Microsoft profit jumps 51%
Sales of Windows 7 fuel growth for the software giant. Stocks end flat as 3M's decline pushes the Dow lower, but traders appear to be waiting for next week's election and Fed meeting.
Microsoft (MSFT) shares were rising after hours after the software giant reported a 51% increase in net income and saw earnings per share jump 55% in the fiscal first quarter.
The gain came on a 25% increase in revenue. Earnings and revenue beat Wall Street estimates.
Microsoft shares were up 3.4% after hours to $27.18 after rising 0.9% in regular trading to $26.28. (Microsoft is the publisher of MSN Money.)
Investors seemed unwilling to make big bets before Friday's report on gross domestic product and a tumultuous week ahead that includes the midterm elections, a very important Federal Reserve meeting on Tuesday and Wednesday and the October jobless report, due on Nov. 5.
The Dow Jones industrials ($INDU) closed down 12 points to 11,114. But a 6% decline in shares of 3M (MMM) subtracted nearly 46 points from the index alone. The Standard & Poor's 500 Index ($INX) ended up 1 point to 1,184, and the Nasdaq Composite Index ($COMPX) closed up 4 points to 2,507.
Futures trading suggests a flat open on Friday.
Windows 7 powers Microsoft growth
Microsoft earned 62 cents a share, up from 40 cents a year ago and ahead of the Street estimate of 55 cents. Revenue was a record $16.2 billion, up from $12.92 billion a year ago. The Street had expected $15.5 billion.
Net income rose 51% to $5.4 billion.
Results were fueled by a 66% revenue gain to $4.79 billion in the company's Windows and Windows Live division and a 124% profit gain for the business to $3.3 billion.
Server and tools, which includes Windows Server, Microsoft SQL Server, Windows Azure and other cloud and server offerings, saw a 12% revenue gain and a 32% profit gain.
The Microsoft Business Division, which includes the Office family of software, saw a 14% revenue gain and a 20% operating profit gain. Revenue for the Entertainment business was up 27% to $1.8 billion. Profit grew 47% to $382 million. Sales of the new version of its Halo video game hit $350 million in the quarter.
Its Online business, which includes the Bing search tool, saw revenue grow 8% to $527 million. But the loss widened to $560 million.
On a conference call with analysts, Chief Financial Officer Peter Klein said the company believes unit sales for personal computers were up 9% to 11% for the quarter. Consumer sales were up in the single digits; business PC sales were up "in the mid-teens," Klein said. Online advertising was up 13% in the quarter, driven mostly by search.
A close above $27 on Friday would be the first for Microsoft's shares since May 20. While shares are down 13.8% this year, they are up 7.3% this month, second-best among the 30 Dow stocks after Walt Disney (DIS), whose shares are up 10.3%.
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A toppy market
While the wait for certainty to emerge next week is a big factor, the market also has been looking toppy.
A chart of the S&P 500 shows this nicely. The index hit an intraday high of 1,196 on Monday. But it hasn't come close to hitting that level since, let alone closing above 1,200 for the first time since April 26.
That's a real sign of resistance -- meaning all attempts to get above that level will trigger waves of buying.
It's possible that the market will fall back in the next few weeks.
The dollar's off, so gold rises
The dollar was lower against major currencies today after three days of gains. That gave gold a reason to move higher, and it did, reaching $1,342.50 an ounce, up $19.90, or 1.5%.
Interest rates were lower, with the 10-year Treasury yield falling to 2.658% from 2.712% on Wednesday. That was partly the result of a strong auction of 7-year Treasury notes today.
GM will buy back shares from US
Automaker General Motors said today it is paying down a big chunk of debt and has secured a $5 billion, five-year revolving credit facility.
GM will pay back $2.8 billion borrowed from the United Auto Workers.
The moves are in advance of an initial public offering expected next month. The company will use the proceeds from the IPO to buy back $2.1 billion in preferred stock owned by the government and make a $6 billion contribution to worker pension plans.
A big day for earnings
The lack of movement in the market is ironic because several hundred companies reported quarterly results today, including 3M, Exxon Mobil (XOM), Royal Dutch Shell (RDS.A) and Microsoft.
Shares of Exxon Mobil and Royal Dutch Shell were up 0.8% to $66.22 and 1.7% to $63.79, respectively, today after earnings for both beat analyst estimates. They were also benefiting from a lower dollar and higher crude oil prices today.
Crude settled at $82.18 a barrel, up 24 cents from Wednesday.
Halliburton (HAL) shares were off 8% to $31.68 after the presidential commission investing the Gulf of Mexico oil spill said the company and BP (BP) knew that the cement mixture they planned to use to seal the bottom of the well was unstable but still went ahead with the job. BP was up 1.3% today to $40.60.
Elections and Fed and jobs, oh my!
The pause noted at the start of this post appears to have set in starting on Monday. The Dow and S&P 500 are basically flat on the week. The Nasdaq is up about 0.9% -- and is in the midst of its best September-October performance since 1982.
One reason for the pause is interest in Friday's report on gross domestic product for the third quarter. The Commerce Department will report results at 8:30 a.m. ET. The consensus is the economy will show 2% annualized growth, Reuters said today.
More importantly, however, many investors don't want to make big bets before it's clear how the bitterly fought elections will turn out. Polls suggest the Republicans will take control of the House of Representatives, while Democrats hold on to the Senate, barely.
At the same time, the Fed is looming large over the market because no one knows if it will start a new program of quantitative easing, basically buying in Treasury securities to boost the economy.
Some good news on jobs
The jobs picture remains tough, although there was some good news today.
Initial claims for unemployment dropped to a seasonally adjusted 434,000 in the week ended Oct. 23 from 455,000 a week earlier.
That drop was a surprise. Most economists had expected a small increase. The claims rate was the lowest since the week of July 10.
The four-week moving average, which smooths out the volatility, was down to 453,250, the lowest level since peaking at 488,000 in the week ending on Aug. 21.
Today's earnings: Motorola, Potash, Colgate, AstraZeneca
Shares of Motorola (MOT) were up 0.5% to $8.13 after climbing as high as $8.71. The company reported a third-quarter profit of 16 cents a share, topping expectations for earnings of 11 cents a share. Strong Android phone sales helped revenue rise 6% to a better-than-expected $5.8 billion.
Shares of Potash Corp. of Saskatchewan (POT) were off 3.3% to $142.53 on concerns about BHP Billiton's (BHP) hostile bid to buy the company. Potash's third-quarter profit of $1.32 a share beat expectations of $1.16. Sales of $1.58 billion surpassed revenue expectations for $1.3 billion.
Dow Chemical (DOW) shares dropped 1.1% to $30.86, despite the company's reporting third-quarter earnings of 54 cents a share, beating estimates.
Colgate-Palmolive (CL) shares were down 0.8% at $74.92, after the consumer-goods company's third-quarter sales of $3.94 billion missed expectations for $4.03 billion. The company's $1.21-per-share profit beat estimates and it forecast double-digit earnings growth for the year.
Drugmaker AstraZeneca (AZN) said its quarterly profit dropped after it set aside nearly half a billion dollars to settle claims of harmful side effects related to one of its anti-psychotic drugs. AstraZeneca shares slid 1% to $50.43.
Material from The Street.com was incorporated in this post.
|Short hits from the markets -- New York close|
|Thur.||Wed.||Month chg.||YTD chg.|
|13-week Treasury bill||0.130%||0.130%||-13.33%||160.00%|
|5-year Treasury note||1.237%||1.304%||-4.40%||-53.95%|
|10-year Treasury note||2.661%||2.712%||5.43%||-30.76%|
|30-year Treasury bond||4.054%||4.041%||9.66%||-12.65%|
|U.S. Dollar Index||77.503||78.377||-1.82%||-0.92%|
|(in U.S. $)|
|U.S. $ in pounds||£0.6274||£0.6336||-1.37%||1.49%|
|Euro in dollars||$1.3930||$1.3774||1.98%||-2.81%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.7179||€ 0.7260||-1.94%||2.90%|
|U.S. $ in yen||81.23||81.70||-2.92%||-12.65%|
|U.S. $ in Chinese||6.71||6.68||-0.11%||-1.69%|
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'Stock slip 12 pts amid election concerns' ARE YOU SERIOUS? 12 pts is nothing in the stock market, and somehow it is attributed to "election concerns"? Give me a break. Of all the things that could cause the Dow to move 12 pts in either direction, I highly doubt the election has anything to do with it. What a pathetic article title.
- If Repubs win - the rich gain.
- If the dems win - good for the poor.
- In both cases - the midlle class loses again!
hey lib, yeah that was one of the better, balanced overview articles i have seen in a while and the blog was lively as i was prime for any debate. bring it.
as a moderate swing voter i have many sympathies with the libertarian party and wish them well. they are a nice offset to the tea party.
as you know, we are not traders so i really can't comment much on your current sector picks. we are more balanced in our approach and pick above-peer mutual fund managers while constructing a classic asset allocation. then, as an overlay to this, we practice tactical asset allocation whereby we use broad market timing or "opportunistic re-balancing" to buy low and sell high.
we are 50% in cash, avoided the entire downturns of 01-02 and 08-09, and are simply looking to "get it in good" as they say in poker when the next substantial dip arrives. if we trend sideways then we will dollar cost average back in over time. no hurries and no worries.
be safe out there and watch your risk exposure by only using about 40-50% of your portfolio total for these risky sector plays.
A close look at what got us into this financial mess, reveals unqualified borrowers put into homes that were overpriced with loans that were essentially ticking time bombs. When you hear the Dems claim the Republicans will take us back to the bad policies, keep in mind that the Glass-Stiegal act was repealed by both Dems and Republicans in 1999. Dems saw it as a way to get more low-income people into home ownership, while Republicans saw it as a way for the folks on Wall Street to line their pockets.
fateteaser: The IPO may end up a good investment, but I can't find the Emoticon for a corporation that has been 2 x the value of the entire company funded @ "0"% interest and how that relates to a corporation that will eventually have to survive under real world conditions, "they f' ked it up real good the first time, they are capable of the same thing or worse"!
Do not think there is a second chance for bailout, the people will literally have a revolution over that crap!
rch, while what you post is accurate and balanced, you are missing the point. i suggest you go read the article i suggested in an earlier post.
in a nutshell, what we fear is that the pee party will tip the balance over to allowing the Pubs to both keep tax-welfare for the wealthy in place (keeps the national debt rising - go see www . usdebtclock . org ) and they may stifle the economic stimulus at a crucial juncture, much like damaging a good driver turning into the skid on an icy road, they may jerk the wheel the other way, putting us back into the great recession ditch from which we were recently towed.
in the end, we gave dubya 8 years and now only willing to give bama 2. we are such suckers for short-term campaign lies and additional debt. the day of reckoning cometh - and that right soon.
Wow you are correct. I looked at "don't' blame Obama" . What a crazy blog. I am as my handle implies a libertarian go Ron Paul,
Lightened up on My PMs bought TBT, so I still have GLD, SLV,SLW, TBT + a REIT and an emerging market fund (Morgan Stanley).
What you think. BTW Bonds are a bubble.
For the real fun and giggles posts for today - I urge you to go to the article "Don't blame Obama for this mess" and weigh in. The article itself is bi-partisan, fair, insightful and touches a lot of hot spots. Great fodder for opinionated, pre-election posting. Enjoy!
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