Microsoft profit misses estimates

SEATTLE — Microsoft Corp.’s profit missed analysts’ projections as Windows sales were hurt by shrinking demand for personal computers and the company wrote down the value of unsold inventory of its Surface tablet.

Excluding a 7-cent charge related to the inventory adjustment, fourth-quarter profit was 66 cents a share, Redmond-based Microsoft said in a statement Monday. Sales rose 10 percent to $19.9 billion. Analysts had predicted profit of 75 cents a share on $20.7 billion in revenue, according to the average of estimates compiled by Bloomberg.

Windows sales are being besieged by poor demand for PCs, reflected in five consecutive quarters of declining shipments, which researcher IDC predicts will be the worst annual drop on record. It’s a slide that the company’s new Windows 8 software has failed to arrest. Chief Executive Officer Steve Ballmer is reorganizing the world’s largest software maker to try to spur better performance in areas like mobile computing as consumers gravitate to tablets and smartphones.

“Consumer PCs remain pressured,” said Sid Parakh, an analyst at McAdams Wright Ragen in Seattle. “Consumers are buying smartphones and tablets. Microsoft has launched some products in those areas but hasn’t made much headway. They’re late to market, and they’re not competitively priced.”

Microsoft fell as much as 4.8 percent in extended trading. The shares declined less than 1 percent to $35.44 at the close in New York. The stock is up 33 percent this year, compared with a 18 percent increase in the Standard &Poor’s 500 Index.

Microsoft released Windows 8 and the Surface tablet on Oct. 26 to stem the loss of consumers to mobile devices that offer many of the same features. The new products have failed to ignite demand. PC shipments fell 11 percent last quarter, according to Framingham, Mass.-based IDC.

The company reported a net loss of $492 million a year earlier, which included a $6.2 billion writedown related to Microsoft’s 2007 acquisition of AQuantive Inc.

Unearned revenue, which comes from sales of multiyear deals that will be recognized in the future, was $22.4 billion, compared with the $21.8 billion average projection, according to analysts’ estimates compiled by Bloomberg.

Ballmer’s biggest reorganization of Microsoft in a decade is designed to speed development of hardware and services as the company’s Windows business continues to suffer from the shrinking PC market and poor demand for Windows-based mobile devices.

The revamp may result in changes in how Microsoft reports earnings for its various units, Chief Financial Officer Amy Hood said in a conference call last week. Microsoft previously had eight business units and reported earnings broken into five groups. It now has four product-engineering units and hasn’t said how it will handle earnings for the new structure. Today’s report is the first being handled by Hood, who was named in May to replace Peter Klein.

Intel Corp., the largest semiconductor maker, yesterday forecast third-quarter sales that may fall short of some analysts’ estimates as the PC slump also erodes its largest business.

Microsoft has said it has sold more than 100 million copies of Windows 8. The company is currently testing a new version that addresses some customer complaints about the design and adds new features. It’s also working with computer makers to get more machines in stores with touch screens and lower prices.

More in Herald Business Journal

Stan Jones (left) father of Vice Chairwoman Teri Gobin, gets a handshake from Jared Parks while Herman Williams Sr. hugs Bonnie Juneau (right) after the Tulalip Tribes and Quil Ceda Creek Casino held a groundbreaking ceremony for the new Quil Ceda Creek Casino Hotel on Tuesday at the Tulalip Reservation. The casino hotel will be built on 16 acres of ancestral tribal land and will feature a main casino that will showcase as many as 1,500 slot machines. (Andy Bronson / The Herald)
Tulalips break ground on new Quil Ceda Creek Casino Hotel

A 150-room hotel was added to what is now a $140 million project in Tulalip.

Teddy, an English bulldog, models Zentek Clothing’s heat regulating dog jacket. (Ian Terry / The Herald)
Everett clothing company keeps your dog cool and stylish

Zentek uses space-age fabrics to moderate the temperature of pets and now humans.

Trudeau snubs Boeing, unveils plan to buy used Aussie jets

Trudeau will be assessing the impact fighter jet contracts have on his country’s economy.

Boeing raises dividend 20%, continues stock buyback program

The manufacturer said it has repurchased $9.2 billion worth of its shares this year.

Everett engineers learn lessons from Mexico City catastrophe

Structural scientists went to help after the September earthquake there and studied the damage.

Providence Hospital in Everett at sunset Monday night. Officials Providence St. Joseph Health Ascension Health reportedly are discussing a merger that would create a chain of hospitals, including Providence Regional Medical Center Everett, plus clinics and medical care centers in 26 states spanning both coasts. (Kevin Clark / The Daily Herald)
Merger would make Providence part of health care behemoth

Providence St. Joseph Health and Ascension Health are said to be talking. Swedish would also be affected.

Hospital companies merge as insurers encroach on their turf

An anticipated deal between Providence St. Joseph Health and Ascension is only the latest.

DaVita to sell off medical groups including The Everett Clinic

Another round of health care consolidation means The Everett Clinic could soon get new ownership.

Engine trouble hits Air New Zealand’s 787 Dreamliners

A Rolls-Royce engine was shut down and was afterward found to be seriously damaged.

Most Read