Tags: microsoft | earnings | profit | PC

Microsoft Profit, Sales Beat Estimates on Recovering PC Market

Thursday, 23 Oct 2014 04:39 PM

Microsoft Corp. reported fiscal first-quarter profit and sales that exceeded analysts’ estimates, thanks to recovering personal-computer sales and demand for Internet-based cloud software and services.

Profit, excluding restructuring charges, in the period ended Sept. 30 was 65 cents a share, the company said in a statement. Revenue rose 25 percent to $23.2 billion. Analysts were predicting, on average, profit of 55 cents on sales of $22 billion, according to data compiled by Bloomberg.

Chief Executive Officer Satya Nadella, who is trying to remake the company around Web-based services and mobile devices, is benefiting from demand for Microsoft’s cloud Azure software and online versions of Office. The company is also getting a boost from corporate customers replacing aging PCs.

“The bear case on Microsoft historically has always been Windows is going to go off a cliff -- facts are proving the other direction,” said Mark Moerdler, an analyst at Sanford C. Bernstein & Co. in New York. “The PC data is getting better.”

The shares of Redmond, Washington-based Microsoft rose in extended trading following the report. They advanced as much as 3.5 percent to $44.99 at the close in New York. The stock climbed 11 percent last quarter, compared with an increase of less than 1 percent in the Standard & Poor’s 500 Index.

Including charges related to Microsoft’s biggest-ever job cuts, which began in July, the company reported first-quarter net income of $4.54 billion, or 54 cents a share. Nadella is cutting costs after Microsoft completed its 5.44 billion euros ($7.33 billion) acquisition of Nokia’s mobile-phone operations, and is seeking to streamline operations elsewhere at the company.

Job Cuts

Microsoft fired 2,100 workers in September and 13,000 in July, part of a total of 18,000 who will be cut.

Unearned revenue, which comes from sales of multiyear deals that will be recognized in the future, was $22.5 billion for the quarter, compared with the $22.6 billion average analyst projection, according to data compiled by Bloomberg.

Intel Corp., the biggest chipmaker, last week forecast higher-than-projected sales as companies replace aging PCs that were running Windows XP software, an operating system that Microsoft no longer supports. Worldwide PC shipments fell 1.7 percent in the period ending in September, IDC said this month, a smaller decline than the 4.1 percent drop that the researcher had predicted.

Microsoft said in July that commercial cloud revenue, which includes Azure and the Office 365 Internet-based applications, has reached the equivalent of $4.4 billion in annual sales. The business is growing at a rate of 147 percent, said Moerdler, who describes his rating on Microsoft’s stock as “pound the table outperform,” or the equivalent of a buy.

“How many vendors of that size are growing that fast?” Moerdler said. While some cloud sales could be moving from older versions of Microsoft programs, that will make future revenue more stable even though it may lower sales in the short term, Moerdler said.

 

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Microsoft Corp. reported fiscal first-quarter profit and sales that exceeded analysts' estimates, thanks to recovering personal-computer sales and demand for Internet-based cloud software and services.Profit, excluding restructuring charges, in the period ended Sept. 30 was...
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2014-39-23
Thursday, 23 Oct 2014 04:39 PM
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