Microsoft Corp., the largest software maker, reported fiscal second-quarter sales that met most analysts’ estimates as corporate customers continued to buy copies of Windows and Office software.
Sales rose 2.7 percent to $21.46 billion, meeting the average of analysts’ estimates compiled by Bloomberg. Net income declined to $6.38 billion, or 76 cents a share, in the three months through Dec. 31, from $6.62 billion, or 78 cents, a year earlier, the Redmond, Washington-based company said in a statement. That beat the 74 cents projected by analysts.
Even as personal-computer sales declined last year, businesses continued to upgrade their Windows systems -- some of them from the 12-year-old Windows XP -- and invest in Office productivity software. That helped make up for what Hewlett- Packard Co. Executive Vice President Todd Bradley called a slower-than-expected initial quarter for Microsoft’s latest operating system, Windows 8.
“Right now investors are myopically focused on the Windows business,” said Brent Thill, an analyst at UBS AG in San Francisco. “It’s an important business, but they forget about the other 75 percent of revenue.”
Demand from companies signing multiyear contracts translated into unearned revenue, a measure of future sales, of $19.8 billion. That’s better than analysts’ average estimate of $19.1 billion, according to data compiled by Bloomberg. During the quarter, Microsoft also recognized revenue from the Windows division that had been deferred from previous quarters, to account for coupons that let customers upgrade to the latest software versions.
New Windows
Microsoft shares fell 2 percent to $27.08 in extended trading after the report, after ending the regular New York session little changed. The stock had declined 10 percent in the last three months of 2012, compared with a 1 percent decline for the Standard & Poor’s 500 Index.
Microsoft reiterated its operating expenses outlook for the fiscal year that began July 1 of $30.3 billion to $30.9 billion.
The operating system’s new design is tailored for machines with touch screens, and those were in short supply last quarter. Some models were delayed and others were scrapped as Microsoft limited which companies could make tablets with Windows RT, a version that runs on chips from ARM Holdings Plc. Intel Corp. also hit a snag in readying its latest low-power chips for use with Windows 8.
Corporate Demand
Microsoft sold 60 million copies of Windows 8, a pace largely in line with the previous version, Windows Chief Financial Officer Tami Reller said on Jan. 8. That number includes both upgrades and copies computer makers bought to pre-install on their machines. Reller didn’t say how many of those machines ended up in customers’ hands.
Corporate customers are also rushing to upgrade because Microsoft is ending support for Windows XP, which debuted in 2001. Microsoft also started rolling out a new version of Office, which includes the Word and Excel productivity programs, businesses late last quarter.
“One of the biggest stories in 2013 is the business transition from Windows XP to Windows 7,” said Bob O’Donnell, an analyst at market research firm IDC Corp. “There are a staggering number of machines still running Windows XP. The IT guys have to pull the plug on those and upgrade, and most will do that by buying new machines.”
Machines running Windows 7, which was introduced in 2009, remain available as Windows 8 is rolled out. Some companies are still opting for the earlier version because it’s field-tested and available on more machines.
Worldwide PC unit sales dropped 6.4 percent in the fourth quarter from a year earlier, the first time in more than five years shipments have fallen during the holiday shopping season, according to IDC.
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