Tech Giants Report: Microsoft Beats as IBM Disappoints on Earnings

Michael Teague  |

Microsoft Corp. (MSFT) released its fiscal third quarter earnings on Thursday, indicating the world’s largest software company made a profit of $6.06 billion, $0.72 cents per share, on gross income of $20.5 billion.

The figures represent a significant improvement both over the prior-year period when the company earned $5.1 billion or $0.61 cents per share on revenue of $17.4 billion, and over analyst estimates of earnings of $0.68 cents per share on $20.53 billion on revenue.

Drastic increases in sales of Xbox, Kinect, and the Windows operating system lifted the company’s profits, but these gains were negated by fines resulting from failures to make good on promises to European anti-trust regulators regarding the availability of competing browsers on the Windows platform.

Additionally, the company announced that CFO Peter Klein would be leaving his position towards the end of June after three and a half years on the job.

The company’s shares had closed Thursday slightly down, losing 0.12 percent to $28.79, but popped over 2 percent in late trading to $29.37 after the news was released.

Meanwhile, International Business Machines Corp. (IBM) reported far less encouraging earnings. The company’s net income was $3.03 billion, or $2.70 per share on revenue of $23.42 billion, a drop from the prior year period during which IBM made $3.07 billion, or $2.61 per share. Analysts had expected the company to make $3.05 per share on revenue of $24.62 billion.

The biggest loss came from the company’s systems and technology division that fell by 17 percent, yet another confirmation of the thesis that the future of computer technology is increasingly less dependent on hardware. Software sales were down half of a percent, while tech services dropped over 4 percent, and business services were down over 3 percent.

IBM has been trying to rid itself of less profitable businesses in order to adapt to the changing tech market, where the revenue sources are shifting from hardware to mobile and data analysis. Economic uncertainty, particularly in Europe, is hampering these efforts.

The company’s shares dropped 1.20 percent in regular trading to $207.15, but were hit hard in after hours, slipping 3.56 percent to $199.77.

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