Microsoft's profit falls short of expectations

Microsoft said today that its fiscal fourth-quarter profit jumped 42 percent, helped by strong sales of its Office and Windows software, but the company offered a soft outlook for the current quarter.

Earnings for the three months ended June 30 rose to $4.3 billion, or 46 cents a share, but that missed Wall Street's expectations by a penny a share. In the year-ago quarter, Microsoft reported earnings of $3.04 billion, or 31 cents a share.

Revenue increased 18 percent to $15.8 billion from $13.4 billion last year, just ahead of Wall Street's average forecast of $15.65 billion, according to a Thomson Financial survey.

"Those are very good numbers for a company of our size, in what many companies are finding challenging (conditions)," Microsoft's chief financial officer, Chris Liddell, said in an interview.

Despite the solid results, Microsoft offered guidance short of Wall Street's expectations for the current first quarter. The company said it expects to earn 47 to 48 cents a share on $14.7 billion to $14.9 billion in sales.

Analysts had been looking for a profit of 49 cents a share on $15.1 billion in revenue.

Shares sank $1.52, or 5.5 percent, to $26 in after-hours electronic trading, after rising 26 cents to close at $27.52 in the regular session.

The division responsible for Microsoft's longtime surefire profit engine, the Windows operating system, posted a 16 percent rise in earnings to $3.22 billion in the quarter.

Liddell said the company sold 50 million Vista licenses in the quarter, for a total of 190 million since the operating system's January 2007 launch.

Strong PC sales, up more than 15 percent from a year ago, helped bolster results for both Windows and Microsoft's Office productivity software. Earnings for the segment that produces Office and other business software gained 12 percent to $3.34 billion.

But the segments responsible for the Xbox 360 and for selling online advertising lost money in the quarter. Microsoft's online services business lost $488 million, more than double its year-ago loss.

For the full fiscal year, Microsoft's earnings rose 26 percent to $17.7 billion, or $1.87 a share, from $14.1 billion, or $1.42 a share in fiscal 2007.

Sales for the year surged 18 percent to $60.4 billion from $51.1 billion last year.

Microsoft's full-year guidance for fiscal 2009 was much the same as three months ago. The company forecast a profit of $2.12 to $2.18 a share on $67.3 billion to $68.1 billion in revenue.

Wall Street currently expects the company to earn a more modest $1.88 a share on $60.2 billion in sales.