Microsoft fourth-quarter profit jumps 42% on software sales

Seattle: Microsoft Corp said on Thursday its fiscal fourth-quarter profit jumped 42 per cent, helped by strong sales of its Office and Windows software, but the company offered a softer-than-expected outlook for the current quarter.

Earnings for the three months ended June 30 rose to $4.3 billion, or 46 cents per share, missing Wall Street's expectations by a penny per share.

In the year-ago quarter, Microsoft reported earnings of $3.0 billion, or 31 cents per share, but the comparison isn't completely fair. Last year, Microsoft took a $1 billion charge related to defective Xbox consoles. Taking the charge into account, operating income grew 13 per cent from last year.

Revenue increased 18 per cent to nearly $15.8 billion from $13.4 billion last year, just ahead of Wall Street's average forecast of $15.7 billion, according to a Thomson Financial survey. The revenue rise would have been 14 per cent if not for weakness in the dollar.

"Those are very good numbers for a company of our size, in what many companies are finding challenging conditions," Microsoft's chief financial officer, Chris Liddell, said in an interview.

But Sid Parakh, an analyst for McAdams Wright Ragen, wasn't buying it.

Bottom line

"The bottom line was disappointing," he said. "Across board, they are investing more in growth, which is hurting the bottom line. That's been a concern about Microsoft that investors have felt for a long time."

Microsoft also offered guidance short of Wall Street's expectations for the current first quarter. The company said it expects to earn 47 to 48 cents per share on $14.7 billion to $14.9 billion in sales.

Analysts had been looking for a profit of 49 cents per share on $15.1 billion in revenue. Microsoft's shares sank $1.66, or 6 per cent, to $25.86 in after-hours trading, after rising 26 cents to close at $27.52.

Liddell explained the shortfall by saying analysts didn't accurately model first-quarter results from the full-year guidance Microsoft offered in its last quarterly report in April. Indeed, Microsoft's full-year guidance for fiscal 2009 was essentially unchanged Thursday.

The division responsible for Microsoft's longtime sure-fire profit engine, the Windows operating system, posted a 16 per cent rise in earnings to $3.22 billion in the quarter. Liddell said the company sold more than 40 million Vista licenses in the quarter, for a total of more than 180 million since the operating system's January 2007 launch.