Microsoft Profit Up; Revenue Misses Forecast

Published April 29, 2005

| Reuters

Microsoft Corp. (MSFT) on Thursday posted sales below Wall Street expectations, but it said it had a strong product pipeline and gave an upbeat outlook for the year ahead.

Microsoft (search) shares rose to $24.60 in after-hours trade from their Nasdaq close of $24.45.

Brendan Barnicle, an analyst at Pacific Crest Securities, said revenue was a little disappointing in the quarter.

"The outlook for fiscal 2006 is better than we expected. That's what's driving the shares in after-hours," he said.

Microsoft, based in Redmond, Washington, reported a net profit of $2.56 billion, or 23 cents a share, for its fiscal third quarter ended March 31, compared with $1.32 billion, or 12 cents a share, a year earlier.

Revenue rose to $9.6 billion from $9.18 billion.

Analysts on average had expected $9.8 billion in revenue, according to forecasts compiled by Reuters Estimates.

But Microsoft said that excluding a legal charge and stock-based compensation it earned 32 cents a share, in line with Wall Street targets according to Reuters Estimates.

Microsoft projected fiscal fourth-quarter revenue of $10.1 billion to $10.2 billion, compared with the Wall Street target of $10.1 billion and earnings per share of 27 cents to 28 cents, compared with the Wall Street net profit target of 27 cents.

In addition, Microsoft projected fiscal 2006 revenue of $43.3 billion to $44.1 billion and diluted earnings per share in the range of $1.26 and $1.30, including stock-based compensation expense.

Wall Street had targeted $43.3 billion in revenue and net earnings of $1.27 per share, on average, for fiscal 2006.

"Given our optimism about the future with our strong product pipeline and the growth opportunities from our investments in innovative products and services, we expect increased revenue growth in fiscal 2006," Scott Di Valerio, corporate vice president and corporate controller at Microsoft, said in a statement.

"It looks to be a good quarter and constructive on the outlook," said Jordan Posner, senior portfolio manager at Matrix Asset Advisors.

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