Q1'09 Results Fair, Outlook Cautious for FY'09

Weak revenue growth in Microsoft’s client OS business was offset by strength in sales of business productivity software, helping Microsoft increase its year-to-year revenues 9% to US$15.06 billion for the quarter ending Sept. 30, 2008 (the first quarter of Microsoft’s fiscal year 2009). Not only did revenue come in ahead of expectations, but operating income and earnings per share were also at the high end of expectations. However, the company noted that the global credit crisis has begun impacting sales and significantly lowered its guidance for FY’09 in expectation of a recession.

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

Inexpensive Laptops Blamed for Client Shortfall

Two of Microsoft’s most important segments, Client (its most profitable) and Server and Tools (its fastest-growing) both came in short of expectations in Q1’09. These shortfalls were tempered by a strong performance by its Business segment (the company’s largest), although some of this revenue came from multiyear license agreements signed in previous quarters.