For the fiscal fourth quarter 2008, ended June 30, Microsoft said sales increased 18% over the prior year to $15.8 billion. Net income rose 41% to $4.3 billion while earnings per share climbed 48% to 46 cents.
Excluding the impact of a one-time, $1.1 billion charge to cover Xbox warranty costs that Microsoft took in the fourth quarter of 2007, the company's fourth quarter 2008 net income increased a more modest 14% while earnings per share rose 18%.
While the growth numbers were strong, financial pros had been expecting more. Wall Street analysts surveyed by Thomson Reuters, on average, expected per-share earnings from Microsoft of 47 cents. As a result, Microsoft shares were down more than 8% to $25.28 at one point on Friday morning.
Microsoft's fourth quarter financials were a mixed bag. The company saw solid growth in sales of its Windows Vista operating system, which helped its Client unit increase revenue 15% to $4.4 billion. Business sales of Microsoft's Office desktop suite jumped 19%. That was partly offset, however, by a 7% decline in consumer sales as some customers turn to free desktop offerings from rivals like Google and IBM.
Sales of business server software showed a strong, double-digit increase of 21%, helped along by this year's launches of the 2008 versions of Windows Server, SQL Server, and Visual Studio.
But losses at Microsoft's key Online Services unit -- which the company is looking to bolster through a billion dollar buyout of Yahoo's search operations -- widened significantly to $488 million. Microsoft blamed much of the loss on investments in data center equipment needed to power next-generation hosted search and application services.
Online services revenue grew 24% to $838 million, but most of the gain was the result of Microsoft's integration of aQuantive, an Internet ad agency that the company acquired last year for $6 billion.
Sales at Microsoft's Entertainment and Devices unit, home to the Xbox 360 gaming console, climbed 37% to $1.58 billion on the back of strong console and video game sales.
For the current quarter, Microsoft said it expects to post revenue of between $14.7 billion and $14.9 billion, on earnings per share of between 47 cents and 48 cents. Wall Street analysts were expecting earnings for the quarter to come in at 49 cents on revenue of $15.1 billion.
For its full fiscal year 2008, which ended June 30, Microsoft said revenue increased 18% over the previous year to $60.4 billion, while net income rose 26% to $17.7 billion and earnings per share gained 32% to $1.87.
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