Microsoft Earnings Wrap-Up

Google (GOOG) is being cautious.  Apple (AAPL) is being prudent .  Now, another bellwether earnings announcement and more of the same. Thursday, Microsoft (MSFT) reported decent earnings but cut forward guidance amidst prevalent fears about the economy and uncertainty in how to predict its impact in the coming months.

Net income for the first quarter in Microsoft’s fiscal year came in at $4.373b, or 48 cents a share (diluted), up 2% from $4.289b (45cents/share) for the same period last year.  Revenue was up 9 percent to $15.06b.

The results were in line with Microsoft’s July guidance which forecast EPS of 47 to 48 cents a share and slightly ahead of analysts whose consensus estimate (Thomson Reuters) was 47 cents a share on revenues of $14.8b.

Broken out by division segments, Business division revenue was up 20% and Servers and Tools up 18%.  The Client Division saw a 1.9% jump and Online Services pushed ahead 15%. 

In operating income, the Client group was down slightly to $3,267m from $3,388m while  Servers and Tools was up to $1,151m from $959m  .  Losses grew at the online services group and income jumped in the Business division.

Entertainment and Devices, home to the Xbox platform,  was the laggard in revenue, off 6% to $1,814m, but the group was up modestly in Op. Income with $178m, up from $167.  

Entertainment and Device’s year over year results mirror the fall in U.S. game sales during August and September but, like the NPD September results,  may be somewhat misleading: in September of 2007, Microsoft released Halo 3.  It was one of the fastest selling console titles of all time, driving both game software results, and more notably for Microsoft, gaming hardware for the month . Pushed by Halo, in September 2007, the Xbox sold 527k units, nearly double its prior month’s finish.   This year there wasn’t a comparable blockbuster, as most years there isn’t. The data, therefore, doesn’t match up. (see image for more info; click charts to enlarge).

Looking forward, Microsoft is forecasting Q2 revenue in the range of $17.3 to $17.8b.  EPS is guided to 51 to 53 cents a share.  Analysts had expected slightly higher than the top end of the range (55cents and $17.9b.)