Company sees record fourth-quarter revenues of $17.4bn, but losses in online services division continue to deepen
Microsoft exceeded analyst earnings estimates in its fourth quarter to the end of June, helped by strong sales of its Office software and Xbox console - but its shares fell on concerns about soft PC sales reducing demand for its Windows product.
The company saw record fourth-quarter revenues of $17.4bn and profits of $6.2bn, up 8% and 4% respectively, although the figures mean that it was eclipsed for the second quarter in a row by Apple.
It follows Apple, Google and IBM in reporting unexpectedly good results as technology spending appears to be holding up well in otherwise uncertain economies in the US and Europe.
Losses at Microsoft's online services division, which includes its Bing search engine, continued to deepen: it lost $728m on revenues of just $662m – compared to $688m losses on revenues of $568m a year ago – indicating that attempts to sign new search partners are costing it dearly, while efforts to push cloud computing – part of the same division – continue to require huge investment.
Analysts also pointed to a slowdown in revenues at its Windows division, which sells licences for PCs. Revenue dropped by 1% year-on-year to $4.7bn – despite PC sales having risen by nearly 2% – and profits fell 4% to $2.9bn. It was the second consecutive quarter in which Windows revenues and profits declined on a yearly basis.
"It kind of jumped out at me that the Windows and Windows Live division didn't particularly grow this quarter even though we know from Intel yesterday that the number of PCs shipped in the quarter grew 1%," said Kim Caughey Forrest, senior analyst at fund manager Fort Pitt Capital.
The Entertainment and Devices division, which produces the Xbox games console and licences the new Windows Phone platform, edged $32m profit, a substantial improvement on losses of $172m a year ago, but marking a two-quarter sequential decline. Revenues at the division were up 30% to $1.5bn.
However analysts had been expecting far lower figures for the company. The stock is up just 8% over the past 12 months, compared to a 30% rise in the Nasdaq composite index.
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Source: http://www.guardian.co.uk/technology/2011/jul/22/microsoft-expectations-fourth-quarter
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