Microsoft shares hit six-year high
Oct 27th, 2007 by admin
Shares of Microsoft Corp jumped Friday to their highest level in more than six years after the software giant handily beat Wall Street’s expectations for first fiscal quarter earnings.
The stock topped the $36 mark in early morning trading – a level not seen since the summer of 2001. The shares later cooled, trading around $35, or 9 per cent up from the previous close.
The world’s largest software maker saw strong sales of its traditional Windows operating system software complemented by rise in sales for its entertainment and devices unit, which includes its ‘Halo’ video game franchise.
PC growth
“While upside from solid PC growth and the ‘Halo 3′ launch were relatively expected, further upside came from improved piracy rates and uptake of premium server editions,” analysts at Thomas Weisel Partners said. In addition, some analysts looked beyond the current report to see the company shifting its business model to an even more profitable set-up.
“While still heavily dependent on Windows and Office licenses, Microsoft is using the tremendous cash flow from those businesses to slowly reorient itself toward an on-demand software model,” said Brendan Barnicle of Pacific Crest. Barnicle upgraded Microsoft to an outperform rating, noting that the company “is in the unique position, shared only with Google, to potentially dominate the on-demand phase of computing, as it has client-server.”
After the close on Thursday, Microsoft said net income for the period ending September 30 rose to $4.3 billion, or 45 cents a share, from $3.5 billion, or 35 cents a share, a year earlier. Revenue rose to $13.76 billion from $10.8 billion.
Financial outlook
Analysts polled by Thomson Financial had been estimating earnings for the quarter of 39 cents a share, on $12.6 billion in revenue. In addition, Microsoft raised its financial outlook for the full fiscal year. Microsoft’s client unit, which includes the Vista operating system released to consumers in January, posted $4.1 billion in revenue for the quarter. This is a 24 per cent increase from the same period a year earlier.
Demand for Vista was especially encouraging in ‘emerging markets’ such as Russia and China, Microsoft CFO Chris Liddell said. In addition, demand for premium, and more expensive versions of Vista was better than expected, he said.