SEATTLE (AP) - Microsoft Corp.'s fiscal first-quarter earnings rose by 11 per cent, exceeding Wall Street estimates, as the company said it benefited from stronger sales of server software and some cost savings.
For the three months ended Sept. 30, Microsoft said it earned US$3.48 billion, or 35 cents per share. That compares with earnings of $3.14 billion, or 29 cents per share, in the same period a year earlier.
The year-earlier results included a one-time legal charge of two cents per share.
The Redmond-based company said revenue for its fiscal first quarter was $10.81 billion, an 11 per cent increase over $9.74 billion in the same period a year earlier.
Analysts polled by Thomson Financial were expecting earnings of 31 cents per share on revenue of $10.75 billion.
Microsoft shares rose four cents, or 0.14 per cent, to close at $28.35 in trading Thursday on the Nasdaq Stock Market, before the earnings report. In after-hours trading, shares rose 21 cents, or less than one per cent.
Microsoft chief financial officer Chris Liddell said net income was boosted by higher than anticipated investment income. He said Microsoft also was able to reduce spending in the just-ended quarter, but he warned that some of that money will be spent in the current quarter instead, on marketing and other efforts.
Liddell said Microsoft also had higher-than-expected revenue from server software and the unit that includes the Xbox videogame console.
For the current fiscal second quarter that ends Dec. 31, Microsoft said it expects to earn between 22 cents per share and 24 cents per share. The company said the results would be about 11 cents less than it might have been because it expects to defer about $1.5 billion in revenue to its fiscal third quarter.
Microsoft expects to defer the revenue because of a plan to offer consumers who buy computers over the next few months coupons good for free or discounted upgrades to the new versions of its Windows operating system and Office business software.
After many delays, Windows Vista is due to reach consumers in January. Microsoft and computer makers are offering the coupons in the hopes people will buy new Windows-powered computers as holiday gifts even though they will be running a soon-to-be-outdated operating system. Office 2007 also isn't due to consumers until January.
Microsoft said that after deferring the $1.5 billion, revenue for its second quarter would be between $11.8 billion and $12.4 billion.
Analyst Sid Parakh with McAdams Wright Ragen said that although analysts were warned two days ago of the revenue deferral, some may not have been expecting the impact on earnings to be quite so high.
Microsoft now expects earnings between $1.43 and $1.46 per share for its full fiscal year ending in June, a small revision to a previous forecast of $1.43 to $1.47 per share.
But revenue for the 12-month period is expected to be between $50 billion and $50.9 billion, a slight increase over a previous forecast of $49.7 billion to $50.7 billion.
Liddell said the fiscal year earnings forecast was lowered in part because the company's plan to buy back about $20 billion worth of shares wasn't as successful as anticipated, and Microsoft only was able to buy back about $4 billion in stock.
But analyst Alan Davis with D.A. Davidson said the slightly lowered full-year forecast may have been a bit jarring to investors, because the company just announced better-than-expected quarterly results. That may mean the remaining quarters won't be as strong as anticipated, Davis said.
Still, he noted that the company - which is often considered conservative in its guidance - may exceed those forecasts, and he said he was relatively pleased with the performance.
"It's not a bad quarter, not a bad outlook," he said.
