Microsoft demand slows ahead of Windows 8
Shares fall in after-hours trading as the company's latest quarter comes in light on revenue. The company will release its new operating system on Oct. 26.
By Scott Rubin
Tech giant Microsoft (MSFT) saw shares fall 3% in after-hours trading Thursday after reporting a profit that, while down from a year earlier, still beat analyst estimates. Revenue, however, came in below expectations.
The company reported net income of $4.47 billion, or 53 cents per share, in the period. In last year's corresponding quarter, the company reported net income of $5.74 billion or 68 cents per share. That's down from $7.2 billion, or 68 cents per share, a year earlier. The company said that its financial results reflected the deferral of $1.4 billion of revenue and 13 cents a diluted share largely related to the upcoming release of Windows 8.
On a non-GAAP basis, which is comparable to analysts' consensus estimates, earnings for the first quarter were $0.65 per share. That beat Wall Street analyst expectations of 56 cents a share.
Revenue in the period was $16 billion, down from $17.4 billion a year earlier. This compares to Wall Street consensus revenue estimates of $16.4 billion. On an adjusted basis, which takes into account the deferred revenue related to Windows and Office, revenue was $17.4 billion.
"The launch of Windows 8 is the beginning of a new era at Microsoft," said Steve Ballmer, CEO at Microsoft. "Investments we've made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."
The company's server and tools segment posted an 8% increase in sales during the quarter, driven by by double-digit revenue growth in SQL Server and more than 20% growth in system center revenue.
Microsoft's business division saw sales drop 2% in the quarter on a GAAP basis, but once adjusted for the impact of an offer related to Office, revenue rose 1%.
The major weak area in the quarter for Microsoft was in its Windows and Windows Live division. Revenue fell 33% using GAAP standards to $3.24 billion and 9% on a non-GAAP basis. Windows 8 will become generally available on Oct. 26, the company said.
"While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income," said Peter Klein, chief financial officer at Microsoft. "Multi-year licensing revenue grew double-digits across Windows, Server & Tools, and Microsoft Business Division products as businesses commit to our technology roadmap.”
The Redmond, Wash., company's entertainment and devices segment posted revenue of $1.95 billion, which was a decrease of 1% versus the year earlier period. Xbox continues to be the top-selling gaming console in the United States with a 49% market share. Microsoft will also be rolling out its Windows Phone 8 this fall, which should drive growth in this division going forward.
The company affirmed its guidance for 2013 operating expenses between $30.3 billion and $30.9 billion.
During the regular trading session Thursday, Microsoft shares fell 0.32% to $29.50. This year, Microsoft has added a little less than 14%.
(Microsoft owns and publishes Top Stocks, an MSN Money site.)
Microsoft Tablets sell faster than hot cakes.
Microsoft sees slower demand
Microsoft brought this on themselves. They're pushing Metro in spite of the fact that more then a few customers hate the idea of doing away with the start menu and going along with something like the Mac's launch pad (which many Mac users themselves say they don't even use), or making their PC work like a phone. For similar reasons I could care less to upgrade to Windows 8. Metro, without a touch screen monitor on all those laptops one might buy from an OEM and the like (I can build desktops, but a laptop forget it, that I'll buy) is just of no interest. Perhaps if they left the start menu in, and left people with the option to interface with the thing they same as with Windows 7, it would have bigger demand.
Just go to many computer and tech sites, more then a few hate Metro (for the PC at least), and don't want to have to use it for a UI, on their own computer... This would be similar to how Intel tried to move away from x86-64 (when AMD came out with the Athlon 64), released the Pentium 4, and wanted to push the market into going with IA-64 for a 64-bit platform. Simple fact, the market didn't want to go that way. Perhaps MS should do better marketing research into whether Metro sells, and if the customers are really interested in adopting it, whatever their argument in favor of it might be...
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
The auto parts giant beats Wall Street expectations, while continuing to expand its stores in the U.S. and Mexico.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.