Microsoft’s pursuit of Yahoo may have run into some bumps, but its big software business is humming along smoothly.
The company reported fiscal third-quarter earnings on Thursday that slightly surpassed Wall Street’s expectations, and it provided an optimistic outlook for its 2009 fiscal year, which begins in July.
Its net profit for the three months ended March 31 fell 11 percent to US$4.39 billion, or US$0.47 per share, from US$4.93 billion, or US$0.50 per share, in the same period last year.
The results still beat Wall Street’s expectations. Analysts surveyed by Thomson Financial forecast a profit of US$0.44 per share.
The faltering US economy has not had a big impact on the company, Microsoft executives said. Two-thirds of the firm’s revenue now comes from overseas sales, and demand for many of its products remained healthy in the US.
“We have not seen any significant spillover to our business,” Microsoft chief financial officer Christopher Liddell said of the broader economy’s problems in a conference call with analysts.
During the call, Liddell spoke briefly about Microsoft’s unsolicited offer for Yahoo, mainly echoing the tone of comments this week by chief executive Steve Ballmer. Liddell said he did not favor raising Microsoft’s bid, which was worth US$44.6 billion when it was announced in February and US$44.1 billion at the close of trading on Thursday.
“The strongest argument I have heard for increasing our bid — simply that we can afford to — is not one that I favor,” Liddell said.
Speaking in Milan, Italy, on Wednesday, Ballmer held out the possibility that Microsoft might drop its efforts to take over Yahoo if its management continued to spurn the offer.
“We are prepared to go forward without a merger,” Ballmer said.
His comment, most analysts say, was probably a gesture intended to put more pressure on Yahoo’s board.
A proxy battle for control of Yahoo is a more likely alternative, analysts say. On April 5, Ballmer sent a letter to Yahoo’s directors, threatening to oust the board and lower the cash-and-stock offer unless Yahoo started negotiations within three weeks. That deadline is today. Liddell said the company would decide how to proceed next week.
Microsoft had some weak spots in its quarterly performance. Revenue from its Windows personal-computer operating system was somewhat lower than most analysts’ estimates.
But Liddell attributed that to higher demand in developing countries, which are less likely to buy higher-priced versions than developed markets.
He also said that piracy had picked up in some Asian markets.
Microsoft’s mainstay desktop software, data center software and video game businesses all delivered strong performances.
“It was a little weak in the Windows client business, but it was a solid performance overall and the guidance for 2009 was strong,” said Charles di Bona, an analyst at Sanford Bernstein.
However, Microsoft’s shares fell in after-hours trading.
Di Bona said one reason might have been that some investors were expecting that Microsoft would make clear whether it was going to proceed with its Yahoo bid.
The stock fell 5 percent in after-hours trading, to US$30.20. In the regular session it rose US$0.35 to US$31.80.
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