Microsoft Corp. (MSFT) swung to a fiscal fourth-quarter profit
as a hefty write-down weighed on the software giant's year-earlier
results and sales in its servers and business divisions
increased.
Shares fell 3.4% to $34.22 after hours as results fell short of
analyst expectations. Through the close, the stock is up 16% over
the past 12 months.
The latest results come a week after the company unveiled a
broad reorganization that aims to break down barriers between its
internal units and potential partners outside the company. The
reshuffling strips away a structure based around divisions
overseeing particular products, such as Microsoft Windows, the Xbox
videogame console or the Office bundle of workplace software, and
instead imposes a horizontal scheme with managers that oversee
different kinds of functions--like engineering, marketing and
finance--that would be applied to multiple product lines.
About a year ago, Microsoft began portraying itself less as a
producer of operating systems and application software and more as
a creator of devices and Web services. Microsoft had already
developed successful combinations of hardware and software, like
its Xbox videogame console, but in other cases has been hurt by
largely independent product units working in isolation
Microsoft has been squeezed by a shift in consumer and business
spending to tablets and smartphones and away from PCs. The company,
whose software is on a majority of the world's PCs, last fall
introduced Windows 8, a completely overhauled operating system with
touch-screen capabilities. However, Windows 8 received mixed
reviews from PC users.
"While our fourth-quarter results were impacted by the decline
in the PC market, we continue to see strong demand for our
enterprise and cloud offerings, resulting in a record unearned
revenue balance this quarter," said Chief Financial Officer Amy
Hood. "We also saw increasing consumer demand for services like
Office 365, Outlook.com, Skype, and Xbox Live."
For the quarter ended June 30, Microsoft reported a profit of
$4.97 billion, or 59 cents a share, compared with a year-earlier
loss of $492 million, or six cents a share.
The latest results include a $900 million charge related to
Surface RT inventory adjustments and reflect the recognition of
$782 million of previously deferred revenue related to an Office
upgrade promotion. The year-ago period included a $6.19 billion
goodwill write-down in its online services division and the
deferral of $540 million of revenue related to a Windows 8 upgrade
promotion. Adjusted per-share earnings slipped to 52 cents.
Revenue rose 10% to $19.9 billion. Adjusted revenue totaled
$19.11 billion.
Analysts polled by Thomson Reuters most recently projected
earnings of 75 cents a share and revenue of $20.73 billion.
Microsoft's Windows and Windows Live division saw revenue rise
6.2%. Excluding the impact of the prior year Windows Upgrade Offer
revenue deferral, the division's adjusted revenue fell 6%.
Revenue for the company's servers and tools products, which form
the backbone of enterprise networks and private clouds, increased
9%.
At the business division, which earns most of its sales from
Microsoft Office, sales were up 14%.
Sales at the entertainment-and-devices business, which houses
the Xbox video game console, jumped 7.5%
In online services, which includes the company's Bing search
engine, revenue was up 9.4%.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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