Microsoft Results Trounce Estimates

(RTTNews) - Software giant Microsoft Corp. (MSFT) said Thursday after the markets closed that its second quarter profit rose 3% from last year, as solid growth in its commercial licensing business and strong holiday sales of its new Xbox videogame console helped offset continued weakness in its flagship Windows business.

The company's quarterly earnings per share also breezed past Wall Street expectations as did its quarterly revenue.

"Our Commercial segment continues to outpace the overall market, and our Devices and Consumer segment had a great holiday quarter," said Microsoft chief executive officer Steve Ballmer. "The investments we are making in devices and services that deliver high-value experiences to our customers, and the work we are doing with our partners, are driving strong results and positioning us well for long-term growth."

Microsoft shares are currently gaining 4.15% in after hours trading after closing the day's regular trading session at $36.06, up 12 cents. The shares trade in a 52-week range of $27.10 to $38.98.

For the second quarter ended December 31, 2013, the world's largest software company reported net income of $6.56 billion or $0.78 per share, compared to $6.38 billion or $0.76 per share for the year-ago quarter.

On average, 26 analysts polled by Thomson Reuters expected the company to earn $0.68 per share for the second quarter.

Redmond, Washington-based Microsoft said revenue for the second quarter rose 14% to $24.52 billion from $21.46 billion in the same quarter last year. Twenty-four analysts had a consensus revenue estimate of $23.68 billion for the second quarter.

The year-ago quarter results included the net deferral of $1.3 billion of revenue for the Windows Upgrade Offer, the Office Upgrade Offer and Pre-sales, and the Video Game Deferral, and the recognition of previously deferred revenue of $783 million for Windows 8 Pre-sales.

The company's commercial revenue for the quarter rose 10% year-over-year to $12.67 billion, with SQL Server revenue growing double-digits and commercial cloud revenue more than doubling from a year earlier. Office 365 commercial seats and Azure customers both grew triple-digits.

Devices and Consumer revenue for the quarter grew 13% to $11.91 billion, but Windows OEM revenue declined 3%, hurt by continued softness in the consumer PC market.

Earlier this month, market research firm Gartner, Inc. (IT) said worldwide PC shipments fell 6.9% year-over-year to 82.6 million units in the fourth quarter of 2013. This marks the seventh consecutive quarter of shipment decline.

Microsoft said it sold 7.4 million Xbox console units into the retail channel, including 3.9 million Xbox One consoles and 3.5 million Xbox 360 consoles.

The company also said it sold $893 million worth of Surface tablets in the second quarter, up sharply from $400 million in the first quarter.

Microsoft reported quarterly profit amid uncertainty about the appointment of a successor to Steve Ballmer.

According to a blog posted on the official Microsoft blog last month, the company expects to narrow in on a new CEO to replace Ballmer in the 'early part of 2014'.

The CEO search kicked off after Ballmer bid farewell to employees in his one hour emotional speech at his final company meeting as CEO in late August and announced his decision to retire within the next 12 months. Ballmer, who joined Microsoft in June 1980, was at the helm of the company for more than 13 years since January 2000.

Microsoft is also in the process of buying Nokia Corp.'s (NOK) handset business for $7.2 billion to strengthen its position in mobile. Nokia shareholders approved the deal in November.