Earnings: Microsoft | Kimberly-Clark | AT&T | Bristol-Myers Squibb |

Microsoft Profit Down, Beats Estimates

The long-delayed launch of the Windows Vista operating system cut into fiscal second-quarter profits at Microsoft Corp. (MSFT), which reported a 28 percent drop in earnings Thursday despite decent revenue growth.

In the last three months of the year, earnings fell to $2.63 billion, or 26 cents per share, from $3.65 billion, or 34 cents per share, during the same period last year.

Analysts polled by Thomson Financial expected the Redmond, Wash.-based software maker to post a profit of 23 cents per share.

Revenue rose to $12.5 billion, a 6 percent gain from $11.8 billion in the year-ago quarter. Analysts were expecting just shy of $12.1 billion in sales.

Microsoft shares fell 64 cents, 2.1 percent, to close Thursday at $30.45 on the Nasdaq Stock Market, ending an uneven day in which the stock also hit a 52-week high of $31.48. In extended trading after the earnings release, the stock was back up to $31.45.

Although Windows Vista and Office 2007, the latest editions of Microsoft's flagship products, do not hit the consumer market until Tuesday, they have been available for businesses since Nov. 30, two-thirds of the way through the company's second quarter.

Even so, Microsoft's "client" division, responsible for Windows, posted a 25 percent drop in sales to $2.59 billion. And the business division, which includes Office, saw a 5 percent drop to $3.51 billion.

The falls were expected, because Microsoft had warned that it would be deferring $1.6 billion in Windows and Office revenue from the second quarter to the current period. That was done to account for coupons that recent computer buyers could use to upgrade existing software to Vista and Office.

In addition to the revenue deferral, Microsoft's profits were trimmed by $1.13 billion, or 11 cents per share, because of the upgrade-coupon program.

A huge reason for Microsoft's overall revenue gain was the performance of the entertainment and devices division, which includes the Xbox 360 video game console. That unit saw revenue hit $2.96 billion, a 76 percent jump. The unit lost $289 million, however, roughly even with last year.

Microsoft also updated its outlook but appeared to give analysts little reason to alter their expectations.

In the current quarter, Microsoft predicts earnings of 45 cents to 46 cents per share on $13.7 billion to $14 billion in revenue, helped by the deferrals from the second quarter. Analysts already were expecting 46 cents per share and $14 billion in revenue, according to Thomson Financial.

For the full fiscal year, which ends June 30, Microsoft foresees earnings of $1.45 to $1.47 per share, with revenue of $50.2 billion to $50.7 billion. That was slightly ahead of the estimates already held on Wall Street: $1.45 per share and revenue of $50.5 billion.

For the first half of its fiscal year, Microsoft earned $6.10 billion, 61 cents per share, on revenue of $23.4 billion. In the comparable period a year earlier, Microsoft's profit was $6.79 billion, 63 cents per share, with revenue of $21.6 billion.

Kimberly-Clark Reports Better-Than-Expected Profit

CHICAGO (Reuters) - Kimberly-Clark Corp. (KMB), the maker of Kleenex tissues and Huggies diapers, posted a better-than-expected fourth-quarter profit Thursday, benefiting from a restructuring plan put in place in 2005.

The company also said it was optimistic about its sales and profit prospects for 2007 based on improvements it saw in the second half of 2006. But the forecasts it gave for the first quarter and full year call for earnings to meet or fall short of Wall Street's average expectations.

Fourth-quarter profit rose to $482.6 million, or $1.05 per share, from $371.1 million, or 79 cents per share, a year earlier.

Before one-time items, the Dallas-based company, which also makes Cottonelle, Scott and Viva paper products, earned $1.03 per share. On that basis, Kimberly-Clark had forecast earnings of $1 to $1.02, while analysts on average expected $1.02, according to Reuters Estimates.

Kimberly-Clark forecast first-quarter adjusted earnings of 99 cents to $1.01 per share. Analysts on average expect $1.01.

For the full year, the company expects adjusted earnings of $4.10 to $4.20 a share, while analysts call for $4.20.

"The stock had run up into the quarter, and we think guidance will scare investors," Bear Stearns analyst Justin Hott said in a research note. "But we believe these results are solid, and Kimberly management is doing the prudent thing by keeping expectations low."

Shares of Kimberly-Clark were unchanged at $69.47 in light early electronic trading. The shares are up 2.2 percent so far this year after rising 14 percent in 2006.

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HIGHER COSTS CONTINUE

The company, under pressure from higher costs for materials such as pulp, is about 18 months into a restructuring that includes cutting 6,000 jobs as it works to improve its diaper and health-care businesses and expand in emerging markets.

Sales rose 7.4 percent to $4.31 billion, topping the analysts' average revenue forecast of $4.24 billion.

Kimberly-Clark said volume rose more than 3 percent. More expensive products and stronger foreign currencies made up the remainder of the sales growth.

The company said the higher sales, along with cost reductions and strong results at Mexico's Kimber, in which it holds a minority stake, helped it overcome about $90 million in higher costs, mainly for fiber and other raw materials, during the quarter.

Kimberly-Clark expects about $100 million to $150 million in increased costs during 2007, mainly for fiber.

The company said it planned to repurchase $600 million to $800 million of its shares. It also plans to set a high single-digit percentage increase in its dividend in April, subject to board approval.

AT&T Growth Boosts Earnings

NEW YORK (Reuters) - Top U.S. telecoms company AT&T Inc. (T) said Thursday fourth-quarter earnings rose, bolstered by growth in Internet and wireless subscribers, pushing the shares up 2 percent in pre-market trade.

It also raised its forecast on the expected benefits from its merger with BellSouth, a deal that closed in late December and reinforced its position as the biggest U.S. phone company.

AT&T said profit, excluding merger-related costs and other special items, rose 38.5 percent from a year earlier, to $2.4 billion, or 61 cents a share. The results include AT&T's 60 percent stake in Cingular Wireless — a stake that rose to 100 percent when AT&T acquired BellSouth Corp., which had owned the remaining 40 percent in Cingular.

Analysts on average expected 60 cents per share in earnings excluding items, according to Reuters Estimates.

Including costs such as those related to recent mergers, AT&T's net income rose 17.1 percent from the same quarter a year earlier to $1.9 billion, or 50 cents per diluted share.

Formed through a merger of SBC Communications Inc. and AT&T Corp. in 2005, the company's acquisition strategy has given it a competitive advantage to offset declining sales of traditional phone lines, analysts say.

Cingular, which is being rebranded as AT&T, said Wednesday its quarterly profit nearly quadrupled, boosted by stronger-than-expected customer additions.

AT&T also said its high-speed Internet subscribers totaled 8.5 million, up 23.4 percent from a year earlier.

AT&T said it realized $1.1 billion in total synergies from the SBC merger, compared to its forecast last year for $600 million to $800 million in synergies.

The company said it expects synergies from the BellSouth merger to be higher than previously forecast. It said it expects total synergies to be $0.8 billion to $1.2 billion in 2007, up from a previously expected $0.5 billion to $0.8 billion.

It said it now sees the net value of the synergies to be around $22 billion, up from a previous estimate of $18 billion.

The company now expects to deliver double-digit percentage growth in adjusted earnings per share in 2007 and 2008, it said.

AT&T shares rose 2 percent to $37.39 in premarket trading, from the previous NYSE close of $36.63.

AT&T also released BellSouth's quarterly results. BellSouth's adjusted earnings per share totaled 68 cents per share, up 28.3 percent from the year-ago quarter.

Bristol-Myers Squibb Posts Loss

NEW YORK (Reuters) - Bristol-Myers Squibb Co. (BMY) Thursday reported a fourth-quarter loss because of special charges and generic competition for its Plavixblood-clot drug, but results beat expectations.

The New York-based company said it lost $134 million, or 7 cents per share, compared with a profit of $499 million, or 26 cents per share, a year earlier.

Excluding special items, Bristol-Myers earned 19 cents per share. Analysts, on average, expected 16 cents per share, according to Reuters Estimates.

It said results were hurt by an increase in litigation reserves and costs of early debt retirement.

The company forecast 2007 earnings, excluding items, of $1.20 to $1.30 per share. The Reuters Estimate forecast is $1.22 per share.

Although fourth-quarter sales fell 16 percent to $4.21 billion, they were a bit higher than the $4.18 billion Reuters Estimates forecast.

Bristol-Myers said revenue from Plavix, which is sold in partnership with Sanofi-Aventis, fell 53 percent to $496 million, as remaining supplies of a copycat made by Canadian drugmaker Apotex Inc. continued to cut into sales.

But that is an improvement over earlier quarters, when sales of Plavix plunged more than 70 percent. Apotex is now forbidden from shipping any more of its generic, because of an ongoing patent battle in New York federal court, but supplies of its copycat already in warehouses and drugstores continue to be sold.

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