MS Q4 profit falls 24% to $2.8 bn
After startling investors in the fiscal third quarter when it disclosed plans to seriously boost spending, the company on Thursday topped Wall Street estimates for its fiscal fourth quarter and announced plans to repurchase at least $20bn worth of...
By Agencies |
REDMOND: For Microsoft, it was likely a relief to end its fiscal year on a more positive note. After startling investors in the fiscal third quarter when it disclosed plans to seriously boost spending, the company on Thursday topped Wall Street estimates for its fiscal fourth quarter and announced plans to repurchase at least $20bn worth of shares.
For the three months ended June 30, the software maker earned $2.8bn. That was a 24% drop from earnings of $3.7bn in the same period last year. Revenue for the quarter was $11.8bn, a 16% increase over $10.2bn in the same period a year earlier.
Analysts were expecting earnings of 30 cents per share on revenue of $11.6bn. Those expectations were reduced after Microsoft said in April that it expected earnings for the fiscal fourth quarter and ’07 fiscal year to be lower than many had previously expected. The company blamed the change on a decision to significantly boost research and development spending in areas where it is not dominant.
Microsoft also said on Thursday that it plans to repurchase as much as $20bn worth of shares by August 17 in a tender offer. Under its plan, the company said it will take offers to buy shares within the range of $22.50 and $24.75, in a tactic similar to a reverse auction.
Based on the offers it receives, the company will come up with a strike price that allows it to buy $20bn worth of the shares. Microsoft chief financial officer Chris Liddell said the company decided on the buyback plans because it saw that it had excess cash on hand that it didn’t think it would immediately need for things like legal expenses and acquisitions.
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For the full ’06 fiscal year, Microsoft reported earnings of $12.6bn or $1.2 per share on revenue of $44.3bn. That compares with earnings in the previous fiscal year of $12.3bn or $1.1 per share on revenue of $39.8bn.For the FY07, the company forecast earnings of between $1.43 and $1.47 per share, on revenue of between $49.7bn and $50.7bn. Liddell said the higher guidance was mainly due to the planned $20bn tender offer.
Liddell also said a further delay in the release of the new version of Windows would not likely have a significant impact on revenue because of longer-term licenses and other factors. Windows Vista is currently scheduled to be released to consumers in January.
The company also gave more details on its expected boost in spending during the FY07. Microsoft said it expects marketing costs to increase by $450m because of product launches including new versions of Windows and Office, plus a holiday marketing push for its money-losing Xbox 360 videogame console.
Sales and other marketing costs also will increase by about $450m. Microsoft also plans to spend about $1bn more on product development, plus $500m more on online services, including its push to compete with companies including Google and Yahoo. In addition, it plans $300m in general spending increases.
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