Microsoft Q1 Profit Up 11 Percent

Microsoft, the world’s largest producer of software, on Thursday posted an 11 percent increase in quarterly net profit, driven largely by sales within its database division and decreasing losses associated with its Xbox 360 gaming console, which launched nearly a year ago, Reuters reports via Computerworld.com.

Redmond, Wash.-based Microsoft said it plans to defer $1.5 billion in revenue associated with the launches of its Office 2007 software suite and its much-anticipated Windows Vista operating system (OS), according to Reuters. Microsoft plans to release Vista to enterprises and manufacturers before the end of year and to consumers in early 2007.

That deferral will cut Microsoft’s profit by about 11 cents per share this quarter, and—including those costs—Microsoft expects profits between 22 cents and 24 cents per share in the second quarter and revenue of between $11.8 billion and $12.4 billion, Reuters reports.

An average of analysts’ projections for the firm’s second-quarter earnings suggests that Microsoft will post Q2 earnings of 36 cents per share on $13.4 billion in sales, according to Reuters Estimates.

The deferral of revenue is due to an initiative launched by Microsoft this week, according to Reuters, under which customers who purchase PCs between Oct. 25, 2006 and March 15, 2007 will be offered Vista discount coupons to upgrade to the OS upon its release.

Microsoft also announced expectations for its complete-year earnings, which it predicts will range between $1.43 to $1.46 per share on revenue of between $50 billion and $50.9 billion, Reuters reports. Analysts on Wall Street have predicted complete-year profit for the firm to be $1.44 per share on sales of $50.3 billion, according to Reuters.

Chris Liddell, Microsoft chief financial officer, said the outlook is deceptively low, noting that a $20 billion tender offer for shares set for August was not finished, resulting in a bigger share base that would decrease earnings by as much as 3 cents more than predicted, Reuters reports.

The company’s first quarter ended on Sept. 30, and it reported net profit of $3.48 billion, or 35 cents per diluted share, compared with the $3.14 billion, or 29 cents per diluted share, posted a year earlier, according to Reuters.

An average of analysts’ predictions suggested Microsoft would report earnings of 31 cents per share on revenue of $10.7 billion, according to Reuters Estimates.

The firm saw sales and profit increases within its server and tools business, due largely to a 30 percent increase in year-to-year sales of its SQL server database software platform and strong Windows server software demand, Reuters reports. It also announced that it has shipped some 6 million Xbox consoles since its launch last fall, and that losses associated with its entertainment and devices unit decreased to $96 million from $173 million one year earlier, according to Reuters.

Related Links:

• Microsoft Clarifies Vista Licensing; Users Still Not Pleased

• Microsoft Offers Windows Vista Upgrade Coupons

• Microsoft Vista RTM Date Bumped Due to Bug

This article is posted on our Microsoft Informer page. For more news on the Redmond, Wash.-based powerhouse, keep checking in.

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