Software giant Microsoft Corp. (MSFT: Quote) said Thursday after the markets closed that its first quarter profit fell 22% from last year, hurt by a weak PC market and the deferral of some revenue related to the upcoming release of its Windows 8 operating system.
Microsoft joins two other technology giants - Intel Corp. (INTC) and International Business Machines Corp. (IBM) - who reported lower quarterly profits earlier this week.
Microsoft shares are currently losing 2.36% in after hours trading after closing the day's regular trading session at $29.50, down 9 cents. The shares trade in a 52-week range of $24.30 to $32.95.
"While enterprise revenue continued to grow and we managed our expenses, the slowdown in PC demand ahead of the Windows 8 launch resulted in a decline in operating income," said Peter Klein, chief financial officer at Microsoft. "Multi-year licensing revenue grew double-digits across Windows, Server & Tools, and Microsoft Business Division products as businesses commit to our technology roadmap."
Microsoft's two major divisions make the Windows operating system and Office business software. About 90% of the PCs around the world run on the company's windows operating system.
In July, Microsoft unveiled its Windows-based tablet "Surface" in a bid to take on Apple Inc.'s (AAPL) hugely successful iPad. Earlier this week, the company revealed the pricing of "Surface". The least expensive version of "Surface", a 32 GB model without a Touch Cover, will cost $499, while a 32 GB model with a black Touch Cover will cost $599. The 64 GB model, including a black touch cover, is priced at $699.
Microsoft's business division revenue decreased 2% year-over year to $5.50 billion in the first quarter. Excluding the impact of the Office offer, the division's adjusted revenue increased 1% for the first quarter.
First quarter revenue from the company's windows and windows live division fell 33% to $3.24 billion. Excluding the impact of the Windows upgrade offer and pre-sales of Windows 8 to OEMs prior to general availability, the division's adjusted revenue declined 9%. This marks 6th time in the last 7 quarters that the division's revenue has declined year-over-year.
Windows 8 will become generally available October 26. It is designed to work equally well on touchscreen devices and conventional ones.
The softness in the PC market has definitely hurt Windows sales. Earlier this month, two industry research firms International Data Corp. (IDC) and Gartner Inc. (IT) said that global PC shipments in the third quarter of 2012 fell over 8% from last year, as the popularity of latest smartphones and media tablets continued to hit PC demand and PC vendors liquidated inventory a ahead of the release of the Windows 8 operating system.
Server and tools division's revenue rose 8% to $4.55 billion in the first quarter, driven by double-digit revenue growth in SQL Server and more than 20% growth in System Center revenue. In September, Microsoft launched Windows Server 2012. However, this marks the first time in ten quarters that the division has not posted a double digit revenue growth.
First quarter revenue from the company's entertainment and devices division fell 1% year-over-year to $1.95 billion. Xbox continues to be the top-selling console in the U.S., where it now has 49% market share, the company said. Skype continues its rapid growth and now has over 280 million users.
Online services division revenue for the quarter rose 9% year-over-year to $697 million, while the division's operating loss narrowed to $364 million from $514 million a year ago.
For the first quarter ended September 30, 2012, the world's largest software company reported net income of $4.47 billion or $0.53 per share, compared to net income of $5.74 billion or $0.68 per share for the year-ago quarter.
The latest quarter results include the deferral of $1.36 billion of revenue for Windows upgrade offer, Windows 8 Pre-sales, and Office offer.
Excluding the the impact of deferred revenue, adjusted earnings for the latest quarter were $0.65 per share.
On average, 29 analysts polled by Thomson Reuters expected the company to earn $0.56 per share for the first quarter. Analysts' estimates typically exclude special items.
Operating income for the first quarter fell 26% to $5.31 billion, while its adjusted operating income declined 7% to $6.66 billion.
Redmond, Washington-based Microsoft said revenue for the first quarter fell 8% to $16.01 billion from $17.37 billion in the same quarter last year. Excluding the deferral, adjusted revenue for the latest quarter was $17.36 billion. Twenty-seven analysts had a consensus revenue estimate of $16.42 billion for the first quarter.
Microsoft reaffirmed its fiscal year 2013 operating expense guidance of $30.3 billion to $30.9 billion.
The company stopped making specific profit or revenue forecasts in January 2009, citing market volatility.
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by RTT Staff Writer
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