Microsoft profits beat market forecasts

25-01-2008

by Emmet Ryan

The global economy may be falling apart but no-one seems to have told Microsoft as the IT giant posted second quarter results that beat analysts' expectations.

The Redmond-based firm posted revenues of USD16.4 billion for its second quarter of fiscal 2008, up 30 percent on the previous year. The firm's operating income of USD6.5 billion was up 87 percent on the same quarter last year while earnings per share (EPS) climbed 92 percent year-on-year to USD0.50, well clear of the average analyst prediction of USD0.46.

Needless to say Microsoft's management was somewhat pleased with the results. "Revenue of over USD16 billion this quarter exceeds our previous record by USD2 billion," said Chris Liddell, chief financial officer at Microsoft. "We are extremely pleased by the broad based strength of our business performance and field execution. Throughout the first half of our fiscal year, all of our businesses met or beat our expectations."

The figures are slightly misleading, however, as results from the year-ago quarter were impacted by the deferral of USD1.64 billion of revenue and operating income and USD0.11 of earnings per share. Without these deferrals growth in the current quarter would still be good but nowhere near as impressive, with revenues up 15 percent, operating profits up 27 percent and per-share earnings up 32 percent.

The much-criticised Windows Vista, which only truly became generally available a year ago, saw its sales grow 20 percent year-on-year. Microsoft's management were singing the praises of the system's sales: "We are pleased with the progress of Windows Vista in the market. We've hit our stride with partners and customers and are looking forward to the release of our first service pack later this quarter," said Kevin Johnson, president of the Platforms and Services Division at Microsoft.

On the whole Microsoft should be pleased with its performance in the quarter. The current economic pinch is being felt across all sectors, but so far the Redmond-based firm has managed to stay relatively immune to its effects while also managing to press ahead with Vista adoption despite the flood of criticism the operating system has received.

Microsoft has also published its guidance figures for its third quarter, which ends on 31 March. The IT giant expects revenues of between USD14.3 billion and USD14.6 billion, operating profits of between USD5.6 billion and USD5.7 billion with earnings per share of between USD0.43 and USD0.45.