Microsoft shares rise on profit, raised forecasts

Jan 25 | Updated: Jan 26 2008, 05:02am hrs
Microsoft Corp advanced 4.8% in early trading after raising annual sales and profit projections, reassuring investors that the company can cope with slowing economic growth.

Microsoft, the worlds largest software maker, rose $1.60 to $34.85 after closing at $33.25 on the Nasdaq Stock Market on Thursday.

If the gain carries over in regular US trading, it would be the biggest increase in three months.

The shares had dropped 6.6% this year before Friday.

Increasing shipments of personal computers have helped Microsoft escape the effect of any US slowdown, chief financial officer Chris Liddell said on Thursday in an interview.

The company also now gets about 60% of its sales outside North America, making it less vulnerable to the whims of US customers, he said.

This will help the psychology of Microsofts stock and will help tech investors feel better about the tech sector overall, said Chuck Jones, who helps oversee $17 billion, including Microsoft shares, at Atlantic Trust Private Wealth Management in San Francisco. Microsoft has large international exposure and the international growth is helping.

Chief executive officer Steve Ballmer led the company to a 79% increase in net income in the second quarter to $4.71 billion, or 50 cents a share.

That surpassed the 46-cent average of analysts estimates compiled by Bloomberg. Sales climbed 30% to $16.4 billion, topping projections.

Microsoft, based in Redmond, Washington, said profit in the year ending June 30 will be $1.85 to $1.88 a share, on sales of $59.9 billion to $60.5 billion.

Analysts on average estimated profit of $1.81 and sales of $59.4 billion.

It was striking how much they raised earnings guidance for the year, said Ken Allen, a portfolio manager at T. Rowe Price Associates Inc in Baltimore, the fifth-biggest institutional holder of Microsoft shares. Microsoft has widely been viewed in the last couple of years as a company with only modest growth prospects. Theyve really proved a lot of doubters wrong.

Microsoft underperformed the Dow Jones Industrial Average for the first nine months of 2007 before beating sales projections by more than $1 billion in its first quarter.

That propelled the stock to a 21% increase in the December period, the best performance in the Dow and

Microsofts biggest quarterly increase since 2001.