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<< Previous   of   Next >>   ADVERTISEMENT   CONTACT THE HERALD Mike Benbow, Business Editor benbow@heraldnet.com   Published: Saturday, July 19, 2008 Microsoft shares drop 5 percent Associated Press SEATTLE -- Shares of Microsoft Corp. sank more than 5 percent on Friday, a day after the company missed Wall Street's earnings forecast by a penny, and issued softer-than-expected guidance for the current first quarter. Microsoft cited weakness in the online business, which makes most of its money from Web advertising. With a Yahoo Inc. search deal uncertain at best, Microsoft also plans to invest hundreds of millions of dollars more than expected in the next year to whip its unprofitable online operations into shape. Analysts, however, wondered how long Wall Street can wait to see those bets pay off. Shares dropped $1.41 in morning trading, to $26.11. Microsoft said Thursday its fiscal fourth-quarter profit jumped 42 percent -- or 13 percent, factoring in a hefty charge a year ago -- as revenue topped $15 billion. For the three months ended June 30, Microsoft's profit jumped 42 percent to $4.3 billion, or 46 cents per share. In the year-ago quarter, earnings totaled $3 billion, hurt by more than $1 billion in charges related to defective Xbox game consoles. Revenue increased 18 percent to $15.8 billion from $13.4 billion last year, just ahead of Wall Street's average forecast of $15.7 billion, according to a Thomson Financial survey. The revenue rise would have been 14 percent if not for weakness in the dollar. "Those are very good numbers for a company of our size, in what many companies are finding challenging conditions," Microsoft's chief financial officer, Chris Liddell, said in an interview. Sid Parakh, an analyst for McAdams Wright Ragen, wasn't buying it. "The bottom line was disappointing," he said in an interview. "Across the board, they are investing more in growth, which is hurting the bottom line. That's been a concern about Microsoft that investors have felt for a long time." Earnings for the three segments responsible for Microsoft's major franchises -- the Windows operating system, Office programs and server software -- rose 18 percent to total $7.9 billion. Strong PC sales helped bolster Office and Windows results. Liddell said Microsoft sold more than 40 million Vista licenses in the quarter, surpassing 180 million since January 2007.

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