Microsoft Transformation Continues As Earnings Impress


It's been a while since an earnings report fromMicrosoft ( MSFT ) got people talking, but that was the case Friday after the Dow industrials component reported better-than-expected fiscal first-quarter earnings and sales growth.

Quarterly profit rose 17% from a year ago to 62 cents a share, well ahead of the consensus estimate of 54 cents. Sales growth accelerated from the second quarter, rising 16% to just over $18.5 billion, nicely above views of $17.8 billion.

Enterprise sales of its Office and server software offset weakness in its Windows operating system. Declining PC sales are still a head wind. Earlier this month, Gartner estimated that worldwide PC shipments fell 8.6% in the third quarter.

Commercial licensing revenue, which includes enterprise products such as Windows Server, rose 7% to $9.59 billion. Add cloud computing services to the mix and revenue rose 10% to $11.2 billion.

Sales from devices and consumer licensing revenue, which includes sales from Windows and Windows Phone, fell 7% to $4.34 billion.

For the first time, Microsoft revealed quarterly Surface tablet sales. Sales totaled $400 million, helped in part by interest in the smaller, heavily discounted Surface RT. Earlier this week, the company launched its latest tablet models, Surface 2 and Surface Pro 2.

Microsoft has taken its share of shots from the analyst community, mainly because it was late to the mobile party. Demand has been lukewarm for its Surface tablet and its Windows phone hasn't gained much traction. Still, the company is intent on transforming into a devices and services company.

Last month, Microsoft announced plans to acquire Nokia's smartphone business for $7.2 billion. Microsoft's latest game console, Xbox One, set to launch next month.

Microsoft last month raised its quarterly dividend 22% to 28 cents a share for an annual yield of 3.3%.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: MSFT

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