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Microsoft profit rises 79% to boost technology stocks
Microsoft signalled confidence to a rattled stock market by raising its full-year earnings outlook above Wall Street targets and reporting a 79 per cent rise in quarterly profit.
- Reuters
- Published: 22:55 January 25, 2008
Seattle: Microsoft signalled confidence to a rattled stock market by raising its full-year earnings outlook above Wall Street targets and reporting a 79 per cent rise in quarterly profit.
Analysts took the results as a good sign for technology companies in the face of a slowing economy, and Microsoft shares rose 4.5 per cent in after-hours trade. That followed a four per cent gain in regular trade, representing a gain of more than $26 billion in its market value for the day.
The results and raised forecasts from the world's largest software maker come on the heels of disappointing outlooks from tech bellwethers Intel and Apple, which sent shivers through a US stock market that shed about 10 per cent to start the year, before bouncing.
Microsoft reported bumper quarterly sales of its Windows Vista operating system and Office software on the back of strong computer sales, while its Xbox unit cashed in on new game titles that spurred hardware demand.
"It's clear that this new product cycle is paying off," said Andy Miedler, technology analyst at Edward Jones. "We're impressed that they had enough confidence to follow through and raised guidance."
Cautious approach
Chief financial officer Chris Liddell said the company was "a little cautious" about sales in North America for the remainder of its fiscal year. Liddell later said there were no signs of any significant impact on Microsoft from a slowing US economy.
"You have to look really hard to find any weakness in our results," said the usually-reserved Liddell.
"Microsoft often sets the bar low for itself," said Kim Caughey, senior analyst at Fort Pitt Capital Group. "These numbers tell me that Microsoft is seeing strength in the pipeline."
Demand from corporate customers showed no signs of slowing, as reflected in a $2 billion increase in unearned revenue versus a year earlier. That excludes a one-time bump last year from the issuance of coupons to cover software delays.
Unearned revenue usually covers multiyear agreements signed by large organisations to licence Microsoft products. That revenue is recognised over the life of the contract.
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