March 29, 2024

Microsoft Profit Rises 19%

The company, based in Redmond, Wash., also disclosed that Peter Klein, its chief financial officer, will leave the company this year after nearly four years of running its finance department. Mr. Klein’s departure was unexpected, and Microsoft said it would name a new C.F.O. from its finance team within the next several weeks.

Microsoft is closely identified with the PC business, which is struggling as new types of electronics products, most notably smartphones and tablets, nibble away at sales. The research firm IDC recently reported that global PC shipments fell almost 14 percent during the first three months of the year, the industry’s worst performance in almost two decades.

During its fiscal third quarter, which ended March 31, Microsoft said revenue from its Windows division rose 23 percent to $5.7 billion from $4.63 billion a year earlier.

The company reported better financial performance than the overall PC sector for several reasons. Its Windows sales for the quarter included the delayed recognition of revenue from an upgrade offer that allowed Microsoft customers last year to receive the latest Windows operating system, Windows 8, after it was released last fall. Without that deferred revenue, sales in Microsoft’s Windows division were flat, the company said.

The Windows results included sales of Surface, a family of Microsoft-designed tablet computers that the company did not begin selling until late last year. Finally, the business got a lift from multiyear licensing agreements with big corporate customers, which allow them to install new versions of the operating system on their computers, with Microsoft gradually recognizing the revenue over the life of the contracts.

Analysts said the results were better than some of the more dire outcomes that had been predicted for Microsoft. “Windows revenue being flat is better than being down double digits,” said Colin Gillis, an analyst at BGC Financial.

The company’s profit figures exceeded Wall Street estimates and the company’s shares rose 2.7 percent in after-hours trading.

For its fiscal third quarter, which ended March 31, the company reported net income of $6.06 billion, or 72 cents a share, up from $5.11 billion, or 60 cents a share in the same period a year ago.

Revenue rose 18 percent to $20.49 billion from $17.41 billion.

While revenue came in slightly below analysts’ expectations of $20.56 billion, the company beat Wall Street forecasts of 68 cents a share, according to an average estimate compiled by Thomson Reuters.

Microsoft still has a lot of work to do to restore growth to its Windows business, one of the main engines of the company’s profits. The company created a markedly different interface for Windows 8 to make the software work better on touch-screen devices. But its look is so different from past versions of Windows that the product might have put off some customers, according to IDC, and some PC makers say they’ve been disappointed with the customer reception of Windows 8.

The company has also struggled to gain ground in the mobile phone market with an operating system called Windows Phone, which lags far behind Apple’s iPhone and devices running Google’s Android operating system in market share.

In an e-mail sent to Microsoft employees on Thursday, Microsoft’s chief executive, Steve Ballmer, said that “while the mobile device environment is challenging, the decisions we made with Windows 8 and Windows Phone 8 set us up well for long-term growth.”

The departure of a chief financial officer is often the source of hand-wringing among investors, who fear it could be a sign of deeper financial problems at a company. Microsoft has seen the departure of a number of other high-level executives over the past several years, raising concerns about its ability to retain talent.

“They’ve had a lot of departures, so that part is troubling,” said Brendan Barnicle, an analyst at Pacific Crest Securities.

But investors seemed to shrug off the news of Mr. Klein’s departure. In an interview, Mr. Klein said he was leaving Microsoft after 11 years at the company to spend more time with his family, which he said he could not do during his career in business.

“This is what it is,” Mr. Klein said. “I’ve been killing it for 30 years.”

Microsoft’s broad product portfolio helped lift its growth, including its server and tools division, which rose 11 percent to $5.04 billion. The company’s business division, which includes its Office software and a new service called Office 365, rose 8 percent to $6.32 billion.

Microsoft’s Internet division, a perennial money-loser for the company, bled only $262 million in red ink in the quarter, compared to $480 million a year earlier.

“I always feel with Microsoft there’s a lot of good things they don’t get credit for, but they are facing a lot of challenges,” Mr. Gillis said. “That’s going to be the focus.”

Article source: http://www.nytimes.com/2013/04/19/technology/microsoft-profit-rises-19.html?partner=rss&emc=rss

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