October 25, 2020

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

Microsoft Posts a 30% Increase in Profit, but Sales of Windows Are Weak

The software giant’s mixed financial results, reported Thursday, showed a company struggling with the muted demand for computers while winning strong sales for Xbox 360 and products for business customers.

“We felt like it was a very solid close to a very solid fiscal year,” Peter Klein, Microsoft’s chief financial officer, said in an interview.

Microsoft reported that its net income in the fiscal fourth quarter, which ended in June, rose 30 percent to $5.87 billion, or 69 cents a share, from $4.52 billion, or 51 cents, in the year-ago quarter.

The company said revenue climbed 8.5 percent, to $17.37 billion from $16 billion.

The net income was above the expectations of Wall Street analysts. They had expected 58 cents a share and revenue of $17.25 billion, according to a survey of analysts by Thomson Reuters.

The focus, however, is inevitably on Windows, Microsoft’s flagship product.

Revenue from the unit that sells the Windows operating system software fell 1 percent, to $4.74 billion. It is the second consecutive quarter that Microsoft’s Windows revenue has fallen, a trend that Microsoft executives expect to continue because of the weakness in PC sales. The division’s fortunes are closely tied to PC sales, which worldwide grew 2.6 percent in the quarter, according to IDC, the market research firm.

The shifting demand toward tablets is worrisome to Microsoft because most tablets run on Apple’s operating system or on Google’s Android software.

Tablet manufacturers have shown little interest in adopting Windows, leaving Microsoft out of what some of its executives had thought was a niche product. Sales of tablets are expected to triple to 43.6 million units in 2011 from a year earlier, according to eMarketer, a market research firm.

Microsoft attributed some of the decline in Windows revenue to a greater mix of PCs shipped to emerging markets, where prices were lower. A tough economy and a 41 percent drop in the sales of netbooks also contributed.

Brendan Barnicle, an analyst with Pacific Crest Securities, said that Microsoft was trying to make inroads in tablets with an updated version of Windows, to be available in 2012. If it turns out to be “interesting, but not game-changing, then this deterioration will continue,” he said. 

Mr. Klein said Microsoft would have more to say about its plans for tablets at its developer conference in September.

Microsoft is also struggling with getting its Windows Phone 7 operating system on smartphones. Earlier this year, Nokia agreed to make phones that used Windows, but the partners have yet to introduce any devices.

In an ominous sign, Nokia said on Thursday that its smartphone sales fell 32 percent in the quarter. The decline shows eroding demand for Nokia’s products and the difficulty Microsoft faces in competing against Apple and Google.

The company still has strengths. Revenue from its Office software, which includes Word, grew 7 percent, to $5.78 billion. The company has said that the latest version, Office 2010, is being deployed at a rate five times faster than its predecessor. An 8 percent decline in revenue from Office to consumers was offset by a 12 percent gain with business customers. Microsoft attributed the weak consumer results, as it did with its operating system, to sales in emerging markets. Revenue from servers and tools, a division that caters to corporate customers, grew 12 percent to $4.64 billion. 

A particular bright spot in Microsoft’s portfolio was its entertainment products and devices like the Xbox 360 video game console and the Kinect game controller, which lets users move their bodies to control characters in video games. Sales by the division grew 30 percent, to $1.49 billion.

Microsoft’s shipments of Xbox 360 game consoles increased 13 percent to 1.7 million, underscoring its popularity among gamers. “They are continuing their amazing momentum this year,” Mr. Klein said.

Revenue from Microsoft’s online properties, like the MSN portal and Bing search engine, rose 17 percent, to $622 million. The unit posted $728 million in operating loss, continuing a streak of red ink.

Microsoft took over Yahoo’s search engine in an effort to better compete with Google. But so far, the partnership has failed to raise online advertising revenue as much as executives originally told investors. Both companies are working on the problem, Mr. Klein said, but it will not be resolved until the end of the year.

Shares of Microsoft fell less than half a percent to $26.99 in after-hours trading. In regular trading, they closed nearly flat at $27.10.

Article source: http://feeds.nytimes.com/click.phdo?i=df360767d6bc2812c562c69d5539df51