Business Stabilizes in Q1'10

Cost cutting and strong sales of Windows client OS licenses ahead of the Windows 7 launch helped Microsoft beat most analysts’ expectations for the first quarter of its 2010 fiscal year (Q1’10), which ended Sept. 30, 2009. The company earned US$0.40 per diluted share on US$12.92 billion in revenue, down 17% and 14%, respectively, from last year. However, these results included the deferral of US$1.47 billion into the second quarter to account for presales of Windows 7; without that deferral, revenue would have dropped only 4% to US$14.39 billion and earnings per share (EPS) would have risen 8% to US$0.52.

(For an overview of Microsoft’s recent financial performance, see the chart “Microsoft Financials for the Last Five Quarters“.)

Some Segments Improving

Three of Microsoft’s five business segments showed revenue and operating income declines from last year’s fiscal first quarter (Q1’09), but two (Server and Tools and Entertainment and Devices) were approximately flat. This is a better showing than last quarter, in which all five segments declined from the previous year, and suggests that growth could return next quarter, since the company will be facing easier comparables with Q2’09, when the economic downturn became severe.