Microsoft exceeds expectations on buoyant sales

Steve Lohr The New York Times Media Group
International Herald Tribune
01-26-2008
Microsoft exceeds expectations on buoyant sales
Byline: Steve Lohr The New York Times Media Group
Edition: 1
Section: FINANCE/BUSINESS

Microsoft reported quarterly sales and profit gains that surpassed Wall Street's expectations and delivered an optimistic outlook on Thursday, suggesting that a weakening economy would not slow it down.

The performance was led by Microsoft's three major businesses: personal computer operating systems, office productivity programs and software that runs computers in corporate data centers.
The company continues to struggle and lose money as it battles Google in its new markets for Internet services and online advertising. But for Microsoft, that is a financial challenge of the future, one overshadowed by the heft and continuing growth in its personal computer products, led by the Windows Vista operating system and Office 2007. Microsoft's desktop software divisions accounted for 56 percent of the company's revenue and more than 80 percent of the operating profit of its product groups.

"Microsoft is still investing without much to show for it yet in the online business, but that is kind of nitpicking when you look at the results of the company over all," said Charles di Bona, a securities analyst for Sanford C. Bernstein. "The strong performance seems to be pretty much across the board."

Other leading technology companies, like Intel and Apple, have reported strong quarterly results, only to have their shares punished after they warned of cloudy outlooks given the increasing possibility of an economic recession.

But Microsoft executives still sound confident. In a conference call with analysts, Christopher Liddell, Microsoft's chief financial officer, said, "We have not seen any significant spillover for an economic slowdown in the U.S."

Sixty percent of Microsoft's business is now outside the United States, which helps insulate the company from the chill of a slowdown in the American economy. Even so, Liddell noted that Microsoft's sales in the American market in the last six months had grown at a healthy 15 percent clip.

For its 2008 fiscal year ending in June, Microsoft offered a bit more optimism. The company said revenue for the year would be $59.9 billion to $60.5 billion, above the analysts' consensus of $59.4 billion. Microsoft said its earnings would be $1.85 to $1.88 a share, up from Wall Street's projection of $1.81 a share.

(Copyright 2008)