October 23, 2009
By Dina Bass Oct. 23 (Bloomberg) — Microsoft Corp. , the world’s largest software maker, posted a smaller drop in profit than analysts estimated after slashing costs to make up for falling sales. The stock rose as much as 8.7 percent in early trading. First-quarter net income fell to $3.57 billion, or 40 cents a share, beating the 32-cent average estimate of analysts surveyed by Bloomberg. Revenue, excluding $1.47 billion deferred to a future quarter, was $12.9 billion, Microsoft said today in a statement distributed by PR Newswire. Microsoft made its first companywide firings this year, slashed travel costs and cut the rates it pays vendors to cope with slower spending by customers. The company also benefited as personal-computer sales rose last quarter after falling for three straight periods. “They can’t manage revenue, but they can manage the bottom line,” said Sid Parakh , an analyst at McAdams Wright Ragen in Seattle. “They’ve been pretty good about costs in the quarter. Everybody is more cautious on spending.” Analysts had projected sales of $12.4 billion for the period ended Sept. 30. A year earlier, net income was $4.37 billion, or 48 cents a share, on sales of $15.1 billion. Microsoft, which stopped giving earnings forecasts in January, didn’t provide a specific outlook for profit and sales. The company said it will spend less than it previously forecast on operating expenses. Windows 7 For the second quarter, analysts project earnings of 51 cents a share on sales of $17.1 billion. For the full year, they predict profit of $1.67 a share on sales of $58.7 billion. Microsoft , based in Redmond, Washington, rose as much as $2.31 to $28.90 after closing at $26.59 yesterday on the Nasdaq Stock Market. The stock advanced 8.2 percent last quarter, trailing the 15 percent gain by the Standard and Poor’s 500 Index. PC sales rose 2.3 percent last quarter, according to IDC, resuming growth a quarter earlier than the research firm had projected. Much of the growth was back-to-school sales and cheaper PCs sold in emerging markets, according to Sarah Friar , an analyst at Goldman Sachs Group Inc. Those two segments are less lucrative for Microsoft than PCs used by businesses, according to Friar. Corporate buyers are still cautious, holding back sales of business versions of Windows, Office software and server programs, Parakh said. Microsoft yesterday released its newest operating system, Windows 7, in a bid to boost sales and move beyond the poorly received Windows Vista. That should fuel growth, with Windows sales rising 12 percent to $16.7 billion in calendar 2010 after a drop of 11 percent this year, according to Goldman’s Friar. Bing’s Gains Analysts’ average projections for profit this fiscal year and next are too low because some are underestimating the boost from Windows 7, Friar said. Microsoft will also sell Windows 7 for slimmed-down laptops called netbooks, a popular category that’s been helping computer sales rebound. Until now, most netbooks have used the older and cheaper version of Windows. Microsoft’s Bing search engine, released in June, has taken more than a percentage point of market share, according to research firm ComScore Inc. Microsoft had 9.4 percent of the U.S. search market in September, compared with 64.9 percent for Google Inc. and 18.8 percent for Yahoo! Inc. , according to ComScore. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net
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October 15, 2009
By Brian Womack Oct. 15 (Bloomberg) — Google Inc. reported a 27 percent increase in third-quarter profit, beating analysts’ estimates, after the recovering economy boosted demand for online ads and e-commerce. The shares gained in late trading. Net income rose to $1.64 billion, or $5.13 a share, from $1.29 billion, or $4.06, a year earlier, the company said today in a statement. Excluding revenue passed on to partner sites, sales were $4.38 billion, compared with an estimate of $4.25 billion in a Bloomberg survey of analysts. Search advertising, Google’s main source of revenue, rebounded last quarter as marketers sought a cost-effective way to promote themselves. Spending on U.S. search ads rose 5 percent from the previous period, according to Efficient Frontier , a search marketing firm in Sunnyvale, California. The number had dropped 3 percent in the second quarter. “Advertisers want to stay in front of people who are spending,” said Sameet Sinha , an analyst with JMP Securities LLC in San Francisco, who rates the stock a buy and doesn’t own it. “They are willing to pay up for it.” Leaving out some costs such as stock-based compensation, profit was $5.89 a share. Analysts had estimated $5.43. Google, the most used Internet search engine, rose $7.76 or 1.5 percent, to $537.67 in extended trading, after closing at $529.91 on the Nasdaq Stock Market. Shares of the Mountain View, California-based company have climbed 72 percent this year. Worst Is Over? Chief Executive Officer Eric Schmidt said this month that the “worst is behind us.” He also has said that Google will step up acquisitions again as the economy improves. Google eliminated jobs and shuttered underperforming business units this year. In March, the company cut about 200 sales and marketing positions, or 1 percent of its workforce . Even as companies pared marketing budgets, Google benefited from a shift to online ads from traditional media. Search advertising will grow 3.6 percent in the U.S. this year, while the entire ad industry declines 15 percent, according to Magna Global in New York. Google has maintained its dominance in the Internet search market this year, warding off an attack from Microsoft Corp. ’s Bing, which debuted in June. Microsoft is joining forces with Yahoo! Inc. to form a bigger search competitor to Google. The partnership, slated to take effect next year, would put Bing on Yahoo’s Web sites. Google had 64.9 percent of the U.S. market last month, compared with 65 percent in May, according to ComScore Inc. in Reston, Virginia. Microsoft’s share grew to 9.4 percent from 8 percent over that period — mostly at the expense of Yahoo, which fell to 18.8 percent from 20.1 percent. To contact the reporter on this story: Brian Womack in San Francisco at Bwomack1@bloomberg.net
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