Microsoft Q1: beats estimates and Wall Street is happy

UPDATE 10/24: When markets opened Friday morning, investors decided they were not so happy with Microsoft's lowered year-end projections and Microsoft's shares suffered what Dow Jones called a "strong market-wide sell-off." Analyst's recommendations at the time of this blog posting range from "hold" to "buy." Microsoft's stock has hit its 52-year low at $20.95 with analysts on average saying the stock is currently worth about $32.

From 10/23: Even though Microsoft lowered its its full-year earnings, its Q1 results beat analysts estimates. And in this day and age, that made everyone happy. Q1 for Microsoft's fiscal '09 ended September 30. Today the company reported that profits rose 2% to $4.4 billion (48 cents a share) compared to $4.3 billion (45 cents a share) a year ago. Analysts were looking for earnings of 47 cents a share. But the revenue story is even better. Analysts polled by Thomson Reuters were looking for $14.8 billion and Microsoft delivered $15.1 billion, up 9.4% over last year's Q1 $13.7 billion, which Microsoft says is record for Q1 revenue.

Each one of the company's five main business units did well. Client software delivered $4.2 billion in revenue ($4.38 billion expected) and $3.3 in profit; The Server unit came in at $3.4 billion ($3.45 billion expected) and $1.2 billion in profit; and the Business division beat expectations of $4.73 billion in revenue by coming in at $4.95 billion ($3.3 in profit). Microsoft noted that it shipped Microsoft SQL Server 2008, Microsoft Hyper-V Server 2008 and Microsoft Dynamics CRM Online this quarter.

Interestingly, the Entertainment and Device division, where Microsoft has only recently begun to make strides with Xbox (and analysts feared an Xbox slowdown) also did extremely well. It beat the $1.45 billion in revenue expected and instead delivered $1.8 billion, and $178 million in profit. The sore spot was the Online Services Business. But even that had its own silver lining. It was expected to deliver $718 million in revenue and beat that with $770. But it also reported $480 million loss, almost double the loss of a year ago of $267 million.

Microsoft downgraded projections and in a typical year, that could have sent Wall Street into a sell-off fury. But there's nothing typical about October, 2008. Microsoft said it is expecting Q2 to come in at 51 to 53 cents per share on sales of $17.3 billion to $17.8 billion. Analysts were expecting a profit of 55 cents per share on $18 billion in sales. For the full year fiscal 2009, Microsoft now expects an EPS range of $2 to $2.10 with analysts looking for $2.11. For revenues the company said to expect $64.9 billion to $66.4 billion. Analysts wanted $66.5 billion.

Still the company is known for being conservative with its projections and no one expects any company to do anything but lower projections as the market stands now. As of the time of this blog, Microsoft shares rose over 3% to $22 in after hours trading. The company's shares were previously down 19% since its last earnings report. These results are a hopeful sign to a market that has been battered for the past few weeks. Those making their living trading securities are not about to kick this news in the teeth.

Visit the Microsoft Subnet home page for more news, blogs, podcasts.
More blog post from the Microsoft Subnet posts:

Also see:

12 tips for safe social networking
10 questions for Microsoft's Windows Server 2008 guy, Jason Hermitage
17 job-hunting resources for Windows pros
Under the hood of Hyper-V (master list of links).
Subscribe to all Microsoft Subnet bloggers.
Sign up for the bi-weekly Microsoft newsletter. (Click on News/Microsoft News Alert.)