KEY POINTS:
SEATTLE - Microsoft 's quarterly net profit beat Wall Street expectations on Thursday, driven by sales of database software and its Xbox 360 game console, and the company raised its full-year profit target.
Shares of the world's largest software maker rose more than 2 per cent in after-hours
trade to US$31.16, within 30 cents of its year high touched earlier this month.
Microsoft posted a 28 per cent drop in quarterly earnings as it deferred more than US$1 billion in net income related to the consumer launch of its Windows Vista operating system and Office 2007 software due next week.
Those businesses account for most of the company's earnings, and investors expect the new products to drive sales and earnings in the coming quarters.
"Microsoft had another good quarter. A lot of the new products like Xbox 360 and SQL Server contributed to strong revenue growth this quarter. More importantly, Microsoft slightly raised its revenue guidance for fiscal year 2007 and also boosted their guidance for operating income as well," Morningstar analyst Toan Tran said.
Net profit in its fiscal second quarter ended December 31 totalled US$2.63 billion, or 26 cents per diluted share, compared with US$3.65 billion, or 34 cents per diluted share, a year ago. Second-quarter sales rose 6 per cent to US$12.54 billion.
Analysts, on average, had expected Microsoft to report earnings per share of 23 cents on sales of US$12.09 billion in the quarter, according to Reuters Estimates.
"There doesn't seem to be any real hiccups here. Right now it looks pretty solid across the board," said Charles Di Bona, analyst at Bernstein Research.
The Redmond, Washington-based company said it deferred US$1.64 billion in revenue and accompanying profit to the March-ending quarter from the past quarter due to the way it accounts for upgrade coupons for those products.
Looking ahead to this quarter, Microsoft forecast diluted earnings per share of 45 cents to 46 cents on revenue ranging from US$13.7 billion to US$14 billion. Analysts polled by Reuters Estimates, on average, expect earnings of 46 cents per share on sales of US$14 billion for the March quarter.
For the full year, Microsoft lifted its earnings outlook range to US$1.45 to US$1.47 per share from an earlier range of US$1.43 to US$1.46 per share. The company narrowed its full-year revenue estimate range to between US$50.2 billion and US$50.7 billion from between US$50.0 billion and US$50.9 billion.
Analysts, on average, expect full-year earnings of US$1.45 per share on sales of US$50.48 billion, according to Reuters Estimates.
In the past quarter, Microsoft delivered strong Xbox 360 sales. The company said this month it had shipped 10.4 million units of the game console since its November 2005 launch, exceeding a target to ship 10 million by the end of 2006.
The large installed base of Xbox 360 consoles helped to drive sales of Microsoft Studio's own "Gears of War" game.
Microsoft's server business continued to grow at a rapid clip. Earnings at the server and tools division, which accounts for more than 20 per cent of Microsoft sales, got a boost from steady demand for its SQL Server database software.
Shares of Microsoft have risen 12 per cent since the start of its second quarter. Prior to the earnings announcement, the stock closed down 64 cents at US$30.45 in Thursday Nasdaq trade.
"The stock from a technician's standpoint looks very good as it moves up very steadily on good volume," said Jim Hardesty, chief investment officer at Hardesty Capital Management, which owns Microsoft shares.
- REUTERS