Microsoft earnings shine; Ups fiscal year outlook

Microsoft on Thursday reported fiscal second quarter earnings of $4.7 billion, or 50 cents a share, on revenue of $16.36 billion. More importantly, Microsoft's outlook was in line with expectations for the March quarter. The software giant upped its outlook for fiscal 2008.

Wall Street was expecting second quarter earnings of 46 cents a share on revenue of $15.94 billion, according to Thomson Financial.

But the projection for the third quarter was far more important given companies such as Apple and Intel have been toning down their guidance in recent days.

For the March quarter (statement), Microsoft is projecting revenue between $14.3 billion to $14.6 billion with earnings per share between 43 cents a share and 45 cents a share. Wall Street was expecting Microsoft to report earnings of 44 cents a share on revenue of $14.4 billion.

For the fiscal year ending June 30, Microsoft projected revenue between $59.9 billion to $60.5 billion and earnings per share between $1.85 a share and $1.88 a share. Those projections were slightly higher than expectations.

Among the notable nuggets:

• Microsoft's $16 billion in revenue is a company record.
• The company's client unit--think Vista and XP--had operating income of $3.36 billion on revenue of $4.33 billion. For the same quarter a year ago, Microsoft's client group had operating income of $1.84 billion on revenue of $2.58 billion. Translation: For all the whining about Vista folks are buying it.
• Enterprise sales are strong with Microsoft's business division and server and tools unit posted double-digit revenue growth rates. The business division--Office, Sharepoint etc--in the December quarter reported operating income of $3.18 billion on revenue of $4.81 billion.
• Microsoft's server and tools business had operating income of $1.72 billion on revenue of $3.28 billion in the December quarter.
• Microsoft says it is seeing "healthy demand from both businesses and consumers in the United States and our growth in emerging markets is especially strong."
• Xbox 360 console sales hit the 17.7 million unit mark. That's a lot of units for a relatively small profit. In the December quarter, Microsoft's entertainment and devices division had an operating profit of $357 million on revenue of $3.06 billion.
• But Microsoft's online services division--MSN etc.--still isn't making money with a second quarter operating loss of $245 million on revenue of $863 million.