from Wall Street Journal
Microsoft Corp. added to the view that recovery is taking hold across the technology sector, beating expectations for its fiscal first-quarter earnings even as profit declined 18% from last year.
Shares of the world's largest software maker jumped 11% to $29.42 as consumer demand for Windows and the company's Xbox videogame systems offered a reason for optimism, one quarter after Microsoft's first full year of declining sales as a public company.
"We are very pleased with our performance this quarter and particularly by the strong consumer demand for Windows," Microsoft Chief Financial Officer Chris Liddell said.
The slump in global PC sales and broad economic weakness has battered Microsoft's results over the last year, compounding already weakened demand for Windows Vista. But on Thursday, the company moved to recharge revenue growth with the launch of its next-generation operating system, Windows 7.
After suffering revenue drops across all five of its businesses last quarter, Microsoft saw growth in its server and tools division, while its entertainment unit remained roughly flat with last year.
Revenue for its Windows unit, Microsoft's largest division, was still down 39% from last year, and earnings for the division fell 52%. But the introduction of Windows 7 is already beginning to show signs of strength. Deferred revenue for pre-sales of the new software totalled $1.47 billion.
For the quarter ended Sept. 30, Microsoft reported earnings of $3.57 billion, or 40 cents a share, down from $4.37 billion, or 48 cents a share, a year earlier. Revenue declined 14% to $12.92 billion.
Analysts polled by Thomson Reuters expected earnings of 32 cents on revenue of $12.37 billion.
The company's server and tools was the only one to post revenue growth, albeit 0.5% growth, while sales at the business division fell 11%.
In online services, a small but important division, revenue decreased 5.8%.
In addition to its updated Windows software, Microsoft is also looking to broaden its relevance beyond the desktop personal computer into newer types of devices like the light-weight netbook and a new line of smartphones.
Meanwhile, Microsoft reduced its full-year operating expense guidance by $400 million to between $26.2 billion and $26.5 billion.
"We also maintained our cost discipline, which allowed us to drive strong earnings performance despite continued tough overall economic conditions," Mr. Liddell said.
