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Microsoft reports rise in core business profits

Copies of Microsoft Corp's Digital Image 2006 software are shown on display on Wednesday at a CompUSA store. Redmond, Washington-based Microsoft reported steady growth for fiscal first quarter earnings on Thursday. PHOTO: AP

Microsoft rode a wave of global strength in the personal computer market to report growth in profit and sales in the first quarter of its 2006 fiscal year, slightly exceeding analysts' expectations.

Microsoft, the world's largest software publisher, on Thursday reported quarterly revenue of US$9.74 billion, 6 percent higher than US$9.19 billion in the comparable quarter last year. Earnings rose 24 percent, to US$3.14 billion, or US$0.29 a share, from US$2.53, or US$0.23 a share, a year earlier.

The results in the most recent quarter, which ended Sept. 30, included a charge of US$0.02 a share stemming from the antitrust settlement that the company reached earlier this month with rival RealNetworks. The year-earlier quarter included a charge of US$0.03 a share as a result of an antitrust settlement with Novell Inc.

Excluding the charge, analysts had expected them to earn US$0.30 on revenue of US$9.78 billion, according to Thomson Financial.

Despite its continued strong financial performance, Microsoft's stock has remained largely stalled over the last four years. On Thursday the stock declined 26 cents, to US$24.85 a share, in Nasdaq trading, and in after-hours trading, after the results were released, it fell further.

Several analysts said a 17 percent increase in global shipments of personal computers for the quarter ending in September, which was reported recently by the International Data Corp, was a key factor in Microsoft's growth. It said it expected revenue growth of 10 percent to 12 percent for the full year.

"I think we're going to see very strong reports for both Dell and HP," said Mark Stahlman, a financial analyst at Caris and Co in New York. "All the evidence suggests that PCs, including servers, are selling surprisingly well."

Despite its strengths, Microsoft issued its typically cautious forecasts that were below analysts' expectations for the current quarter. The company forecast earnings per share of US$0.32 to US$0.33 a share on revenue of US$11.9 billion to US$12 billion; analysts had forecast earnings of US$0.35 a share on revenue of US$12.29 billion.

While the company's traditional businesses -- like its Windows desktop and its server and Office business -- continued to show strength, Microsoft again lost money in new areas like home and entertainment, mobile devices, and business solutions.

Although its mobile software business showed a loss, revenue in the segment increased to US$75 million from US$49 million.

The company said that its brightest segment continued to be its server and tools business targeted at corporate customers, which grew 12.8 percent in the quarter.
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