE (Reuters) - Microsoft signalled confidence to a rattled stock market by raising its full-year profit outlook above Wall Street targets and reporting a 79 percent rise in quarterly profit on Thursday.
Analysts took the results as a good sign for technology companies in the face of a slowing economy, and Microsoft shares rose 4.5 percent in after-hours trade. That followed a 4 percent gain in regular trade, representing a gain of more than $26 billion (13.2 billion pounds) in its market value for the day.
The results and raised forecasts from the world's largest software maker come on the heels of disappointing outlooks from tech bellwethers Intel and Apple, which sent shivers through a U.S. stock market that shed about 10 percent to start the year, before bouncing.
Microsoft reported bumper quarterly sales of its Windows Vista operating system and Office software and said anti-piracy efforts were improving results at an above-average rate.
"It's clear that this new product cycle is paying off," said Andy Miedler, technology analyst at Edward Jones. "We're impressed that they had enough confidence to follow thorough and raised guidance. They continue seeing the business being healthy for the remainder of the fiscal year."
But Chief Financial Officer Chris Liddell told Reuters in an interview the company was "a little cautious" about second-half sales in North America.
"We're probably a little cautious in the back half of the year, but that's made up for in the other parts of the (global) economy," he said. "Even if we shave a few percentage points off, we think the overall level of growth is still very healthy."
Net profit in Microsoft's fiscal second quarter rose to $4.7 billion, or 50 cents per diluted share, from $2.6 billion, or 26 cents per diluted share, in the year-ago period. Revenue rose 30 percent to $16.37 billion.
Analysts, on average, had forecast 46 cents per share on revenue of $15.94 billion, according to Reuters Estimates.
The second-quarter revenue and profit growth rates are exaggerated by results a year before, when Microsoft deferred more than $1 billion in net income due to delays in releasing Vista and Office 2007, which hit stores in early 2007.
For the fiscal year ending in June, Microsoft lifted its outlook. It now expects earnings per share to range between $1.85 and $1.88 per share, up from its previous estimate of $1.78 to $1.81. Wall Street, on average, had projected $1.81.
It boosted its revenue outlook to between $59.9 billion and $60.5 billion, up from $58.8 billion to $59.7 billion before.
"I think (the forecast) is pretty strong. Microsoft often sets the bar low for itself ... they are extremely conservative with regard to promising results (but) these numbers tell me that Microsoft is seeing strength in the pipeline," said Kim Caughey, senior analyst at Fort Pitt Capital Group.
Microsoft has long argued its products are less sensitive to swings in technology spending because they account for a small, but essential, portion of overall spending by corporate customers.
Caughey said Microsoft's business revenues may be less affected because their biggest business customers are buying site licenses, which are not dependent on how many people are in the building. Continued...
