Microsoft beats street profit view, shared up

Microsoft Corp. beat Wall Streets profit forecast as personal computer sales held up
better than expected, lifting its shared 2,5 percent after hours.
The results buoyed optimism around the worlds largest software maker, which is
lining up a new tablet friendly version of Windows for later this year and is looking to make
a dent into Apple Inc and Google Incs domination of the mobile market this holiday
shopping season.
The results were a fair amount better than we were looking for, said Rick Sherlund,
an analyst at Nomura Securities. Overall revenue growth was 6 percent, and this is before
the new product cycle, which should come around October
Microsoft whose shares hit a 4- year high of U$$32.95 last month has not said
when its Windows 8 system will be released, but most in the industry expect it on devices
from around October, offering an alternative to Apples runaway iPad. New Windows
Smartphone software is expected around the same time.
Next year at this time we should be talking about Windows 8 mobile and how its
contributing or not to the company, said Kim Forrest, analyst at Fort Pitt Capital Group.
But we really need Windows 8 to come out all devices, to see if its to have that synergy or
not.
The Redmond, Washington based company reported fiscal third-quarter profit of U$
$5.11 billion, or 60 cents per share, compared with $5.23 billion, or 61 cents per share, in the
year-ago quarter when it posted a one-time tax gain.
Profit beat analysts average forecast of 57 cents per share, according to Thomson
Reuters 1/B/E/S.
Sales rose 6 percent to $17.41 billion, driven by strong demand for its server software
products and office application. Analysts had expected sales of $17.18 billion.
Worldwide personal computer sales rose a modest 1.9 percent in the quarter,
according to tech research firm Gartner Inc. that was better than expected in a market facing
hard-drive shortages from Thailand and the onslaught of Apple Inc.s iPad.
That helped Microsoft, which supplies the operating system for 90 percent of PCs, to
post a 4 percent increase in sales of Windows, still its main product.
The Windows beat was a positive surprise, looking at about 4 percent growth, versus
expectations for about a 4 percent decline, said Josh Olson, an analyst at Edward Jones.
We also had solid business and server performance as well. The Big Three, if you
will, in terms of the revenue drivers, were all a little bit better than expected, with Windows a
lot better than expected."
On the downside, Microsofts usually profitable entertainment and devices unit posted
a quarterly loss due to falling sales of its aging Xbox console and increased research and
marketing costs for its new Windows Smartphone software.
There was weakness in entertainment and devices, said Sid Parakh, an analyst at
McAdams Wright Ragen. If that were to have come in in-line, it would have been a pretty
nice beat.
Traditional console sales are down across the board this year hurting Microsoft,
Sony Corp, and Nintendo Co. Ltd. as Apples iPad and other tablets grab a slice of the
lucrative market.
Microsoft shares rose to $31.87 in extended trading, after closing at $31.01 on Naslaq.
The stock is up 20 percent so far this year, outpacing the tech-heavy Nasdaqs 16
percent gain, and a 10 percent rise in the Standard & Poors 500.

But it is still below levels of 10 years ago, as investors worry about the companys
ability to match Apple and Google in online and mobile technology. Apples market value is
now comfortably twice that of Microsoft, and its sales of iPhones last quarter exceeded
Microsofts overall revenue.
Microsoft is the cheapest of the big tech stocks, with a price hovering around 10.7
times expected earnings for the next 12 month, or about 14 percent lower than its peers,
according to StarMine.