microsoft.jpg
Microsoft's fared better than analysts anticipated in its latest quarter, boosted by a surprising rise in sales of its Windows operating system for personal computers. (AP Photo)

Microsoft beats Street, readies new mobile devices

April 18, 2013 @ 4:28 pm

NEW YORK (AP) - Microsoft is working with manufacturers to produce a line of small touch-screen devices powered by Windows, apparently intended to compete with 7-inch tablets like the iPad Mini and Amazon Kindle Fire.

Peter Klein, Microsoft's chief financial officer, told investors and analysts on a conference call Thursday that the new devices will be available in coming months at competitive prices.

Microsoft Corp. is struggling to extend its software into smartphones and tablets as consumers are turning away from PCs, the foundation of its empire. Over the winter, it launched two larger tablets under the Surface brand. And in October, the company took a large stake in Barnes & Noble's digital unit, which sells a line of entertainment-oriented 7-inch tablets under the Nook brand.

Microsoft reported financial results for its latest quarter Thursday, showing a deep _but largely expected_ impact from the slowdown in global PC sales. Investors seemed to be expecting worse after some recent dismal reports on the PC slump.

Outside the Windows division, Microsoft posted solid results from its Office, software tools and Xbox divisions.

Even if the company has a lot of challenges, "there's a lot of good things going on at Microsoft," said Colin Gillis, an analyst at BGC Partners.

The Redmond, Wash.-based company's shares rose 81 cents, or 2.8 percent, to $29.60 in extended trading, after the release of the report.

The software company's net income was $6.1 billion, or 72 cents per share, for the fiscal third quarter, which ended in March. That was up 18 percent from $5.1 billion, or 60 cents per share, a year ago, and beat the forecast of analysts polled by FactSet, at 68 cents. However, analysts have trimmed their forecasts quickly in the last few weeks _ a month ago, they were expecting Microsoft to post 77 cents in earnings.

Last week, research firm IDC said PC sales fell 14 percent in the quarter, a record. It blamed, in part, Microsoft's new Windows 8, which makes a clean break with the look and workings of old Windows in order to work better with touch screens. Buyers seem daunted by the new interface, IDC said.

Klein said that an updated version of Windows 8 to be released later this year and code-named "Blue," will be in part a response to "customer feedback." Many complaints have focused on the lack of a Start button for those who prefer the older "Desktop" environment, which is hidden behind the new tile-based interface. Klein didn't offer details.

Revenue was $20.5 billion, up 18 percent from a year ago and matching analyst forecasts.

Both earnings and revenue were skewed by software accounting practices. Microsoft offered a $15 upgrade to Windows 8 for Windows 7 PCs purchased June 2 or later. It wasn't able to start recognizing the full value of the software licenses until these offers were redeemed or expired. In the latest quarter, Microsoft was able to recognize $1.1 billion of such deferred Windows revenue, greatly boosting the overall figure.

Stripping out the deferred revenue, overall revenue rose 8 percent, and revenue in the Windows division was flat with a year ago. Even if consumers aren't buying many Windows 8 PCs, businesses are still upgrading from Windows XP to Windows 7 at a rapid clip.

Stripping out deferred revenue and the effect of a $733 million fine levied by the European Commission, Microsoft earned 65 cents per share, up 8 percent from a year ago.

At the company's largest division, Business, revenue rose 8 percent from a year ago to $6.3 billion. The increase was 5 percent adjusting for upgrade offers for the new Office suite.

Microsoft also said CFO Klein is leaving at the end of the fiscal year, in June. He has been in his current role for four years and at the company for 11 years. The company plans to name a new CFO from its finance team in the next few weeks.


(Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
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Comments (12)


  • Add A Comment

  • Nickatnyt wrote...
    Tell me one single vapor-ware company that is worth paying 6 billion for.
    July 19, 2012 1:52 pm
    Seriously, who was the idiot that pulled the trigger on that decision?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • CH wrote...
    More to come
    July 19, 2012 1:59 pm
    .
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Sue (4) wrote...
    Time for a change?
    July 19, 2012 2:29 pm
    Steve Ballmer was voted worst CEO in America. Microsoft has missed so many emerging opportunities in the software market. The stock has been lagging for several years. Company morale is so low that all the real innovators have left for greener pastures. So when does the board of directors decide that they need to have a change in leadership?
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • kata wrote...
    So when does the board of directors decide that they need to have a change in leadership?
    July 19, 2012 3:14 pm
    soon, I hope.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Zyato wrote...
    Safest Dividend Growth Stock in the World
    July 19, 2012 3:33 pm
    Yet, Windows has a 92% market share; Microsoft Office has a 94% market share. It has over $59.5 billion in cash and investments and less than $12 billion in debt and in the last 12 months generated more than $27 billion in excess cash flow. Their net profit margin, after all expenses and taxes, was 29% last quarter. (Most any business person would love to take home $0.29 of every dollar in sales as profits) Its total capital spending the last four quarters was just $2.3 billion, less than 8% of its total operating cash flow. Over the past 12 months, Microsoft paid $6.06 billion in dividends and has grown about 29% per year since 2003. It buys back stock with its excess cash, which makes the remaining shares more valuable. Over $27 billion of excess cash flow and just $9.52 billion paid out in dividends and share repurchases...they have grown sales 10% a year over the last 10 years and still growing. The price you pay, net profit and yield is important here...
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • BikeNazi wrote...
    Windows has a 92% market share, but which version
    July 19, 2012 7:02 pm
    The last 3 companies I have worked for going back to 2002 have given ma a computer with Windows XP on it. Even the new job I started last month gave me a laptop with XP. Isn't that operating system 11 years old now? Why isn't Microsoft selling more Windows 7 licenses for corporate customers? Oh, it's because their current products SUCK. Steve Ballmer is one of the worst managers I have ever seen and the this "one time write down" is only going to be the first time. There will be others until he is removed by the board. Do you remember when IBM was a corporate behemoth? I don't either, but MSFT is headed down that road.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Mike in Pioneer Square wrote...
    No way
    July 19, 2012 7:11 pm
    Wow. That's a bunch of crap. Windows 7 rocks. Your I.T. guys are idiots.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • awbitf wrote...
    Agree with Mike
    July 19, 2012 7:21 pm
    Windows 7 is solid. A great OS.

    I even run Windows 8 preview on my laptop, and it's pretty slick.

    I too have worked for companies that still mandate Windows XP and Internet Explorer 6. That's not really a technical decision by an IT department, that's a mandate from the accountants.

    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • Zyato wrote...
    IBM
    July 19, 2012 9:15 pm
    Technology giant IBM is a capital-efficient business (and a portfolio holding of Warren Buffett's Berkshire Hathaway, one of the single most successful investors in the world.) In addition to excellent returns on tangible assets, IBM is great at allocating capital; their financial managers are brilliant, particularly in recent years as the company's financial flexibility improved. No major company has had better financial management, a skill that has materially increased the gains enjoyed by IBM shareholders. The company has used debt wisely, made value-adding acquisitions almost exclusively for cash and aggressively repurchased its own stock. Warren Buffet’s wish is for IBM’s stock price to languish for five years, because his earnings would be a full $100 million greater under the "disappointing" scenario of a lower stock price than they would have been at the higher price. At some later point Berkshire Hathaway’s shares would be worth perhaps $1 1⁄2 billion more than if the "high-price" repurchase scenario takes place. People take comfort in seeing stock prices advance; this resembles a commuter who rejoices after the price of gas increases, simply because his/her tank contains a day’s supply. IBM has raised its quarterly dividend for 17 years in a row and Warren Buffett buys stock in capital-efficient companies, there is a reason he is the ultimate long-term successful investor on the planet.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • tuleman003 wrote...
    Hey, Zy
    July 19, 2012 9:29 pm
    Another reason for the slide. Too many stats and not enough production.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • tuleman003 wrote...
    Has anybody noticed
    July 19, 2012 9:25 pm
    that Microsoft has taken a hit because of the Europian market? Might be that they "outsource". They don't hire American employees because (1) IT colleges are lacking instruction and (2) American grads want too much money.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • tuleman003 wrote...
    Anybody can cite reasons
    July 19, 2012 9:41 pm
    for the failing. Only a few can think of resolutions and implementations. Think about it.
    { "Thumbs Up":"1","Thumbs Down":"-1" }
  • { "Thumbs Up":"1","Thumbs Down":"-1" }