Microsoft Corp. reported fiscal third-quarter revenue Thursday that missed analysts’ most optimistic predictions, a sign that corporate customers may be putting off computer purchases.
Sales rose 6.3% to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31.
Although Microsoft’s Windows business has benefited from increased consumer purchases of personal computers, corporations have hung back, avoiding spending on new machines and contracts with the Redmond, Wash.-based software maker. Customers may also be refraining from deals that stretch over multiple years.
Third-quarter net income rose 35% to $4.01 billion, or 45 cents a share. Unearned revenue, a measure of multi-year contracts, was $12.3 billion, compared with $12.8 billion anticipated by some analysts.
Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit.
A year earlier, Microsoft’s net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion. Net income in that period included severance costs and impairments to investments.
Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Intel Corp., the world’s biggest chipmaker, last week indicated that recovery might be gathering steam with a forecast for rising sales this quarter.
Earnings climb 68%, but outlook signals that profitability may come under pressure
Operating income will be $220 million to $320 million, the Seattle-based company said. Analysts in a Bloomberg survey predicted $322.2 million on average. Sales will be $6.1 billion to $6.7 billion, also missing some projections.
Amazon.com, which started about 15 years ago as an online book retailer, is facing tougher competition from rivals such as Apple Inc. as consumers shift to digital music and books as well as downloadable movies. The company‘s growth rate may not justify its stock price, according to BGC Financial.
Shares are “priced for perfection and continue to highlight that Amazon is not likely to experience the same profitability and leadership position in digital media that it enjoys selling physical books, movies and music,” said Colin Gillis, an analyst at BGC in New York.
First-quarter net income rose 68% to $299 million, or 66 cents a share, from $177 million, or 41 cents, a year earlier. Analysts in a Bloomberg survey estimated 61 cents on average.
Sales increased to $7.13 billion. Analysts had predicted $6.84 billion on average for the first quarter and $6.4 billion for the second quarter.
Amazon.com began selling its Kindle digital reader in about 100 Target Corp. stores this week to fend off rival products from Apple and Sony Corp. Apple‘s iPad, introduced this month, lets users browse the Web, watch videos and read e-books. Sony also makes e-readers, which consumers can buy at 10,000 U.S. retail stores including Target, Staples Inc. and Costco Wholesale Corp.
Net income falls 75%
First-quarter net income fell 75% to $409 million, or 14 cents a share, from $1.65 billion, or 58 cents, a year earlier. Sales advanced 1.2% to $26.9 billion, also meeting the average analyst projection. Sales growth is slowing after 10% last year.
Profit more than doubles in quarter
The Los Angeles company said it made $44.7 million, or 60 cents a share, up 122% from the $20.1 million, or 27 cents, a year earlier.
Analysts polled by Thomson Reuters expected income of 64 cents a share. They generally don’t include one-time items.
Revenue declined 7% to $1.45 billion, slightly less than analyst estimates.
The company predicted modest improvements in second-quarter earnings per share, expecting a range of 70 cents to 80 cents.
Times wire services