Microsoft 2Q earnings edge down on slow PC sales

Associated Press Modified: January 27, 2011 at 5:52 pm •  Published: January 27, 2011
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SEATTLE (AP) — Microsoft Corp. said Thursday that its net income for the latest quarter fell slightly from a year ago, and it beat Wall Street's expectations despite the weak personal computer market.

Sales of Office 2010 to consumers and businesses buoyed the results, as did the popularity of Kinect, Microsoft's new motion-sensing controller for the Xbox 360 video game system.

Microsoft's net income for the October-December quarter was $6.63 billion, compared with $6.66 billion in the same period last year. Thanks to stock buybacks, its net income rose to 77 cents per share, from 74 cents. Analysts surveyed by FactSet were expecting net income of 69 cents per share for the fiscal second quarter.

Much of Microsoft's business depends on selling copies of the Windows operating system and Office desktop software, products that usually rise and fall with fluctuations in the personal computer market.

Microsoft launched Windows 7 in the same quarter of 2009, making for a tough comparison. Revenue plunged 30 percent in the Windows division to $5.1 billion. Worldwide personal computer shipments only grew about 3 percent in the latest quarter, as Apple Inc.'s iPad and the promise of more tablet devices to come made consumers think twice about what kind of device to buy.

However, the division that sells Office software and other programs saw revenue rise 24 percent to $6 billion. Big companies that put off buying new technology during the worst of the recession are more willing now to upgrade their systems. Microsoft said the division's revenue from businesses rose 18 percent while revenue from consumers jumped 49 percent, both because of sales of Office 2010.

Strength in the entertainment and devices division, which is responsible for Xbox 360, also helped make up for weak Windows sales. Microsoft says it sold 8 million Kinect controllers, helping push revenue for the segment up 55 percent to $3.7 billion.

In all, Microsoft's revenue edged up 5 percent to $20 billion, topping analysts' expectations for $19.2 billion in revenue.

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