Microsoft may have quite a headache, but the economy finally isn't whacking the company as hard. This morning, Microsoft announced fiscal 2010 first quarter results before Wall Street's opening bell, beating analyst consensus expectations. Mixing metaphors, Microsoft's results don't stink as bad as they have for the last couple of quarters.
Windows 7 is off to a resounding start. Microsoft launched the new operating system yesterday, but PC OEMs have been buying the software for months. During a conference call with financial analysts this morning, Bill Koefoed, general manager of Microsoft investor relations, said that Windows license sales were strongest ever for any single quarter.
For fiscal 2010 first quarter, Microsoft reported revenue of $12.92 billion, for a 14 percent year-over-year decline. Operating income: $4.48 billion, down 25 percent. Net income: $3.57 billion, or 40 cents a share. Net income fell by 18 percent and earnings per share by 17 percent year over year.
Results would have been higher if not for a one-time charge. Microsoft deferred $1.47 billion from fiscal first quarter to the second, because of technology guarantees for Windows 7. People buying Windows Vista PCs were eligible for free or discounted 7 upgrades starting July 1. Without the deferral, Microsoft would have reported $14.39 billion in revenue, for only a 4 percent year-over-year decline, and 52 cents earnings per share, up 8 percent from fiscal 2009 first quarter.
Microsoft stopped offering guidance during fiscal 2009. So Wall Street consensus was solely based on analysts' judgment. Consensus called for a 17.9 percent year-over-year revenue decline, to $12.37 billion. Earnings-per-share estimate was 32 cents, for a 33.3 percent consensus decline. So even without the deferral, Microsoft beat the Street.
Chris Liddell, Microsoft's CFO, described the quarterly results as "strong," during the conference call. He attributed Microsoft's start at revenue and earnings recovery to Windows and Xbox sales and to cost containment. Fiscal 2010 first quarter "might have been the bottom of the economic reset," he said. He predicted real recovery to start in early calendar 2010.