July 17, 2008 / 8:23 PM / 11 years ago

Microsoft profit outlook misses view, shares fall

LOS ANGELES (Reuters) - Microsoft Corp (MSFT.O) posted a lower-than-expected quarterly profit and outlook for its current quarter on Thursday, citing a “tough” environment, and its shares fell 6 percent.

A man walks by the logo of Microsoft in a shop of Brussels September 17, 2007. REUTERS/Sebastien Pirlet

The software maker, which is locked in an on-again, off-again pursuit of Yahoo Inc YHOO.O, lowered its fiscal 2009 forecast range while slightly increasing its revenue outlook for this year.

“It’s what I would describe as a tough environment. It’s clear other companies around us are suffering,” Microsoft Chief Financial Officer Chris Liddell said in an interview with Reuters. “It hasn’t hurt us significantly.”

For the current quarter, Microsoft forecast earnings per share to range from 47 cents to 48 cents on revenue between $14.7 billion to $14.9 billion. That is below Wall Street forecasts on average of 50 cents per share in earnings on $15.06 billion in revenue, according to Reuters Estimates.

The world’s largest software maker has weathered a soft U.S. economy by ramping up sales to emerging markets and offering a diverse set of products aimed at corporate customers and consumers. However, analysts noted that this was proof that Microsoft is not immune to a broader downtown in spending.

“Microsoft narrowing their outlook a bit for the coming year, we think it’s reasonable given the challenging economic conditions,” said Andy Miedler, analyst at Edward Jones.

The stock fell to $25.85 in after-hours trade after closing at $27.52 on the Nasdaq.

Microsoft reported a net profit of $4.3 billion, or 46 cents per diluted share, in its fiscal fourth quarter ended June, up from a profit of $3.04 billion, or 31 cents per diluted share, in the year-ago period.

Revenue rose 18 percent to $15.84 billion.

The earnings were a penny per share below the forecast of analysts, on average, of 47 cents per share but the revenue beat their forecast of $15.65 billion in the June quarter, according to Reuters Estimates.

The software maker was aided by strong demand for Windows 2008, the flagship software at its server and tools division. The profit growth looked even bigger due to a $1.06 billion charge that Microsoft incurred during last year’s June quarter to fix problems with its Xbox 360 game console.

Since Microsoft went public with its unsolicited bid to buy Yahoo on February 1, the stock is down 16 percent, as of the close of trade on Wednesday, versus a 10 percent slide in the S&P 500.

Microsoft lowered its full-year estimates to an earnings range of $2.12 to $2.18 per share on revenue from $67.3 billion to $68.1 billion. Its previous estimates were for earnings per share in a range from $2.13 to $2.19 and revenue of $66.9 billion to $68 billion.

Analysts, on average, are forecasting the company to post earnings per share of $2.16 on revenue of $67.3 billion.

The Windows division posted a 15 percent increase in revenue, helped by adoption of its new Vista operating system. The unit’s performance was a disappointment when revenue came in lower than expected from an inventory build-up of computers and a lack of progress in its ongoing battle against piracy.

Microsoft forecast Windows division revenue to grow between 9 percent to 10 percent this fiscal year.

Liddell said the company’s online advertising business was being hurt by the difficult U.S. economy. Microsoft will make additional investments in its online services business unit.

Rival Google Inc (GOOG.O) said its online advertising business has held up well despite weak economic conditions, but it reported a weaker-than-expected 35 percent rise in quarterly profit due to expenses for foreign currency hedges and lower yields on cash holdings.

(Additional reporting by Ritsuko Ando in New York and Tiffany Wu in San Francisco)

Reporting by Daisuke Wakabayashi; Editing by Gary Hill and Carol Bishopric

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