Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:
Microsoft: Q1 Earnings Up 11 Percent [Business Week]
Summary: Microsoft Corp. saw an 11% rise in fiscal Q1 earnings thanks to stronger sales of server software and some cost savings. For the three months ended Sept. 30, Microsoft earned $3.48 billion, or $0.35 per share, versus the Street's expectation of $0.31 per share. That compares with earnings of $3.14 billion, or $0.29 per share, in the same period a year earlier. Revenue for fiscal Q1 was $10.81 billion, an 11% increase over $9.74 billion a year earlier. Shares rose $0.21 (less than 1%) in after-hours trading. Net income benefited from better-than-expected investment income and a reduction in spending, although the company warns that some of the saved money will be spent in the current quarter on marketing. The company also enjoyed higher-than-expected revenue from server software and the Xbox videogame arm, where revenues shot up by 70%. For fiscal Q2, Microsoft anticipates EPS between $0.22 and $0.24, reflecting a hit of approximately $0.11 to reflect the deferral of about $1.5 billion in revenue to fiscal Q3. The deferral is planned because Microsoft will be offering computer purchasers coupons for free or discounted upgrades to the new versions of its Windows operating system and Office business software. Neither Windows Vista, the company's new operating system, nor Office 2007 will reach consumers until January, and the coupons are intended to entice shoppers to purchase Windows-powered computers as holiday gifts despite their obsolete software.
Related links: Microsoft F1Q07 (Qtr End 9/30/06) Earnings Call Transcript • Insight From Microsoft's 10-Q • Microsoft's Earnings from a Value Manager's Perspective • Microsoft Discusses Search and Online Acquisitions • Microsoft Releases IE7, Hopes to Gain Back Browser Market Share • Microsoft: "The Younger Audience Is Our Future" • Microsoft Gets Boost From Xbox Sales [Wall Street Journal] • Tepid Tidings [Wall Street Journal]
Potentially impacted stocks and ETFs: Microsoft Corp. (NASDAQ:MSFT) • iShares S&P 500 Index (NYSEARCA:IVV), iShares Russell 1000 Index (NYSEARCA:IWB), streetTRACKS DJ Wilshire Large Cap (ELR)
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