Tags: Microsoft | XBox | cloud | PlayStation

Microsoft's Second-Quarter Profit, Sales Top Analysts' Estimates

Thursday, 23 Jan 2014 04:33 PM

Microsoft Corp. reported second-quarter profit and revenue that exceeded projections as the company, which is looking for a replacement for Chief Executive Officer Steve Ballmer, relied on Xbox and cloud-software sales.

Net income in the period that ended Dec. 31 was $6.56 billion, or 78 cents a share, Redmond, Washington-based Microsoft said in a statement today. Sales climbed 14 percent to $24.5 billion. Analysts had predicted on average profit of 69 cents on $23.7 billion in revenue, according to data compiled by Bloomberg.

The world’s largest software maker is in the middle of its biggest transition in more than a decade as it seeks a new CEO, implements a reorganization and works to close the acquisition of Nokia Oyj’s handset unit. Microsoft introduced the new Xbox One game machine in the holiday quarter and boosted sales of Web-based software such as Azure and Office 365, even as traditional PC programs continue to languish along with PC shipments, which posted their biggest drop on record.

“You’ve seen strong traction on the cloud side with Azure and Office 365,” said Daniel Ives, an analyst at FBR Capital Markets & Co., who rates the stock the equivalent of a hold. “The tablet cannibalization issue continues to be a major headwind for Windows sales.”

Microsoft shares rose as much as 5.5 percent in extended trading following the report. They advanced less than 1 percent to $36.06 at the close in New York. The stock climbed 40 percent in 2013, compared with a 30 percent increase in the Standard & Poor’s 500 Index.

CEO Search

Unearned revenue, which comes from sales of multiyear deals that will be recognized in the future, was $19.5 billion for the quarter, compared with the $20.5 billion average analyst projection, according to data compiled by Bloomberg.

Most investors are more focused on the CEO search than earnings results, Ives said. The board is narrowing down candidates in a bid to make a final selection. The list includes Microsoft cloud-computing chief Satya Nadella, Ericsson AB CEO Hans Vestberg and former Nokia CEO Stephen Elop, as well as other outsiders, people with knowledge of the selection process have said.

“The fundamentals have taken a back seat to the CEO search, unless there’s something anomalous that happened on the Windows side or some major gyration on enterprise cloud,” Ives said.

Microsoft sold 3 million Xbox One machines in the latest quarter, following the device’s Nov. 22 debut, the company said earlier this month. The console was the top seller in the U.S. in December, according to NPD Group Inc. regaining the lead after trailing Sony Corp.’s PlayStation 4 in November.

Cloud Services

Microsoft is trying to boost growth by getting customers to adopt its Azure cloud services, which let companies store and run applications in data centers accessed via the Internet. The company is also moving corporate customers to Office 365, which includes cloud-based versions of its popular e-mail, word-processing and collaboration programs.

Microsoft adopted a new financial reporting structure for the current fiscal year, organizing divisions around consumer, commercial and cloud sales instead of the company’s traditional products. That followed a July reorganization which shuffled executives, staff and products into new groups to focus on a strategy of devices and services rather than just software.

© Copyright 2017 Bloomberg News. All rights reserved.

 
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Microsoft Corp. reported second-quarter profit and revenue that exceeded projections as the company, which is looking for a replacement for Chief Executive Officer Steve Ballmer, relied on Xbox and cloud-software sales.
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2014-33-23
Thursday, 23 Jan 2014 04:33 PM
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