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Microsoft Q1 profit beats forecasts, reports strong sales in Office and server software

Oct 25 2013, 16:56 IST
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Microsoft's revenue for Q1 rose 16 per cent to $18.53 billion, beating the $17.79 billion analysts were expecting. Microsoft's revenue for Q1 rose 16 per cent to $18.53 billion, beating the $17.79 billion analysts were expecting.
SummaryMicrosoft's net income in three months through Sept 30 grew 17 per cent to $5.24 billion.

Microsoft Corp cruised past Wall Street's quarterly profit and revenue forecasts on Thursday, helped by strong sales of its Office and server software to businesses, sending its shares up more than 5 per cent after hours.

The world's largest software company is the latest tech firm to surprise investors with a powerful performance, coming the same day as Amazon.com Inc eased past average revenue forecasts.

Technology is proving one of the most resilient sectors in an uncertain economy, with 84 per cent of tech companies beating earnings estimates for the latest quarter.

Analysts had trimmed profit targets for Microsoft over the past three months, concerned by the launch of an ambitious reorganization by retiring Chief Executive Steve Ballmer and the pricey acquisition of Nokia's handset business, even as the company's core personal computer market ebbs away.

"The earnings report will positively surprise the market, especially in the context of the soft expectations going in and the dismal report last quarter," said Todd Lowenstein, a portfolio manager at fund firm HighMark Capital.

"Beating on revenue and earnings handily will boost confidence that the reorganization is pivoting them in the right direction."

Microsoft said nothing about its board's search for a new CEO to succeed Ballmer, who announced in August his plan to retire within 12 months.

As part of its reinvention as a "devices and services" company, Microsoft now reports under two main groups, one covering its devices and consumer business, and one its commercial business.

The commercial side was the stronger in the quarter, posting a 10 per cent increase in revenue, chiefly from selling Office and server software to businesses. The consumer and hardware group's revenue rose a more modest 4 per cent, held back by another poor quarter for the Windows system as sales of personal computers continue to decline.

PCS FADE AWAY

According to industry research firm Gartner, PC shipments fell 8.6 per cent last quarter, confirming a worldwide trend towards tablets that has benefited Apple Inc and Google Inc but hurt traditional PC stalwarts Microsoft and Intel Corp.

PC sales have been sliding for the last 18 months, although Microsoft Chief Financial Officer Amy Hood said in an interview on Thursday that there were "signs of stabilization."

Sales of Windows software to PC makers, such as Hewlett-Packard Co, Lenovo Group and Dell Inc , to install on their machines fell 7 per cent in the quarter.

Microsoft said its Surface tablet posted a sharp increase to $400 million in

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