Microsoft beats forecasts as Q1 profit jumps 17 per cent

 Reuters   Seattle     Last Updated: October 25, 2013  | 00:00 IST
Microsoft beats forecasts as Q1 profit jumps 17%
PHOTO: Associated Press

Microsoft Corp cruised past Wall Street's quarterly profit and revenue forecasts, helped by strong sales of its Office and server software to businesses, sending its shares up 6 per cent after hours.

For the first quarter, the technology giant posted a 17 per cent increase in profit to $5.2 billion, or 62 cents per share, up from $4.5 billion, or 53 cents per share, in the year-ago quarter.

Revenue rose 16 per cent to $18.5 billion, helped by rising sales of its Office software.

Analysts had trimmed profit estimates for Microsoft over the past three months, concerned by the launch of an ambitious reorganisation by retiring Chief Executive Steve Ballmer and the pricey acquisition of Nokia's handset business, even as the company's core personal computer market ebbs away.

"The earnings report will positively surprise the market, especially in the context of the soft expectations going in and the dismal report last quarter," said Todd Lowenstein, a portfolio manager at fund firm HighMark Capital. "Beating on revenue and earnings handily will boost confidence that the reorganization is pivoting them in the right direction."

Technology is proving one of the most resilient sectors in an uncertain US economy, with 84 per cent of tech companies beating analysts' earnings estimates for the latest quarter.

Microsoft, the world's largest software company, is the latest tech firm to surprise investors with a powerful performance, coming the same day as Amazon.com Inc eased past average revenue forecasts.

As part of its reinvention as a "devices and services" company, Microsoft now reports under two main groups - one covering its devices and consumer business, and one its commercial business.

The commercial side was the stronger in the quarter, posting a 10 per cent increase in revenue, chiefly from selling Office and server software to businesses. The consumer and hardware group's revenue rose a more modest 4 per cent, held back by another poor quarter for the Windows system as sales of personal computers continue to decline.

According to industry research firm Gartner, PC shipments fell 8.6 per cent last quarter, confirming a worldwide trend towards tablets that has benefited Apple Inc and Google Inc but hurt traditional PC stalwarts Microsoft and Intel Corp.

PC sales have been sliding for the last 18 months, although Microsoft Chief Financial Officer Amy Hood said on Thursday that there were "signs of stabilisation".

Microsoft said nothing on Thursday about the board's search for a new CEO after Ballmer announced in August that he plans to retire within 12 months.

Its shares rose to $35.65 after hours, after closing at $33.72 on Nasdaq.

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