Microsoft braces for economic turmoil, reduces earnings forecast for year |
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Microsoft braces for economic turmoil, reduces earnings forecast for year
Releasing its quarterly earnings today, Microsoft gave the first clear indication of how the economic turmoil could affect its bottom line -- cuttting its financial forecasts for the current fiscal year, which ends in June. The company says it now expects earnings per share of $2.00 to $2.10 -- compared with its previous forecast of $2.12 to $2.18.
Financial analysts and others on Wall Street were expected to watch those numbers closely as a gauge of Microsoft's prospects amid the economic downturn. Some reduction in the forecast had been expected.
"Clearly they're gearing for a weaker environment, and that is reflected in their guidance," said Sid Parakh, an analyst at McAdams Wright Ragen in Seattle. Under the circumstances, the forecast is likely to be a central topic of Microsoft's earnings call, which starts at 2:30 p.m. Pacific time. Stay tuned for more on that, along with details on the company's quarterly results.
UPDATE: In its quarterly report, the company posted earnings per share of 48 cents, just topping Wall Street estimates. Revenue was $15.06 billion, an increase of 9 percent over the same quarter last year.
However, there's a potential red flag in the Windows business. In its Client division, home to the PC Windows product line, Microsoft reported revenue of $4.2 billion, just 2 percent more than in the same quarter last year. The company had previously been projecting an increase of 6 percent to 7 percent for the quarter. That's likely to raise eyebrows on Wall Street, and it will be interesting to hear what Microsoft's chief financial officer, Chris Liddell, has to say about the situation on the upcoming call.
Here's one possible culprit: In its quarterly filing with the SEC today, Microsoft cited weaker revenue from Windows on PCs, saying decreased $46 million, or about 1 percent. The company attributed that result to factors including decline in premium Windows units as a percentage of the overall sales mix. That "premium mix," as it's known, fell 4 percentage points to 71 percent.
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