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Microsoft Shares Rise After 1Q Profit

Posted by iNext - 2005-10-31

SEATTLE - Microsoft Corp. shares rose nearly 3 percent Friday, a day after the world's largest software maker reported a 24 percent increase in its first-quarter profit.
The company's results were released after regular trading Thursday. Its shares rose 68 cents, or 2.7 percent, to close at $25.53 on the Nasdaq Stock Market. Its shares have traded in a 52-week range of $23.82 to $30.20.

A top Microsoft official said after the earnings report that sales of its new  Xbox console and SQL Server are expected to grow steadily — rather than experiencing major spikes following next month's release dates.

In an interview with The Associated Press, Microsoft Chief Financial Officer Chris Liddell said he thought analysts were expecting bigger spikes in sales of the company's new Xbox 360 video game console and SQL Server, both of which are due out in November. But Microsoft expects to "see more of a ramp-up throughout the course of the year."

For the current fiscal second quarter ending Dec. 31, Microsoft said Thursday it expects to earn 32 cents or 33 cents per share, on revenue of between $11.9 billion and $12 billion. The revenue figure is slightly below the current Wall Street consensus estimate of $12.29 billion.

Microsoft did not change its overall revenue guidance for the full fiscal year ending June 30 of between $43.7 billion and $44.5 billion.

Earnings guidance for the full fiscal year was only slightly changed from the previous quarter's guidance for that period. Microsoft said it expects to earn $1.26 to $1.30 per share, including a 2-cent charge related to a RealNetworks Inc. settlement. The company had previously said it expected to earn $1.27 to $1.32 per share for the full year, without the charge.

"We feel good about the quarter ahead and good about the year ahead," Liddell said.

Microsoft also said Thursday that it expects to accelerate a previously announced plan to buy back around $30 billion in company stock. Microsoft has already repurchased about $11 billion in shares, and Liddell said the company expects to repurchase the additional $19 billion by the end of 2006. It previously had said it expected to complete the plan by June 2008.

Microsoft plans to ship between 4.5 million and 5.5 million Xbox 360 consoles worldwide by June 2006. Analyst Rick Sherlund with Goldman Sachs said the fact that Microsoft is forecasting a steady stream of Xbox consoles, rather than big spikes, will likely mean shortages for customers during the holidays.

"You will not come close to meeting demand in the December quarter," he said.

Sherlund said that raises concerns that there could be some production snafus, but he noted that the company still has plenty of time to gain an edge over Sony's PlayStation 3, which isn't due out until next spring. And in general, Sherlund said it makes sense for the company to send out a steady supply of the consoles, rather than to have spikes and lulls.

Microsoft said it is on track with its Xbox manufacturing plans.

For the fiscal first quarter ended Sept. 30, the Redmond-based software maker earned $3.14 billion, or 29 cents per share, up from $2.53 billion, or 23 cents per share, in the same period last year.

The most recent results included a charge of 2 cents per share to account for a legal settlement with RealNetworks. The results for the year-ago period included a one-time charge of $359 million, or 3 cents per share, to account for a legal settlement with Novell Inc.

Without the one-time charge, the company would have earned 31 cents per share. Analysts polled by Thomson Financial were expecting earnings of 30 cents per share on revenue of $9.78 billion.

Revenue for the quarter rose to $9.74 billion from $9.19 billion in the same period last year.

Analyst Jamie Friedman with Fulcrum Global Partners said the company did fine overall.

"I would characterize it as a quiet quarter," he said.


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