World's No. 1 software firm reports stronger-than-expected profit, but stock sinks after hours.
October 23, 2003: 5:34 PM EDT
ByPaul R. La Monica, CNN/Money Senior Writer
NEW YORK (CNN/Money) - Microsoft Thursday reported that earnings jumped 28 percent for the latest quarter, thanks to stronger-than-expected sales of software for personal computers and servers.
The world's No. 1 software company reported net income of $2.6 billion, or 24 cents a share, for its first fiscal quarter ended Sept. 30, up from $2 billion, or 19 cents a share, a year earlier.
Microsoft said in July that its new restricted stock compensation program would result in a 6-cent-a-share hit to earnings in its first quarter. Backing that out, earnings came in at 30 cents a share, a penny a share higher than what analysts were expecting, according to First Call.
Sales came in at $8.2 billion, up 6 percent from a year ago, and ahead of the consensus estimate of $8.1 billion.
Microsoft (MSFT: Research, Estimates) stock sank 2.5 percent in after-hours trading, according to Island ECN, after ending little changed during regular trading.
Guidance good but not great
Microsoft gave guidance for its fiscal second quarter that was well ahead of analysts' estimates but did not boost guidance for the full year by that much.
The company said it expected sales for the second quarter to be in a range of $9.7 billion and $9.8 billion and that earnings, excluding the 6 cents per share compensation charge, to be between 29 cents and 30 cents. Wall Street was expecting sales of $9.3 billion and earnings of 28 cents per share.
For the full fiscal year, Microsoft said that sales should be between $34.8 billion and $35.3 billion with earnings of about $1.10-to-$1.12, excluding compensation expenses. Analysts are forecasting revenue of $34.7 billion and earnings per share of $1.11.
Considering that semiconductor market leader Intel (INTC: Research, Estimates) reported a strong third quarter a few weeks ago, thanks to robust sales of PCs, and also gave an indication that the fourth quarter would be very strong as well, investors might have been disappointed that Microsoft wasn't as bullish.
"People were hoping for just a little bit better on the guidance," said Alan Davis, an analyst with McAdams Wright Ragen in Seattle. "Guidance was OK but not great."
Richard Williams, strategist for Summit Analytic Partners, an independent research firm focusing on software, said that Microsoft's failure to substantially lift the full-year numbers is a sign that the jury is still out on whether or not the recent strength for PC-related companies is really proof of a full-blown tech recovery.
"At the very best, this hints at a muted recovery, and that's a long way from what tech bulls are expecting. The numbers have to go beyond seasonal strength," said Williams.
Along those lines, Microsoft said that consumer spending on tech continued to be strong but that business spending is still sluggish.
"While corporate IT spending was slow to improve this quarter, we saw strength across all of our consumer businesses, driving higher than expected revenue for the company," said John Connors, Microsoft's CFO, in a written statement.
Still, sales of software for servers increased 15 percent from a year ago, coming in at $1.9 billion. Server software revenue now accounts for nearly a quarter of Microsoft's total sales.
Microsoft stresses security as a priority
Microsoft released its latest version of its flagship Office suite of software this week and hopes are high for the newest version of its Windows operating system, dubbed Longhorn, due out next year.
But its stock has been in a bit of a holding pattern this year, trailing the meteoric returns of many other large tech companies, such as Intel and Cisco Systems (CSCO: Research, Estimates). Microsoft has had to battle a fair share of negative publicity this summer due to a series of worms and viruses that targeted users of computers running on Windows.
In the earnings release, Connors said that "executing on our plan to better help protect customers from a growing number of security attacks" was one of the company's top priorities for the remainder of the year.
Microsoft's widely scrutinized cash figure increased again as well, from $49 billion at the end of June to $51.6 billion as of the end of September. The company has been criticized by some on Wall Street for not putting more of its cash to use. Microsoft did begin paying a dividend in March, and doubled it last month, but the yield is still just 0.6 percent.
O Clubeinvest.com informa que nenhuma da informação
aqui facultada deverá ser entendida como conselho ou recomendação
de qualquer tipo de transacção ou investimento.
