Microsoft beats Street, reports strongest Q1 in 8 years

Strong sales of new and old products led Microsoft to its fastest growing Q1 since 1999, the company reported Thursday.

Strong sales of new and old products alike led Microsoft to its fastest first-quarter growth in eight years, with the company reporting growth in all five business segments and both revenue and earnings per share (EPS) that beat analyst expectations.

Revenue for the fiscal quarter ended Sept. 30 was up 27 per cent at $US13.76 billion compared to $10.81 billion a year ago, Microsoft said Thursday. Consensus estimates from Thomson Financial analysts were for the company to generate revenue of $12.57 billion. Microsoft's EPS for the quarter was $0.45, which also soundly beat Thomson First Call consensus estimate of $0.39. Net income for the quarter was $4.29 billion, a 23 per cent increase over the $3.48 billion reported a year ago.

At $5.92 billion, operating income for the quarter also had double-digit per centage growth: an increase of more than 25 per cent over operating income reported for the same period last year of $4.47 billion.

Microsoft's first quarter was buoyed by the highly anticipated launch of the Xbox 360 game Halo 3 on Sept. 25, just days before the quarter's close. In its first 24 hours on sale the game brought in $170 million in sales; it became the fastest selling video game in history after being in the market for just a week and a half, according to the company.

Strong performances from Microsoft's client, business, sever and tools and online divisions also contributed to revenue growth in the quarter. In particular, Microsoft said sales of its Windows Vista OS experienced double-digit growth through multi-year business contracts, and demand for Microsoft Office, Windows Server and SQL Server was also high.

Looking ahead, Microsoft said it expects to report revenue in the range of $15.6 billion to $16.1 billion for its second quarter, which ends Dec. 31. Operating income is expected to be in the range of $5.9 billion to $6.1 billion, while diluted EPS are expected to be between $0.44 to $0.46 for the second quarter, the company said.

For its fiscal year 2008, Microsoft expects revenue in the range of $58.8 billion to $59.7 billion and operating income in the range of $23.3 billion to $23.7 billion. Diluted earnings per share are expected to be between $1.78 and $1.81 for the fiscal year, the company said.

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Elizabeth Montalbano

IDG News Service
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