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7/21/2011
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Microsoft Posts 30% Gain In Quarterly Profits

Xbox and search advertising up sharply, but Windows sales off amid tablet competition.

Microsoft reported a jump in fiscal fourth-quarter profits Thursday, as net income increased 30% year-over-year to $5.87 billion. Revenue gained 8%, to $17.37 billion, while operating income was up 4%, to $6.17 billion. Earnings per share came in at 69 cents.

The numbers were enough to beat Wall Street analysts' expectations of 58 cents EPS and revenue of $17.25 billion.

For its full fiscal year, the company posted record sales of $69.94 billion, up 12% from the previous year. Net income climbed 23%, to $23.15 billion. Operating income was up 13%, to $27.16 billion, while full-year EPS came in at $2.69.

"Throughout fiscal 2011, we delivered to market a strong lineup of products and services which translated into double-digit revenue growth, and operating margin expansion," Microsoft CFO Peter Klein said in a statement. "Our platform and cloud investments position us for long term growth."

Leading the software maker's growth in the quarter was its Xbox video gaming console and related products, such as the Kinect hands-free controller. Microsoft's Entertainment and Devices unit posted a 30% revenue gain on the back of the Xbox.

The company's online services unit also posted solid gains, with revenue up 17%. Much of the increase was fueled by upticks in search advertising through Bing and through Microsoft's search alliance with Yahoo. The Server & Tools division, which houses Windows Server and the cloud-based Windows Azure operating system, reported a 12% revenue increase.

"We're providing our customers seamless and powerful ways to move to the cloud, and we are well-positioned for the coming year," Microsoft COO Kevin Turner said in a statement. Sales of Microsoft Office and related products sold through the Business Division were virtually flat compared to the previous year.

Most disappointing for Microsoft was the performance of its Windows and Windows Live division, where sales were off slightly from a year ago. The PC market has been sluggish of late as an increasing number of consumers turn to tablets that run software from Apple and Google for their computing and Web browsing needs.

Microsoft said it expects operating expenses to increase between 3% and 5% in fiscal 2012, reaffirming previous guidance. The company's shares were off 0.31% in after-hours trading.

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