Microsoft Tops Forecasts but Soft PC Sales Hurt

CNBC.com with wires

Microsoft topped earnings forecasts, helped by sales of its Office software and Xbox game consoles, but profit from its core Windows fell on soft PC sales.


Shares of Microsoft finished slightly higher in regular trading but wobbled after-hours. Click here for the latest after-hours quote.

The world's largest software maker follows Google , Apple and IBM in reporting surprisingly good results as technology spending holds up relatively well in an uncertain economy.

But Microsoft was hit by waning growth in PC sales, partly due to the collapse of netbook sales in favor of tablets. On Wednesday, chipmaker Intel warned that PC sales will not be as strong as it had expected this year.

Sales of Windows, which comes pre-installed in most PCs, fell for the second consecutive quarter.

"It kind of jumped out at me that the Windows and Windows Live division didn't particularly grow this quarter even though we know from Intel yesterday that the number of PCs shipped in the quarter grew 1 percent,'' said Kim Caughey Forrest, senior analyst at fund manager Fort Pitt Capital.

The software giant reported its earnings excluding items rose to 69 cents a share in its fiscal fourth quarter from 51 cents a share a year earlier.

Revenue for the most recent period increased to $17.37 billion from $16.04 billion a year earlier.

Analysts who follow Microsoft expected the company to turn a profit of 58 cents a share on sales of $17.23 billion, according to a consensus estimate compiled by Thomson Reuters.

In May, Microsoft acquired Skype for $8.56 billionbeating out potential partnerships with Google and Facebook.

Analysts are projecting that sales of tablet computers using Microsoft software will top those of the high-profile Playbook from BlackBerry maker Research In Motion, according to Strategy Analytics.

Even though Microsoft has yet to launch a version of its Windows software designed specifically for tablet computers it still picked up a 4.6 percent share of the market in the second quarter compared with a 3.3 percent share for Playbook, which is based on RIM's QNX software.