Microsoft profit falls on sluggish Windows, currency pressure

[SEATTLE] Microsoft Corp on Monday reported a fall in its quarterly profit that was in line with Wall Street forecasts, as sluggish personal computer sales dampened demand for Windows software and the company struggled with the impact of the strong US dollar.

Shares of the world's largest software company, which have surged to 14 year highs in the past few months, fell 3 per cent in after-hours trading, to US$45.63. "While currency is a headwind for Microsoft and other large international companies, we would characterise the headline numbers as good enough, although some bulls may have been hoping for a bigger beat," said Daniel Ives, an analyst at FBR Capital Markets.

Microsoft's flagship Windows business has been under pressure for three years as PC sales have declined, although the market appears to be stabilizing in recent months.

Currency shifts against the strong US dollar also crimped profit in the fiscal second quarter, ended Dec 31, although Microsoft did not specify by how much. Microsoft gets almost three-quarters of its revenue from overseas, but a significant amount of that is still in US dollars. "Overall, the only surprise I think was in commercial licensing, where we had a little bit of a headwind from foreign exchange as well as macro conditions in China and Japan," the company's chief financial officer, Amy Hood, said in a phone interview with Reuters.

Commercial licensing is chiefly sales of Windows and Office to business customers, which is Microsoft's biggest revenue generator.

Microsoft reported profit of US$5.86 billion, or 71 cents per share for the latest quarter, compared with US$6.56 billion, or 78 cents per share, in the year-ago quarter.

Sales rose 8 per cent to US$26.47 billion, largely due to the acquisition of Nokia's phone handset business last year.

Analysts had expected revenue of US$26.3 billion and earnings of 71 cents per share, on average, including some restructuring costs.

REUTERS