- Related Stories
-
Microsoft tops earnings forecast
October 26, 2006 -
Holiday PC buyers get Vista upgrade promise
October 24, 2006
The software giant said it earned $2.63 billion, or 26 cents per share, on revenue of $12.54 billion for the three months ended December 31, its second fiscal quarter. That compares with earnings of $3.65 billion, or 34 cents per share, on revenue of $11.83 billion for the same quarter a year ago.
Microsoft said in October to expect per-share earnings of 22 cents to 24 cents on revenue of $11.8 billion to $12.4 billion. Analysts had been looking for earnings of 23 cents per share on revenue of $12.08 billion, according to First Call.
"Results this quarter exceeded our expectations across the board, with revenue growth at or above our high-end guidance for all divisions," Microsoft CFO Chris Liddell said in a statement. "Healthy PC and server markets, as well as broad-based business and consumer demand for Microsoft offerings, fueled revenue growth this quarter."
In addition, Microsoft said it took in, but deferred, $1.64 billion of revenue to account for an upgrade program that allowed those who bought Office or a new Windows PC during the holidays to get a free upgrade to the new products--Office 2007 and Windows Vista. The company had projected about $1.5 billion in deferred revenue. The company said the deferred revenue transates to about $1.13 billion worth of earnings, or 11 cents per share.
For the current quarter, Microsoft is expecting revenue to be in the range of $13.7 billion to $14.0 billion, with per share earnings of around 45 cents or 46 cents, with both figures accounting for the impact of the deferred revenue. Analysts were expecting 46 cents per share in earnings on revenue of $13.98 billion, according to First Call.
Microsoft is seeing slightly higher earnings projections and about the same revenue estimate as it previously expected for the fiscal year. The company now expects full-year revenue in the range of $50.2 billion to $50.7 billion, with per-share earnings of $1.45 to $1.47. In October, the company had pegged full-year revenue in the range of $50 billion to $50.9 billion and per-share earnings in the range of $1.43 to $1.46.
However, Microsoft is changing its expectations of where that revenue will come from, saying more revenue is now projected to come from its core Windows, Office and server software businesses, while its Xbox and Internet services businesses are now seen producing less revenue.
The company is forecasting its Net services business to grow 3 percent to 8 percent for the year, down from a prior estimate of 7 percent to 11 percent growth.
"We had ambitious guidance in the back half of the year," Colleen Healy, general manager of investor relations, said in an interview. "We're going to take a more cautious view."
On the Xbox side, Microsoft's Healy said Microsoft is "delighted with where we are from a competitive standpoint" but said the company is "taking a more cautious view on the market."On a conference call with analysts, Liddell said that Microsoft now expects to have sold 12 million Xbox 360s by the end of June, down from its previous expectations of 13 million to 15 million consoles. That's despite the fact the company sold 10.4 million consoles by the end of December, up from its goal of 10 million units.
"We're making tradeoffs and choices...to achieve (our) target of profitability," Liddell said.
Healy said PC sales in the holiday quarter were a little higher than expected, but Microsoft is not changing its forecast for the remainder of its fiscal year.
As for Microsoft's overall drop in revenue compared with a year ago, Healy noted that the company would have posted 20 percent growth if one includes the sales that were deferred to this quarter. "Twenty percent growth is good growth for any company, let alone a company our size," she said.
See more CNET content tagged:
earnings, expectation, Thomson First Call, forecast, holiday
If this attitude is as common as it appears, I think Microsoft might take a little while to get a decent Vista acceptance level in the consumer market.
Myself, I'm still happy with Mac OS X.
Regardless of whether you MS, Apple, or Linux fan there are just some glaring obvious facts here.
Staring on the 30th of this month Vista will come pre-installed on many vendors PC?s. The number of PC?s that will be sold in one month by HP and Dell with Vista on them will be quite large.
In a matter of a few months almost all major vendors will ship Vista on all of their PC?s. Gateway, Toshiba, Acer, IBM?.all will ship Vista on 90+% of the PC?s they ship.
So at the end of 2007 there will be far more PC?s with Vista on them than all of the Macs running OSX.
That is a fact?.and not some fanboy dream. Like it or not.
Wow, that looks like some strong data you got there. How many people do you know? Millions?
You are free to hate MS, detest Bill Gates and believe Vista is a meaningless upgrade, but unless you have any real data, your speculation is simply unfounded. Do you simply have some inside scoop that all the financial analysts seem to have missed?
The real question is, how will you spin Microsoft's positive 1Q performance if they meet or outperform expectations again? Evil empire? forced upgrade? Whatever will you reality-denying haters pull out of your hats?
-Mister Winky
growth if one includes the sales that were deferred to this quarter."
Translation...If we applied some of this quarter's sales to last
quarter's numbers, it would have been a pretty good quarter.
2 Operating Systems for the price of 1
Vista works well... you install, if not then, well you fall back to xp...
The story here is that Vista sales effectively started last quarter so people did get new systems anticipating having Vista but also the fact that MS didn't have to post more sales into this quarter shows a continuing strength in XP sales.
Let the spinning begin... :)
Who's right?
http://www.ashgilpin.com
http://www.eyepinch.com
delayed Longhorn / AstalaVista OS " not being released until the
end of January 2007...
First Zune sticks the music MP3 partners in the back, now Vista
says, we're doing just fine at Redmond One, what's your problem
partners?
News Flash! Microsoft + Dell join to become the new "Apple" for
PC people... Vista only works on "our own" PCs...
Game over for HP PCs / Sony PCs / Lenovo PCs / Toshiba PCs /
Gateway PCs / etc. etc. etc...
Nooooooo we're not an illegal world wide monopoly. (not)
- Sorry to blow your cover
- by FutureGuy January 31, 2007 7:54 AM PST
- ..You can spin it any way you want. The fact is that MS profits did drop.
- Like this Reply to this comment
-
(15 Comments)http://www.msnbc.msn.com/id/16813736/
"The long-delayed launch of the Windows Vista operating system cut into fiscal second-quarter profits at Microsoft Corp., which reported a 28 percent drop in earnings Thursday despite revenue growth that exceeded forecasts."
"Even so, Microsoft?s ?client? division, responsible for Windows, posted a 25 percent drop in sales to $2.59 billion. And the business division, which includes Office, saw a 5 percent drop to $3.51 billion.
The falls were expected because Microsoft had warned it would be heavily deferring Windows and Office revenue from the second quarter to the current period. That was done to account for coupons that recent computer buyers got to let them upgrade their existing software to Vista and Office.
The deferrals trimmed $1.64 billion from Microsoft?s second-quarter revenue, and $1.13 billion, or 11 cents per share, from profits. If not for the deferrals, Microsoft said revenue would have leaped 20 percent in the quarter."
Check your facts before making stupid comments.