Microsoft brushes off economic worries
Posted by maliyye Aprel 25, 2008
By Chris Nuttall in San Francisco
Published: April 24 2008 22:35 | Last updated: April 24 2008 23:22
Microsoft on Thursday brushed off broader economic worries to give a confident projection of double-digit growth over the next year, although short-term weakness in sales of its core Windows product sent its shares sliding in after-hours trading.
The company also indicated it was not prepared to raise its bid for Yahoo and would consider its alternatives if no progress was made by this weekend in talks with Yahoo’s board.
The software maker reported revenues of $14.45bn for its third quarter, just shy of the average analyst estimates of $14.49bn compiled by Thomson Reuters.
It said the strength of its Xbox 360 console, software and accessory sales in its entertainment and devices division had been offset by relative weakness in its client division, home of its Windows Vista software.
It blamed an inventory build-up at its customers and an increase in pirate copies of its software, particularly in Asia.
Microsoft shares were down 5 per cent at $30.20 in after-hours trading in New York, reducing the value of its cash-and-shares bid for Yahoo, originally priced at $31 a share and worth $44.6bn.
Chris Liddell, chief financial officer, said continuing losses in its online services business in the third quarter would not change its strategy regarding the Yahoo bid, an acquisition aimed at boosting Microsoft’s online business and making it more competitive with Google.
Mr Liddell said losses of $228m, up from $171m a year earlier, were in line with planned investments to expand the business. Revenues rose from $603m to $843m.
He told analysts he did not favour the argument that Microsoft should increase its bid because it could afford to do so. He said Yahoo’s views on its value were “unrealistic” and, unless progress was made by the weekend, Microsoft would consider its alternatives, including taking its offer to shareholders.
Major technology companies, including Apple, Google, Intel and IBM, have posted strong earnings over the past two weeks, suggesting the sector has yet to suffer any major impact from the slowdown in the US.
Microsoft reported third-quarter profits of $4.39bn, or 47 cents a share, ahead of expectations of 44 cents, while issuing stronger guidance than Wall Street expected for its 2009 fiscal year beginning in July.
Revenues would be in the range of $66.9bn-$68bn, with earnings per share of $2.13 to $2.19, it said.
Analysts expected earnings of $2.10 on revenues of $66.5bn. “We’re keeping an eye on [the economy] like everyone else, but given our product mix, we are still seeing a healthy business where we will grow revenues by 11-13 per cent next year,” said Mr Liddell.