PC Sales Increase Profit at Software Leader
Increased global demand for personal computers helped Microsoft Corp. on Thursday post stronger sales across nearly all of its divisions, boosting its fiscal fourth-quarter profit 38%.
But the quarter capped a year with the slowest growth in Microsoft’s history.
The software giant earned $3.7 billion, or 34 cents a share, up from $2.69 billion, or 25 cents, a year ago. Sales grew 9% to $10.16 billion in the quarter ended June 30.
Excluding charges for legal expenses, employee stock compensation costs and a tax benefit, Microsoft earned 33 cents a share, beating the consensus estimate of analysts by 2 cents, according to Thomson First Call.
“We’re seeing more evidence of much stronger growth than many had expected in both PC and server sales,” said Mark Stahlman, analyst at Caris & Co.
Redmond, Wash.-based Microsoft said worldwide PC shipments grew 14% to 16% during the quarter compared with a year earlier, fueled by higher corporate spending and a growing appetite in Asia. That boosted sales of its Windows operating system. Windows sales rose 10% to $3.03 billion.
For the full fiscal year, Microsoft earned $12.25 billion, or $1.12 a share, compared with $8.17 billion, or 75 cents, last year. Sales grew 8% to $39.79 billion.
And some investors were disappointed with the company’s forecasts for the current quarter.
“The first-quarter guidance they gave was below expectations,” said James Ragan, an analyst at Crowell, Weedon & Co. Microsoft projected sales of $9.7 billion to $9.8 billion for the quarter. Analysts had expected revenue of $9.9 billion.
Microsoft shares rose 25 cents to $26.44 but fell 49 cents in after-hours trading following the release of earnings.
Chief Financial Officer Chris Liddell attributed part of the lower sales forecast to an anticipated drop in sales of video games for the company’s Xbox console. Microsoft is preparing to launch the successor to the Xbox, called Xbox 360, and sales of consoles generally soften as gamers await the new version.
Analysts said the slowdown would be temporary and that new products would help the company post higher growth rates. In addition to Xbox 360, Microsoft plans to release new database software and a new version of its Visual Studio program in the coming year.
“You’re talking about a company where growth is reaccelerated,” said Charles Di Bona, an analyst at Sanford C. Bernstein & Co. “We bottomed out this year. And now we’re going back to double-digit growth next year.”
Microsoft projected sales of $43.7 billion to $44.5 billion in its current fiscal year, up 10% to 12% from the prior year.
“As we move into our 2006 fiscal year, we’re starting what we believe is the strongest product launch cycle in the company’s history,” Microsoft Chief Accounting Officer Scott Di Valerio said.
