Best Wall St. Stocks Today: MSFT

Microsoft (NASDAQ: MSFT) announced record fourth-quarter revenue of $16.04 billion for the quarter ended June 30, 2010, a 22% increase from the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.93 billion, $4.52 billion and $0.51 per share, which represented increases of 49%, 48% and 50%, respectively, when compared with the prior year period.

Thomson
Reuters has estimates of $0.46 EPS (vs. $0.36 a year ago) and $15.22 billion in revenues.While the core software businesses of the company delivered extremely strong results, non-core operations in games and online search and content did poorly.

Sales of Microsoft’s Windows division� were $4.5 billion with operating income of $3.1 billion. That compares to $3.2 billion and $1.9 billion in the same quarter last� year.

Microsoft’s servers and tools division had revenue of $4 billion and operating income of $1.5 billion. Those numbers during the same quarter last year were $3.5 billion and $1.2 billion, a sign that margins in the group are under some pressure.

The business divisions, Microsoft’s largest, had $5.3 billion and operating income of $3.2billion. In the same quarter last year, the numbers were $4.6 billion and $2.7 billion.

The company’s entertainment group, mostly sales of Xbox products, posted a loss of $172 million, slightly higher than last year. Revenue was $1.6 billion up from $1.3 billion. The company could not add the addition sales to any bottom line benefit

Microsoft’s online business, which has been bedeviled by losses for year, had red ink of $696 million compared with $585 million in the same period last year. Revenue was up modestly from $501 million to $565 million. The recovery of search revenue and display advertising was disappointing. The MSN property’s CPMs could have been hurt by a flood of low-priced display inventory from Face! book.

The total results were better than expectations, but their composition was no surprise at all.

Douglas A. McIntyre

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