Microsoft still driven by standbys
SEATTLE — Microsoft Corp.’s well-received second-quarter earnings report illustrates a blessing and a curse for the technology company: While it may get attention for things like its Xbox 360 videogame console and MSN Internet search engine, when it comes to making money, it depends on less flashy standbys such as Windows, Office and server software.
“They’re kind of a victim of their own success,” said James Ragan, an analyst with Crowell, Weedon and Co.
A positive quarterly earnings report spurred by those cash cows, combined with a relatively rosy outlook for the coming months, appeared to offset any concerns about production snafus with the much-hyped Xbox 360 and ho-hum predictions for its MSN Internet unit.
The results pleased investors Friday. Microsoft shares rose $1.29, or 4.9 percent, to close at $27.79 Friday on the Nasdaq Stock Market.
On Thursday, Microsoft said that for the quarter ended Dec. 31, earnings rose 5 percent to $3.65 billion, or 34 cents per share, up from $3.46 billion, or 32 cents per share, in the same period last year. Revenue rose 9 percent to $11.84 billion, up from $10.82 billion in the same period a year earlier
The Redmond company conceded in a call with analysts Thursday that short-term problems in getting Xbox 360 components hurt its ability to push as many of the consoles immediately into consumers hands. Analysts said it also resulted in a slight revenue shortfall for the quarter. Microsoft also said it expects revenue for its MSN online division to be flat for its fiscal year ending June 30, in part because the company is speeding up efforts to launch its own system for selling Internet advertising.
At this point, Microsoft is still losing money every time it sells an Xbox 360, although the goal is to eventually break even on the consoles and make money on games and other add-ons. Its MSN Internet division, while profitable, represents only a very small portion of its overall earnings.
Ragan said the fact that Windows, Office and server products continue to generate billions of dollars in quarterly profits — while good news for the company’s bottom line — also makes it that much harder for efforts such as MSN to make a dent.