Microsoft earnings top street

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Microsoft reported earnings that bested Wall Street's expectations Thursday, including positive operating income from its Entertainment and Devices Division.

The company said net income for the quarter ended Dec. 31 soared 81% to $4.7 billion on revenue that jumped 31% to $16.37 billion. The company also upped its full fiscal-year net earnings guidance to as much as $1.88 a share, while previously it didn't expect more than $1.81 per share.

The hefty financial report had after-hours traders bidding shares of Microsoft almost 5% higher, after the stock had already gained 4% during the regular trading day.

The comapny's Entertainment Devices Division posted operating income of $357 million, compared with a loss of $302 million in the same quarter a year earlier. Revenue was up only slightly, to $3.06 billion from $3 billion, but results were helped significantly from dropping costs associated with the manufacturing of Xbox 360 video game consoles.

The division, which also includes the Zune digital music player and accompanying Web site, along with other entertainment-related assets, is poised to complete its first year of profitability this year, CFO Chris Liddell said.

Microsoft ended the calendar year with 17.7 million life-to-date sales of Xbox 360 consoles, having shipped 4.3 million in the quarter ending Dec. 31, Microsoft's fiscal second quarter.

Executives -- minus founder Bill Gates, who was delivering a speech overseas -- boasted that Xbox 360 had four game titles in the quarter that sold more than 1 million copies each, better than Wii or PlayStation 3.

Liddel added that the average Xbox 360 user purchases about 7 games, also better than Wii or PS3.

Music downloads at Zune.net, doubled year-over-year, though executives declined to share detailed numbers.

Microsoft's still unprofitable online services business posted revenue of $863 million, up 38% year-over-year. The division lost $245 million, worse than $118 million lost the year earlier, in part due to its $6 billion acquisition of aQuantive.

As for Gates, he gave a keynote presentation Thursday at the annual World Economic Forum in Davos, Switzerland on how "creative capitalism" can allow businesses to help stamp out global poverty and diseases.

But he started out with some humor. Referring to his decision to leave his daily work duties at Microsoft behind as of the summer, he quipped: "I'm not worried. I believe I'm still marketable." After all, Gates joked, "I'm a self-starter, I'm proficient in Microsoft Office - I guess that's it."

Georg Szalai in New York contributed to this report.
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