April 23, 2010 in Business

Microsoft profits up on business spending

Jessica Mintz Associated Press
 

Amazon, Alaska post profit

Amazon.com Inc. said Thursday that its first-quarter profit surged 68 percent to $299 million, or 66 cents per share, in the January-March period. Revenue rose 46 percent to $7.13 billion. But investors were spooked by Amazon’s forecast for the current quarter and its shares fell 6 percent in extended trading.

The parent of Alaska Airlines and Horizon Air did what several of its larger rivals couldn’t in the first three months of the year: turn a profit. Alaska Air Group, based in Seattle, said it earned $5.3 million, or 15 cents a share, in the first quarter. Revenue rose 11.8 percent to $829.9 million.

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Amazon.com and Alaska Air Group also had profitable quarters/A10

SEATTLE – An improvement in corporate spending on computers helped Microsoft increase its net income 35 percent in the most recent quarter, but investors wanted even stronger signals of a recovery and sent Microsoft shares down sharply in after-hours trading Thursday.

For the January-March fiscal third quarter, Microsoft earned $4.01 billion, or 45 cents per share. That was higher than the 42 cents per share forecast by analysts surveyed by Thomson Reuters. It was an increase from $2.98 billion, or 33 cents per share, a year ago.

Revenue rose 6 percent to $14.5 billion, slightly more than the $14.4 billion analysts were expecting. Microsoft had $13.6 billion in revenue in the same quarter a year ago.

Investors looking at the optimistic reports issued recently from Intel Corp., IBM Corp. and other big technology companies may have wanted more from Microsoft, said Edward Jones analyst Andy Miedler. He noted that revenue from the group that makes server software crept up just 2 percent.

The division responsible for Windows increased revenue 28 percent to $4.4 billion. Microsoft’s general manager of investor relations, Bill Koefoed, said during a conference call that sales of copies of Windows for consumers rose 35 percent. Business licenses for Windows, which are more profitable for Microsoft, grew 15 percent.

Businesses may have begun replacing aging computers and software, but it’s early in the process, said Chief Financial Officer Peter Klein. He called the business spending environment still “challenging.”

Microsoft’s online business, which includes Web search and online advertising, saw revenue rise 12 percent to $566 million, but it still posted a wider operating loss of $713 million.

Microsoft didn’t give revenue or earnings guidance for the next fiscal year, which starts in July. But Klein said he expects sales of Windows 7, the new Office 2010 and updates to SharePoint and SQL Server, two business products, to drive revenue. Klein also said he expects the Web advertising market to improve in fiscal 2011.

Microsoft shares fell $1.08, 3.4 percent, to $30.31 in extended trading Thursday. Before results were released, the stock gained 6 cents to close at $31.39.

Standard and Poor’s said Apple Inc. surpassed Microsoft in market value Thursday to become the second-largest company listed on the S&P 500 index, after Exxon Mobil Corp. The S&P values companies based on the number of shares available for public trading, so it only counts 87 percent of Microsoft’s value. Counting total market capitalization, Microsoft is still bigger than Apple.

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