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Microsoft Q4 profit up despite Xbox charge

It pointed to sales of Vista, SQL Server and Windows Server

By Elizabeth Montalbano
July 19, 2007 12:00 PM ET

IDG News Service - Microsoft Corp. managed to earn a profit for its fiscal 2008 fourth quarter despite a billion-dollar-plus charge related to expenses the company incurred to fix faulty Xbox 360 consoles.

For the quarter that ended June 30, Microsoft reported net income of $3.04 billion compared to $2.83 billion for the same period last year. Diluted EPS (earnings per share) for the quarter was 31 cents, which took into account a previously announced charge related to extending warranties for its Xbox 360 console. Excluding that charge, EPS for the quarter was 39 cents, in line with estimates from Thomson Financial analysts.

Revenue for the quarter was up 13% at $13.37 billion, compared to $11.8 billion for the same period last year.

In a statement, Microsoft attributed revenue growth to demand for its new client operating system Windows Vista, as well as business products such as SQL Server and Windows Server. Microsoft's Visual Studio developer tools and Xbox 360 consoles also did well in the quarter, the company said.

Microsoft said earlier this month it would take an earnings charge of more than $1 billion for its fourth quarter related to expenses for expanding its warranty coverage to Xbox 360 customers who have a certain type of hardware failure, which required an "unacceptable" number of repairs to the consoles.

Microsoft revenue was also up for the year and topped $50 billion for the first time. For the fiscal year ending June 30, revenue was $51.12 billion, a 15% increase over the prior year when the company reported $44.28 billion.

Diluted EPS for the year was $1.42, which includes 7 cents in charges for certain items. Excluding those charges, EPS for the year would have been $1.49, an increase of 17% over the prior year when the company also adjusted for certain items and reported EPS of $1.21.

For the current quarter, which began July 1, Microsoft expects revenue in the range of $12.4 billion to $12.6 billion, with diluted EPS in the range of 38 cents to 40 cents. For fiscal year 2008, which will end June 30, 2008, revenue is expected to be in the range of $56.8 billion to $57.8 billion, and diluted EPS is expected to be in the range of $1.69 to $1.73.

However, Microsoft noted its guidance does not include the as-yet-undetermined impact of costs associated with the company's acquisition of aQuantive Inc., which is expected to close in the current quarter. Microsoft announced in May that it would purchase the digital advertising and marketing services agency. 

Reprinted with permission from IDG.net. Story copyright 2014 International Data Group. All rights reserved.
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