Microsoft’s Adjusted Earnings and Revenue Beat the Street

On Thursday after the closing bell, tech giant Microsoft (NASDAQ: MSFT) released its fiscal first-quarter earnings results.

The company reported operating income of $5.31 billion or $0.53 per share in the period. In last year’s corresponding quarter, the company reported operating income of $7.203 billion or $0.68 per share. The company said that its financial results reflect the deferral of $1.36 billion of revenue and $0.13 of diluted earnings per share due to the Windows Upgrade Offer, pre-sales of Windows 8 to OEMs prior to general availability, and the Office Offer.

On a non-GAAP basis, which is comparable to analysts’ consensus estimates, operating income for the first-quarter was $6.664 billion or $0.65 per share. Wall Street analysts had consensus earnings per share estimates for the company of $0.56 heading into Thursday’s report.

Revenues in the period were $16.010 billion compared to $17.372 billion in last year’s first-quarter. On an adjusted basis, which takes into account the deferred revenue for Windows Upgrade Offer, Windows 8 pre-sales and Office Offer, revenues were $17.364 billion. This compares to Wall Street consensus revenue estimates of $16.42 billion.

“The launch of Windows 8 is the beginning of a new era at Microsoft,” said Steve Ballmer, chief executive officer at Microsoft. “Investments we’ve made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners.”

The company’s Server & Tools segment posted an eight percent increase in sales during the first-quarter, driven by by double-digit revenue growth in SQL Server and more than 20 percent growth in System Center revenue.

Microsoft’s Business Division saw sales drop two percent in the quarter on a GAAP basis, but once adjusted for the impact of the Office Offer, revenues rose one percent.

The major weak area in the first-quarter for Microsoft was in its Windows and Windows Live division. Revenues fell 33 percent using GAAP standards to $3.24 billion and 9 percent on a non-GAAP basis. Windows 8 will become generally available October 26, 2012, according to the company’s earnings release.

“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.”

The Redmond, Washington-based company’s Entertainment and Devices segment posted revenue of $1.95 billion, which was a decrease of 1 percent versus the year earlier period. Xbox continues to be the top-selling gaming console in the United States with 49 percent market share. Microsoft will also be rolling out its Windows Phone 8 this fall, which should drive growth in this division going forward.

The company affirmed its guidance for 2013 operating expenses between $30.3 billion and $30.9 billion.

In Thursday’s after hours trading session, MSFT was last trading down around 2.70 percent to $28.70. During the regular trading session, the stock fell 0.32 percent to $29.50. Year-to-date, MSFT has added a little less than 14 percent.

Tags: Steve Ballmer

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