Updated from 5:33 p.m. EDT
The tech slowdown has yet to reach Redmond.
In after-hours trading, Microsoft was up 5.5%.
For the fiscal first quarter ended in September, the Redmond, Wash.-based company registered net income of $2.73 billion, or 50 cents a share, including an after-tax charge for investment impairments of $291 million, or 5 cents a share. Analysts surveyed by Thomson Financial/First Call were expecting Microsoft to earn 43 cents a share, the high end of the company's guided range of 42 cents to 43 cents a share.
The latest results topped net income of $1.28 billion, or 23 cents a share, in the same period a year ago. Excluding a one-time charge, year-earlier net income was 43 cents a share.
Microsoft's guidance for the second quarter targeted revenue ranging from $8.5 billion to $8.6 billion and earnings per share ranging from 45 cents to 46 cents. Wall Street was expecting second-quarter earnings of 50 cents a share and revenue of $8.43 billion.
For the full fiscal year, Microsoft said revenue would range from $32.2 billion to $32.6 billion, higher than previous guidance of $31.4 billion to $32 billion. Earnings are expected to range from $1.89 to $1.95 a share, also higher than the previous range of $1.85 to $1.91 a share. The consensus estimate is for Microsoft to earn $1.90 a share on $31.78 billion in fiscal year 2003.
For the latest quarter, Microsoft said revenue rose 26% to $7.75 billion from $6.13 billion reported a year ago, and 7% from $7.25 billion reported the previous quarter. The consensus estimate on Wall Street pegged first-quarter revenue at $7.12 billion, slightly higher than the company's guided range of $7 billion to $7.1 billion.
In the regular trading session, shares of Microsoft rose 34 cents, or 0.7%, to close at $50.75. Shares were hit at the end of trading by rumors of the company reporting light revenue. In after-hours trading, shares were up $2.79 to $53.20.
"Results for the first quarter were exceptionally strong, exceeding our expectations," CFO John Connors said in a statement. "During the quarter we saw broader customer adoption of our licensing programs than we anticipated."
Connors was referring to a
That switch also drove a large increase in the company's unearned revenue balance, which was being watched by analysts because it also accounts for roughly one-fifth of revenue recognized on the company's income. Unearned revenue increased to $9.13 billion from $7.74 billion on June 30.
On a postclose earnings call, Connors cautioned investors to expect unearned revenue to drop slightly sequentially in the next two quarters as customer purchasing returns to more modest levels.
"The unearned revenue beat even the most bullish expectations," said Tony Ursillo, an analyst at Loomis, Sayles & Co., which holds shares of Microsoft among the $10 billion in equities it manages. "It means that essentially the company has this big barrel of future earnings that will allow it to continue to make numbers for several quarters into the future."
A preliminary review of Microsoft's results by business division also led Ursillo to believe that the change in licensing model was largely responsible for the company's strong results. He noted that revenue from Windows and servers were both strong, which would at least be partially driven by sales tied to the new payment program.
For the first time, Microsoft broke down revenue according to new divisions unveiled in its last conference call. The results include:
Connors said PC shipments could be up slightly or flat in the second quarter compared to a year ago. "Demand for corporate IT infrastructure continues to be challenging," he added. "However, it has not worsened significantly since we last spoke with you."