Microsoft News Tracker

The Microsoft earnings results for the first quarter of their fiscal year 2007 are in:

Microsoft Corp. today announced first quarter revenue of $10.81 billion for the period ended September 30, 2006, an 11% increase over the same quarter of the prior year. Operating income for the quarter was $4.47 billion, an 11% increase compared with $4.05 billion in the prior year period. Net income and diluted earnings per share for the first quarter were $3.48 billion and $0.35 per share. For the same quarter of the previous year, net income and diluted earnings per share were $3.14 billion and $0.29, including a $0.02 per share charge for certain legal charges.

This neatly exceeded the analyst consensus of earnings of $0.31 per share on revenue estimates ranging from $9.74 billion to $10.75 billion. The big star was once again Server and Tools, most particularly SQL Server. You know, the software business is so good, maybe Microsoft should consider getting out of consumer electronics?

But, of course, the analyst mantra this time around was that “it’s not the earnings, it’s the outlook,” and here’s what Microsoft had to say:

Microsoft management offers the following guidance for the fiscal second quarter ending December 31, 2006:

• Revenue is expected to be in the range of $11.8 billion to $12.4 billion, which reflects approximately $1.5 billion of revenue deferrals that will be captured in the fiscal third quarter as noted below.
• Operating income is expected to be in the range of $2.9 billion to $3.1 billion, which reflects approximately $1.5 billion of deferrals noted below.
• Diluted earnings per share are expected to be $0.22 to $0.24, which includes an $0.11 per share impact for deferrals noted below.

Note: The guidance above includes the impact of an approximately $1.5 billion of revenue deferral from the second to the third quarter, primarily related to the technology guarantee programs announced on October 24, 2006 for Windows Vista and the 2007 Microsoft Office system.

Management offers the following guidance for the full fiscal year ending June 30, 2007:

• Revenue is expected to be in the range of $50.0 billion to $50.9 billion.
• Operating income is expected to be in the range of $19.1 billion to $19.5 billion.
• Diluted earnings per share are expected to be in the range of $1.43 to $1.46.

There don’t appear to be any big surprise there, but, pundits, start your engines!

Update: Some related notes:

• Microsoft CFO Chris Liddell tells Reuters that the incomplete share buyback shaved $0.04 off the full year outlook.