Microsoft Reports Sharp Rise In Fiscal Fourth Quarter Earnings

Earnings for the three months ended June 30 were $2.69 billion or 25 cents per share, up from $1.48 billion or 14 cents per share in the same period a year earlier. The most recent earnings included a $208 million tax benefit.

Revenue grew 15 percent to $9.29 billion, up from nearly $8.07 billion a year earlier.

Microsoft -- which disclosed Thursday that its cash reserves now stand at $60.59 billion -- said earlier this week that it plans to pay a one-time dividend of $3 per share, at a cost of $32 billion, as part of plans to return a substantial chunk of that cash hoard back to shareholders. It also doubled its annual dividend and announced plans for a massive stock buyback over the next four years.

The earnings per share figures for the most recent quarter included a 5 cent charge for stock-based compensation expense and the 2 cent per share tax benefit. The results for the same period a year earlier included a charge of 4 cents per share for stock-based compensation expense, as well as another charge of 5 cents per share to settle its lawsuit with AOL.

Last year, Microsoft switched from offering employees stock options to offering them stock grants.

Analysts polled by Thomson First Call had been expecting quarterly earnings of 29 cents per share, on revenue of around $9 billion. Including the two one-time items, Microsoft came in one penny below expectations.

Analyst David Hilal of Friedman, Billings, Ramsey said the weaker than expected earnings per share figures signaled that the company's costs are too high - something chief executive Steve Ballmer is seeking to address with companywide cost-cutting measures.

But in general, he said, all seven of the company's business units exceeded his expectations.

"While not perfect, (it's a) net-net positive," he said of the quarterly results.

Microsoft raised slightly its revenue expectations for the coming fiscal year ending June 30, 2005. The company now expects revenue of $38.4 billion to $38.8 billion, up from previous guidance of $37.8 billion and $38.2 billion. Chief financial officer John Connors attributed the improvement to better results in unearned revenue - contracts that are signed but not entirely recognizable as revenue immediately - in the fiscal fourth quarter.

It also is projecting better sales of Xbox game consoles, he said.

The company said it now expects earnings per share for the entire fiscal year to be between $1.05 and $1.08, including a a charge of about 16 cents related to stock-based compensation.

The company had previously said that it expected earnings per share to be in the range of $1.16 to $1.18, including a charge of 15 cents to account for stock-based compensation. Connors said the drop is because of the company's plan to offer a special dividend of $3 per share.

For the current quarter ending September 30, Microsoft said it expects revenue of $8.9 billion to $9 billion. The company said earnings per share for the three-month period are expected to be 25 cents, including a one-time charge of 5 cents to account for stock-based compensation.

For the entire fiscal year ended June 30, Microsoft reported earnings of $8.17 billion or 75 cents per share, up from $7.53 billion or 69 cents per share in the previous fiscal year. Revenue was nearly $36.84 billion up from $32.19 billion in the 2003 fiscal year.

Shares in Microsoft rose 14 cents to $29 in regular trading on the Nasdaq Stock Market. After the results were released, the shares fell 93 cents in extended trading.

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