SEATTLE – Microsoft Corp. said its fiscal first-quarter earnings rose 11 percent, beating analysts’ expectations, as the company benefited from computer and server shipments that were stronger than expected.
But shares in the firm fell in after-hours trading as analysts expressed concern about the prospects for long-term contracts.
For the three months ended Sept. 30, the Redmond company reported earnings of $2.90 billion, or 27 cents a share, compared with earnings of $2.61 billion, or 24 cents a share, in the same period a year earlier.
The most recent quarterly earnings included a stock-based compensation expense of 5 cents a share. Without that, the company would have reported earnings of 32 cents a share.
Analysts polled by Thomson First Call had been expecting earnings of 30 cents a share, with estimates between 29 cents and 32 cents a share, on revenue of nearly $9 billion.
Revenue was $9.19 billion, up 12 percent over $8.22 billion a year earlier.
Analyst Jamie Friedman with Fulcrum Global Partners said the company’s quarterly numbers looked good, but said Wall Street would likely be concerned about Microsoft’s unearned revenue figures.
The numbers, which reflect contracts that are signed but not immediately recognizable as revenue, declined more sharply than he would have liked. That raises concerns that the company doesn’t have enough major new products in the works to lure corporate customers into renewing long-term contracts.
Microsoft doesn’t expect to ship a new version of its dominant Windows operating system until 2006, and the next big upgrade for its server product isn’t expected until 2007.
“The company looks like it needs products,” he said.
Microsoft’s chief financial officer, John Connors, said the company’s quarterly performance was helped by strong personal computer shipments, which grew 10 percent in the quarter rather than 6 percent to 8 percent, as the company had been projecting. Server shipments were also slightly higher than expected, he said.
For the full 2005 fiscal year, Microsoft said it expects revenue of $38.9 billion to $39.2 billion, up slightly from a previous estimate of $38.4 billion to $38.8 billion. Earnings per share are expected to be $1.07 to $1.09, also up slightly from an earlier estimate of $1.05 to $1.08.
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