Earnings: Microsoft Q2 Revs Rise 18 Percent; Operating Income Up 42 Percent; Q3 Forecast Disappoints

imageThanks in large part to strong sales of products related to its Xbox games, Microsoft (NSDQ: MSFT) said Q2 revenue came in at $15.84 billion, an 18 percent rise over last year. Operating income and diluted earnings per share during the quarter were $5.68 billion and $0.46 — 42 percent and 48 percent higher, respectively, over Q207. For FY08, which ended on June 30, Microsoft’s revenue was $60.42 billion, also an 18 percent compared to the previous fiscal year. Operating income and diluted earnings per share for FY08 were $22.49 billion and $1.87, representing yearly growth of 21 percent and 32 percent, respectively.

Online services: Revenues in this segment, which includes Microsoft’s internet ad platform as well as e-mail, IM, Live Search and the MSN portals, grew 23 percent to $838 million, while the operating loss widened to $488 million from $210 million in Q207. For FY08, Microsoft’s online services business was up 32 percent, ending the year with $3.2 billion in revenue, while the operating loss expanded to $1.2 billion.

Entertainment and devices: The unit that houses Xbox and other gaming products, as well as the Zune music player, saw revenues climb 37 percent in Q2 to $1.5 billion from $1.1 billion. Meanwhile, the segment’s operating loss was reduced significantly to $188 million from $1.2 billion in Q207. Microsoft was able to pare down the unit’s’ operating loss for FY08 down $426 million compared to the prior fiscal year’s $1.9 billion loss.

Not good enough for the market: Despite the double digit growth rates, the economic turmoil has altered Microsoft’s outlook for Q3, which are under what analysts had been predicting, Bloomberg reported. Looking ahead at Microsoft’s next earnings report, the company said it anticipates seeing 47 cents to 48 cents per share on revenues of $14.7 billion to $14.9 billion. Analysts previously expected a Q3 profit of 49 cents on sales of $15.1 billion. As a result of the earnings report, Microsoft’s stock fell to $26.06 in after-hours trading, though it closed slightly up at $27.52 on the Nasdaq.

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