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Xbox or no Xbox, Microsoft sees profit in servers and WindowsBy ALLISON LINN AP Business Writer The Associated Press Yes, it was hard to get Junior one of Microsoft Corp.'s Xbox 360s this holiday season. But the shortage of videogame consoles last quarter didn't concern investors much in the face of healthy growth of the company's more vanilla -- and profitable -- businesses, such as new server software and its flagship Windows computer operating systems. Microsoft said earnings rose 5 percent for the quarter ended Dec. 31, and it slightly increased its profit guidance for the coming fiscal year. The results sent Microsoft shares slightly higher in after-hours trading. Analyst Mark Stahlman of Caris & Co. saw that as further evidence that people are willing to spend money on information technology this year. He said some analysts may also have been happy that the company did not follow in the footsteps of chip maker Intel Corp., which scaled back expectations when it reported earnings earlier this month. "People, to some extent, were relieved," Stahlman said. For the three months ended Dec. 31, the Redmond-based software maker on Thursday reported earnings of $3.65 billion, or 34 cents per share, up from $3.46 billion, or 32 cents per share, in the same period last year. The results included a one-time tax benefit of $108 million, or 1 cent per share. Without the one-time benefit, Microsoft met the expectations of analysts polled by Thomson Financial, who were projecting earnings of 33 cents per share on revenue of $11.96 billion. Microsoft said revenue rose 9 percent to $11.84 billion, up from $10.82 billion in the same period a year earlier. Still, the company conceded Thursday that there were problems getting components for its Xbox 360 console. As a result of supply constraints, the company said it would only sell 2.5 million units worldwide in the 90 days following the console's launch last Nov. 22, down from earlier promises that the company would sell up to 3 million. Liddell said the problems weren't expected to be long-term. Microsoft had shipped 1.5 million Xbox 360 videogame consoles by Dec. 31, he added, and is still on track to ship between 4.5 million and 5.5 million by June 30, when its fiscal year ends. But analyst Jamie Friedman with Soleil Securities said the company failed to meet even his reduced expectations for Xbox 360 sales, while also losing more money than he expected. Microsoft's home and entertainment division, which includes Xbox, lost $293 million during the quarter, after earning $55 million in the year-ago period. Microsoft loses money each time it sells an Xbox 360 console, although the eventual goal is to break even. Microsoft's MSN online division also saw earnings fall to $58 million, from $130 million in the same quarter last year. Liddell attributed the drop to a significant decline in its business of offering narrowband Internet connections, which is being supplanted by increased popularity in faster broadband offerings. On the other hand, the company's unit that focuses on small businesses, Microsoft Business Solutions, was profitable for the first time since the company divided itself into seven business units four years ago. Its Mobile and Embedded Devices unit also posted its first profit since the divisions were announced. Liddell said he didn't expect those units to remain consistently profitable this fiscal year ending June 30. The software maker raised its earnings guidance slightly for the fiscal year. The company said it now expects to earn between $1.28 and $1.31 per share, up from previous guidance of $1.26 to $1.30 per share. Revenue for the full fiscal year is now expected to be between $44 billion and $44.5 billion, up from previous guidance of between $43.7 billion and $44.5 billion. For the current third quarter that ends in March, the company said it expects to earn between 32 cents and 33 cents per share, on revenue of between $10.9 billion and $11.2 billion. For the six months ended Dec. 31, Microsoft said it earned $6.79 billion, or 63 cents per share, on revenue of $21.58 billion. That compares with earnings of $5.99 billion, or 55 cents per share, on revenue of $20 billion, in the same six-month period a year earlier. The company also said it returned $8.5 billion to shareholders during the quarter in the forms of dividends and $7.7 billion in share repurchases. Microsoft shares rose 10 cents to close at $26.50 in regular trading Thursday on the Nasdaq Stock Market. The results were announced after the markets closed. In after-hours trading, shares gained an additional 51 cents, or 1.9 percent. In the past 52 weeks, its shares have traded between $23.82 and $28.85. ___ On the Net: http://www.microsoft.com |