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Microsoft first-quarter net rises to US$2.73 billion

Microsoft options traders follow the market near the end of trading Thursday at the Chicago Board Options Exchange. PHOTO: AP

Microsoft Corp's first-quarter earnings more than doubled as a new licensing plan boosted revenue. The company raised forecasts for the year, sending shares up as much as 6.4 percent.

Net income rose to US$2.73 billion, or 50 cents a share, from US$1.28 billion, or 23 cents, a year earlier, the Redmond, Washington-based company said in a statement. Sales in the quarter ended Sept. 30 climbed 26 percent to US$7.75 billion from US$6.13 billion a year ago.

The world's biggest software maker, which has had year-on-year sales growth each quarter since 1986, was helped by customers signing up for a new licensing program by a July 31 deadline, analysts said. The plan, which locks customers into multi-year agreements, fueled a 33 percent jump in sales of the Windows operating system for personal computers, even as PC sales stalled.

"It was a blowout," said Scott McAdams, chief executive of McAdams Wright Ragen, which manages about US$1.7 billion and owns shares of Microsoft.

Microsoft said it will earn US$1.89 to US$1.95 a share for the fiscal year ending June 30 on sales of US$32.2 billion to US$32.6 billion. Profit will be 45 cents to 46 cents a share on revenue of US$8.5 billion to US$8.6 billion this quarter, which ends in December.

Microsoft Chief Financial Officer John Connors said in an interview that some sales the company had expected to close in the current quarter were completed last quarter, and the company benefited from a strengthening euro when revenue from Europe was converted to dollars.

Connors also said PC sales "won't see much growth in the December quarter," and consumer spending on software and computers during the holiday season will be weak.

Still, Koch said he's concerned that now that the sign-up period for the plan is over, Microsoft's deferred revenue growth will slow. Because the licensing agreements run two or three years, the company doesn't book all of the revenue at once.

Deferred revenue represents sales from contracts already signed that haven't yet been recognized.

Deferred, or unearned, revenue grew 56 percent in the last quarter to US$9.13 billion, from US$5.85 billion a year earlier.

Connors said that the company must prove to those customers that the plan was worthwhile by providing them with quality new products and upgrades.

Sales of the company's first-ever video-game console, Xbox, were lower than Microsoft expected, Boggs said. He didn't provide the number of consoles sold last quarter.

Sales from home and entertainment products, which includes Xbox, game software and other items, rose 82 percent.

Customers interested in buying an Xbox decided to wait for the holiday season, when Microsoft offers packages of the console and free games, Boggs said. The company still expects to sell 9 million to 11 million consoles by June 30.
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