Microsoft earnings top expectations

SEATTLE — A swell of spending by businesses on new computers, software and servers helped push Microsoft Corp.’s earnings for the most recent quarter past Wall Street’s expectations.

Business spending on technology slowed to a trickle during the economic downturn. Microsoft’s report, released after the market closed Thursday, is the most recent evidence that corporate spending is back in full swing.

Microsoft said the increase in sales to businesses of the newest versions of its Windows operating system, Office programs and server software made up for softer-than-expected revenue from sales of consumer PCs in the quarter.

“We ended up in this great sweet spot in business spending that was re-emerging after the downturn,” Microsoft’s general manager of investor relations, Bill Koefoed, said in an interview. The pickup “aligned just perfectly with our product launches.”

Koefoed said he expects the spending to continue for some time, noting that companies are using more than 400 million PCs that are more than four years old.

For the fiscal first quarter, which ended in September, Microsoft’s net income rose 51 percent to $5.4 billion, or 62 cents per share, from $3.6 million, or 40 cents per share, in the same period last year.

In last year’s quarter, Microsoft deferred some revenue from Windows sales. Had it not done so, net income would have been only 16 percent higher this year in comparison.

Revenue increased 25 percent to $16.2 billion, from $12.9 billion a year ago.

Microsoft beat Wall Street’s expectations on both counts. Analysts surveyed by Thomson Reuters had forecast net income of 55 cents per share on $15.8 billion in revenue.

The Windows division’s revenue rose 66 percent to $4.8 billion. Office and other business software brought in $5.1 billion, a 14 percent jump. The group that makes server software reported a 12 percent increase in revenue to $4 billion.

Microsoft’s online revenue, which comes primarily from search advertising, edged up 8 percent to $527 million. That segment widened its operating loss in the quarter to $560 million, however, as the company continued to spend money on chasing Google Inc., the No. 1 search provider.

The software maker’s results tracked with those from other technology heavyweights. The two main chip-makers, Intel Corp. and Advanced Micro Devices Inc., have been milking stronger sales to corporations to make up for weakness in consumer demand for PCs.

Microsoft’s other consumer products should be more prominent factors in the holiday quarter. The company will soon start selling Kinect, an add-on for the Xbox 360 game console that can read body movements so players don’t need to hold a controller.

The company recently launched a new smart phone.

Shares of Microsoft, which is based on Redmond, rose 85 cents, or 3.2 percent, to $27.13 in extended trading after the release of results. Earlier, the stock added 23 cents to close at $26.28.

More in Herald Business Journal

Exec director of Future of Flight in Mukilteo stepping down

A former board president will temporarily lead Snohomish County’s most popular tourism attraction.

Seafood producer Keyport moves corporate HQ to Edmonds

The family business sees the city as business friendly — and able to accommodate expansion.

Tax bill will help fund 5,000 layoffs, Kimberly-Clark says

Executives declined to say which factories the company would be closing.

Ex-Boeing executive Ray Conner joins Alaska Air board

Alaska Air Group said his appointment affirms the company’s commitment to its Northwest roots.

AI can read! Tech firms race to smarten up thinking machines

“A long way from computers being able to read … general text in the same way that humans can.”

Peoples, HomeStreet banks bump lowest salaries after tax cut

The banks with Snohomish County branches will raise minimum salaries for employees to $15 an hour.

Amazon opens store with no cashiers, lines or registers

The Seattle store allows shoppers to use a smartphone app to pay for items they want.

The expansion at Angel of the Winds Casino is expected to add room for up to 300 more slot machines and 16 new table games. (Courtesy Angel of the Winds)
Groundbreaking held for multimillion-dollar casino expansion

Angel of the Winds will gain up to 300 more slot machines, a 200-seat buffet and more.

Trump hits solar panels, washing machines with tariffs

The administration cast the decisions as part of his pledge to put American companies and jobs first.

Most Read