Microsoft Gets Hit by the Econalypse: Earnings and Revenue Slide (Plus the Full Press Release)
Microsoft’s earnings and revenue took a hit in its third quarter, as expected, with profits down 32 percent from a year ago on a six percent sales decline.
Before one-time charges, the software giant earned $2.98 billion, or 33 cents a share after one-time charges, on revenues of $13.65 billion.
The weak results were relatively in line with analysts’ estimates of 39 cents a share on $14.1 billion in revenue.
It was the company’s first-ever year-over-year quarterly sales drop.
But Microsoft stock was up in after-hours trading, after also rising today before the market close by 14 cents, up .75 percent, to $18.92.
Costs from layoffs of $290 million and a $420 million impairment charge on investments also hit the bottom line at Microsoft (MSFT).
The company announced those first-time mass layoffs in the previous quarter. No further layoffs were announced today, despite rumors that they might be.
The culprit for most of the bad news was the decline in consumer and business spending on computers, since half of Microsoft’s operating income comes from sales of its Windows operating system.
But its online services also got hit badly, with a 14 percent decline in revenue from a year ago to $721 million. Losses doubled to $575 million. Oof!
Thus, Microsoft execs better hightail it down to Yahoo (YHOO) some more to strike that long-simmering search and advertising partnership deal.
BoomTown will be liveblogging the earnings conference call soon, but until then, here is the Microsoft press release:
REDMOND, Wash.–Apr. 23, 2009–Microsoft Corp. today announced revenue of $13.65 billion for the third quarter ended March 31, 2009, a 6% decline from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $4.44 billion, $2.98 billion and $0.33 per share, which represented an increase of 3% and declines of 32% and 30%, respectively, when compared with the prior year period.
The financial results for the third quarter ended March 31, 2009, included $290 million of severance charges related to the previously announced plan to reduce up to 5,000 positions and $420 million of impairments to investments. Combined, these two charges reduced earnings per share by $0.06.
Revenue in Client, Microsoft Business Division, and Server & Tools was negatively impacted by weakness in the global PC and Server markets. Revenue from enterprise customers remained stable during the quarter.
“With our continued R&D investment and our broad suite of products and services, we remain in a great position to compete and gain share in the marketplace,” said Kevin Turner, chief operating officer at Microsoft. During the quarter, Microsoft released the beta version of the Windows 7 operating system, which remains on track for a fiscal year 2010 launch. Development milestones were achieved on other products including Microsoft Office 2010, Windows Server 2008 R2 and Windows Mobile.
“While market conditions remained weak during the quarter, I was pleased with the organization’s ability to offset revenue pressures with the swift implementation of cost-savings initiatives,” said Chris Liddell, chief financial officer at Microsoft. “We expect the weakness to continue through at least the next quarter.”
Microsoft offers updated operating expense guidance of $26.7 billion to $26.9 billion, including severance charges, for the full year ending June 30, 2009.
Management will discuss third quarter results and the company’s business outlook on a conference call and webcast at 2:30 p.m. PDT (5:30 p.m. EDT) today.