Microsoft misses targets as revenues slip

SAN FRANCISCO (MarketWatch)
Microsoft Corp. reported results from its fiscal fourth quarter profit that fell well short of Wall Street’s expectations as the software company felt the effect of continued weakness in the PC market
In an e-mail to clients, Walter Pritchard of Citigroup described the results as “the sloppiest quarter in memory,” noting weakness in the main Windows business as well as servers and tools coming in under his forecast
For the quarter ended June 30, Microsoft said it earned $4.97 billion, or 59 cents a share, on revenue of $19.9 billion, compared with a loss of $492 million, or 6 cents a share, on $18.06 billion in sales in the same period a year ago
The results were affected by a charge of $900 million, or 7 cents a share, related to inventory adjustments and price changes to the Surface RT table
Excluding one-time items, Microsoft would have earned 52 cents a share, while analysts surveyed by FactSet had forecast Microsoft to earn 75 cents a share on $20.7 billion in sales for the quarter ended June 30

Speaking on a conference call, Microsoft Chief Financial Officer Amy Hood said that as the PC market slumped, “our Windows business declined [and] we are working to transition this business into the modern era.”

Hood added that the company continued to see strong demand for enterprise and cloud-based software offerings

Hood also said that Microsoft will host a meeting with financial analysts at the company’s Redmond, Wash. headquarters in late September to talk more about the company’s realignment and full-year outlook

Hood said a date for the meeting would be announced, soon

But some analysts sad that Microsoft has its work cut out for itself, as the drop-off in PC demand appears likely to continue for some time

“The PC decline has finally caught up with them,” said analyst Colin Gillis, of BGC Partners

“We’re going to sell three times as many smartphones as PCs this year, and we may have already seen that historical peak in PC sales.”

Microsoft’s Windows division saw revenue grow 6% from a year ago, to $4.4 billion, but adjusting for deferred revenue from the company’s Windows upgrade offer, the division’s revenue fell 6% from the fourth quarter of 2012

Microsoft’s business division, which includes Office 365, reported sales of $7.2 billion, a 14% increase from last year’s fourth quarter

Server and tools revenue rose 9% to $5.5 billion, entertainment and devices revenue climbed 8% to $1.92 billion and online services revenue reported a 9% increase in sales, to reach $804 million from the same period a year ago

The results come a week after Chief Executive Steve Ballmer announced a sweeping company realignment meant to focus Microsoft more on services and devices

“Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses,” Ballmer said, in a statement on Microsoft’s earnings results