Microsoft misses analysts' target for Q3

Microsoft misses analysts' target for Q3

Microsoft revenue grew 13 percent for Q3 but the company missed analyst earnings estimates by a penny.

New products helped Microsoft grow revenue 13 percent year-over-year for its fiscal 2006 third quarter, but earnings per share (EPS) slightly missed analyst estimates.

Revenue for the Redmond, Washington, software maker's quarter ended March 31 was US$10.9 billion, a 13 percent increase over the same period last year, when Microsoft brought in US$9.6 billion.

Net income for the period was US$2.98 billion, or US$0.29 per share, which included US$0.03 in legal charges. Excluding those charges, Microsoft earned US$0.32 per share, a penny less than the US$0.33 per share analysts surveyed by Thomson First Call had expected the company to earn for the quarter.

For the same quarter last year, net income was US$2.56 billion or US$0.23 cents per share, which included US$0.05 per share in legal charges.

Microsoft attributed its quarterly revenue growth to strong sales of new products such as SQL Server 2005, Microsoft Dynamics enterprise applications and its Xbox game console, as well as continued strength in its server and tools business.

Revenue for Microsoft's home and entertainment group was up more than 80 percent due to Xbox demand, the company said. However, some financial analysts had expected growth to be slightly stronger.

SQL Server revenue grew more than 30 percent for the quarter, while Microsoft Business Solutions, the unit where Microsoft's Dynamics applications reside, saw 21 percent revenue growth, the company said. SQL Server is a part of Microsoft's Server and Tools division, which had its 15th consecutive quarter of double-digit revenue growth, according to Microsoft.

Revenue guidance for the fourth quarter, which ends June 30, is expected to be in the range of US$11.5 billion to US$11.7 billion, with diluted EPS expected to be US$0.30. Analysts said Microsoft's guidance for EPS for the next quarter is a little on the low side.

Wall Street reacted negatively to Microsoft's earnings announcement. During the hour after the earnings were released, the company's stock fell 4.66 percent from US$27.25 to US$25.98 in after-hours trading.

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