Microsoft set for slate of releases after results
SAN FRANCISCO (MarketWatch) -- Even when reporting a quarterly earnings loss for the first time since it went public,
Microsoft (MSFT) closed the books on one of its busiest quarters in recent years by reporting a loss of $492 million, or 6 cents a share, on revenue of $18.06 billion. During the same period a year ago, Microsoft earned $5.9 billion or 69 cents a share on $17.4 billion in sales.
Hovering over the quarter's loss -- the first since Microsoft became a public company in 1986 -- was aQuantive, the online-ad firm that Microsoft acquired in 2007, and which the company admitted hadn't worked out as well as hoped. Microsoft recorded a goodwill charge of $6.2 billion in the quarter related to writing down aQuantive, and also deferred $540 million in revenue related to its Windows 8 upgrade offer.
Still, Microsoft shares rose as much as 2.5% in after-hours trading as the software giant already had announced the write-down and plans to defer the Windows-related revenue. Microsoft said that anyone who buys a qualifying PC with Windows 7 between now and January 2013 can get the rights to purchase a Windows 8 upgrade for $14.99.
Without those one-time items, Microsoft would have earned $6.93 billion, or 73 cents a share, on $18.6 billion in revenue.
"We feel we spent the quarter executing on our product road map, and we have many major upgrades coming along," Lisa Nelson, Microsoft's director of investor relations, told MarketWatch.
Among its individual business groups, revenue from the business division, which includes the company's flagship Office products, rose 7% from last year's fourth quarter to $6.3 billion. Server and tools revenue came in at $5.1 billion, up 13% from a year ago. Windows and Windows Live sales were down by 13% to $4.15 billion, and the entertainment and devices division, which includes the Xbox game console and Xbox Live, rose 20%, to $1.8 billion.
Speaking on a conference call to discuss the results, Microsoft Chief Financial Officer Peter Klein expressed disappointment over the performance of the online-services division, even though revenue rose to $735 million from $680 million in the year-ago quarter.
"Despite this progress, our expectations for future growth and profitability are now lower than we previously expected," he said. "We continue to believe that search is a strategic asset for Microsoft and are prioritizing our resources into the areas we believe drive the most business value."
Rick Sherlund of Nomura Securities said that even with the massive write-downs, "Overall, its was a clean quarter. Right now, we're looking forward to the impact of the new products, starting with the launch of Windows 8 in October."
At Cross Research, analyst Richard Williams said the Windows 8 launch stands to be one of biggest catalysts in years for Microsoft. In addition to Windows 8, Microsoft is readying for the rollout of its next versions of Windows Server, Windows Phone and upgrades to Office that will include integration with Skype, as well as Microsoft's recent acquisition of professional social-networking company Yammer.
"It's going to be a big launch," he added. "You have to remember how strong Microsoft is in the enterprise. Surveys suggest that two-thirds of IT managers are uncomfortable using another operating system, so there's a big opportunity there."