Microsoft misses on earnings in $16B quarter ahead of Win 8 launch

Company comes in shy of expectations both on sales and revenues as Windows division sales are down 33 percent. Investors await conference call for news on Surface, Windows 8.

Hurt by a 33 percent decline in its Windows business, Microsoft missed estimates for its first fiscal quarter ended September 30 as it posted 53 cents per share earnings on $16.01 billion in revenue.

Heading into the earnings announcement, the whisper number was for 56 cents per share.

During the same quarter a year ago, Microsoft earned 68 cents a share on $17.37 billion in sales.

Here's how the year-to-year comparisons looked:

  • Server & Tools: $4.55 billion up 8 percent
  • Microsoft Business Division: $5.50 billion, down 2 percent
  • Windows & Windows Live: $3.24 billion, a 33 percent decrease
  • Online Services Division: $697 million, a 9 percent increase
  • Entertainment and Devices Division: $1.95 billion, a decrease of 1 percent

The immediate reaction among investors was disappointment with the stock down more than 1 percent in after-hours trading.

The results follow on the heels of Microsoft's first loss as a public company last quarter.

"The launch of Windows 8 is the beginning of a new era at Microsoft," CEO Steve Ballmer said in a prepared statement. "Investments we've made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."

Microsoft

While investors will scour the earnings statement for clues to the future -- as well as the investor conference call scheduled for later -- this was one of those rare moments in Microsoft's history where the important news accompanying its quarterly earnings statements was not so much the quarterly earnings statement itself. The reason: next week Microsoft will officially release the Windows 8 operating system as well as its Surface tablet as the company takes its next big steps toward a post-PC world that it has dominated for much of the last three decades. That's a market that continues to slow down, a trend underscored by recent warnings from both Intel and Hewlett-Packard of sluggish demand ahead.

But with PC sales slowing, Wall Street is hoping that the Surface tablet will help secure Microsoft s future. Indeed, Credit Suisse forecast PC shipments to grow by just 5.6 percent year-over-year in calendar 2013. The opposite side of that coin: the firm says that Windows 8 "will have a more meaningful position in tablets than the market appreciates, which we believe will serve as a catalyst for the stock."

Microsoft

Earlier this week, Microsoft priced the Surface tablet beginning at $499 and $599 with the cover-keyboard.

In a statement, Microsoft said the numbers reflected the deferral of $1.36 billion of revenue and $0.13 of diluted earnings per share, related to its Windows upgrade offers as well as to pre-sales of Windows 8 to manufacturers and special offers for its Office suite.

 

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