Microsoft Corp reported its first quarterly loss as a public company on Thursday as it took a previously announced hit for writing down the value of its ailing online unit, but held up better than expected in the face of stagnant computer sales.
Excluding the multibillion-dollar write-down, which was signaled earlier this month, and factoring in some deferred Windows revenue, the world’s largest software company actually exceeded Wall Street’s expectations, boosting its shares in after-market trading.
“It looks good, given the dicey economic environment and the weakness we already know about in PCs,” said Brendan Barnicle, an analyst at Pacific Crest Securities.
After several years of stumbling behind mobile and Internet trailblazers Apple Inc and Google Inc, and a decade-long static share price, some expectation is building that Microsoft can re-establish itself as a tech leader with its new, touch-friendly Windows 8 system, due out on October 26, and an accompanying tablet of its own design.
“There’s a lot of anticipation for the next Microsoft products. They are regaining credibility with enterprises,” said Trip Chowdhry, an analyst at Global Equities Research.
Alongside Windows 8 and its new Surface tablet – which it hopes will challenge Apple’s all-conquering iPad – Microsoft is set to release new phone software and a new web-oriented version of its highly profitable Office suite of applications over the next 12 months.
These, and other products, “will drive our business forward and provide unprecedented opportunity to our customers and partners,” said Chief Executive Steve Ballmer, in a statement.
First net loss
The Redmond, Washington-based company reported a net loss of $492 million, or 6 cents per share, for its fiscal fourth quarter, compared with a profit of $5.87 billion, or 69 cents per share, in the year-ago quarter.
The loss was expected after Microsoft said earlier this month that it would take a $6.2 billion write-down for the value of its online unit after an ill-fated acquisition of a digital advertising agency five years ago.
Microsoft has not suffered a quarterly loss since going public in 1986.
Revenue rose 4 percent to $18 billion, slightly below analysts’ estimates, helped by strong growth in its Office unit, but dampened by slowing computer sales featuring its flagship Windows operating system. Global PC sales, which have been stagnant for the last two years, fell 0.1 percent last quarter, according to tech research firms Gartner and IDC.
Microsoft deferred $540 million of Windows revenue in the quarter due to an upgrade discount it is offering customers who buy machines running Windows 7 before the launch of Windows 8 in October.
Excluding the deferred revenue, the company’s flagship Windows unit posted only a 1 percent drop in sales, which was better than some analysts had expected in the uncertain economy and the run-up to the launch of Windows 8.
“PC sales could have been much worse,” said Mark Moerdler, senior research analyst at Sanford C. Bernstein. “Usually people hold off buying new PCs when there is new software coming out.”
Excluding the write-down, but factoring in the loss of deferred revenue, Microsoft said it earned 67 cents per share in the quarter. On that basis, Wall Street expected profit of 62 cents per share, according to Thomson Reuters I/B/E/S.
Microsoft’s shares rose 2.5 percent in post-market trading after closing at $30.67 on Nasdaq.
The stock is up 10 percent so far this year, compared to a 14 percent gain in the tech-heavy Nasdaq. But it has remained locked around the $30 level, which it has not exceeded for any prolonged period since the tech stock boom 12 years ago.