Microsoft Windows bolsters sales, but net profit declines [Times of Oman]
(Times of Oman Via Acquire Media NewsEdge) San francisco:Microsoft reported lower profit on higher revenue, after the world's largest software maker spent more money to market its Windows operating system and lure consumers flocking to tablets and smartphones.
Net income in the fiscal second quarter declined 3.7 per cent to $6.38 billion, or 76 cents a share. Corporate demand helped bolster revenue, which rose 2.7 per cent to $21.46 billion, Microsoft said in a statement on Thursday. Analysts had predicted profit of 74 cents a share on $21.54 billion in revenue, according to the average of estimates.
Microsoft is investing to compete against Apple and Google as personal computers running its software lose out to mobile devices. As PC shipments fell during the quarter, analysts cut their estimates for Microsoft's results, which the company met by boosting sales to businesses upgrading their Windows systems and server software.
"It tells you that they're still on a transition to moving more towards being a little bit more of a hardware and technology services company," Kirk Materne, an analyst at Evercore Partners, said in an interview. He rates the stock equal weight.
Sales and marketing spending surged 15 per cent to $4.31 billion for the fiscal second quarter as Microsoft introduced Windows 8 and the Surface tablet, while research and development costs rose 6.6 per cent to $2.53 billion.
Microsoft fell 1.4 per cent to $27.23 in extended trading after closing at $27.63 in New York pn Thursday. The shares dropped 10 per cent in the last three months of 2012, compared to a 1 per cent decline in the Standard & Poor's 500 Index.New Windows
Microsoft released Windows 8 and the Surface tablet on October 26 to stem the loss of consumers. Even as PC sales declined last year, businesses continued to upgrade their systems, some of them from the 12-year-old Windows XP. That mitigated what Hewlett-Packard executive vice-president Todd Bradley called a slower-than-expected quarter for Windows 8.
Sales in the Windows division rose 24 per cent to $5.88 billion. Excluding recognition of revenue deferred from previous quarters, Windows sales rose 11 per cent. Demand from companies signing multiyear contracts translated into unearned revenue, a measure of future sales, of $19.8 billion. That's better than analysts' average estimate of $19.1 billion.Windows snags
Worldwide PC unit sales dropped 6.4 per cent in the fourth quarter from a year earlier. That was the first time in more than five years shipments have fallen during the holiday shopping season, according to IDC Corporation.
"Expectations for Windows were low, this was a number that had come down," Josh Olson, analyst at Edward Jones, said. "They met a low number, so I wouldn't consider this an optimistic sign." Klein declined to say how many Surface tablets Microsoft had sold since they debuted.
Analysts' average estimates for Microsoft's profit and sales had declined 2.4 per cent over the last four weeks, while sales estimates fell 1.3 per cent. - Bloomberg News
on average, as analysts trimmed their projections on signs that Windows 8 sales hadn't been as high as they'd predicted.
Corporate customers are also rushing to upgrade because Microsoft is ending support for Windows XP, which debuted in 2001. Microsoft also started rolling out a new version of Office, which includes the Word and Excel productivity programs.
"One of the biggest stories in 2013 is the business transition from Windows XP to Windows 7," said Bob O'Donnell, an analyst at market research firm IDC. "There are a staggering number of machines still running Windows XP. The IT guys have to pull the plug on those and upgrade, and most will do that by buying new machines."
Machines running Windows 7, which was introduced in 2009, remain available as Windows 8 is rolled out. Some companies are still opting for the earlier version because it's field-tested and available on more machines.
"Right now investors are myopically focused on the Windows business," said Brent Thill, an analyst at UBS in San Francisco. "It's an important business, but they forget about the other 75 per cent of revenue."
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