Earnings: Microsoft's Income Falls 28 Percent Despite Record Sales Revenue

Updated below: Primarily due to the delayed release of its new Windows operating system Vista, Microsoft (Nasdaq: MSFT) reported a 28 percent drop in earnings for the quarter ending Dec. 31, 2006. Microsoft said it earned $2.63 billion, or 26 cents a share, for the quarter, compared to $3.65 billion, or 34 cents, a year earlier. Other highlights from its earnings report:
— Revenue rose 6 percent to a record $12.54 billion from $11.84 billion, thanks in part to better-than-expected demand for Microsoft’s Xbox 360 video game player.
— Microsoft’s entertainment unit saw revenue rise 76 percent to $2.96 billion, or nearly one-quarter of the company’s total. The company again credited the Xbox 360 for growth in that area.
— Looking ahead, for the quarter ending March 31, Microsoft projects revenue to be in the range of $13.7 billion to $14.0 billion. Earnings Release | Webcast
Updated from conference call transcript: Revenue for our online services business grew 5% to $624 million, driven by an increase in advertising revenue of 20%, partially offset by an expected decline in access revenue…We forecast revenue in the online services business to grow between 3% and 8% for the year and 4% to 10% in quarter 3. Although we’re still forecasting growth in search queries and page views, our plans now include a more measured rate of growth for the balance of the year. Our full year forecast anticipates total advertising growth in the mid-teens, and we expect this to be driven in particular by our display business.”

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