Microsoft coffers swell on twofold success

Citing strength in both the business and consumer markets, Microsoft on Thursday reported better-than-expected quarterly sales - and profits that doubled those of a year ago.

For the three months ended on 31 December, the company earned $3.46bn, or 32 cents per share, on revenue of $10.82bn. That compares with earnings of $1.55bn, or 14 cents per share, on revenue of $10.15bn in the same quarter a year ago.

In October, Microsoft forecast revenue for the December quarter of $10.3bn to $10.5bn and per-share earnings of 28 cents a share. Analysts had been expecting a bit more in revenue, with the consensus average being $10.554bn, according to First Call.

Outgoing financial chief John Connors said in a statement: "Our record revenue came from across-the-board strength in both our business and consumer segments." Connors also noted that the company's Home and Entertainment unit, which includes Xbox, delivered its first profitable quarter. All told, Microsoft's emerging businesses saw a $700m improvement over last year's losses.

For the current quarter, Microsoft said it expects revenue in the range of $9.7bn to $9.8bn, just ahead of current analyst expectations, with per-share earnings expected to be 27 cents or 28 cents.

Microsoft also hiked its expectations for the full fiscal year, which runs through June. The company now expects revenue between $39.8bn and $40bn, with per-share earnings in the range of $1.09 to $1.11. Previously, the company had been calling for revenue between $38.9bn and $39.2bn, with per-share earnings of $1.07 to $1.09.

The earnings report sent Microsoft shares modestly higher in after-hours trading, to $26.47 on the Island ECN. The stock closed regular trading at $26.11, up 10 cents, or less than half of one per cent.

All of Microsoft's seven business units saw an improvement in the bottom line. In many cases, however, better results stemmed from stock-based compensation charges in the year-ago quarter. Most units saw sales rise as well. The Information Worker unit, which includes Office, was the only unit whose sales dropped, while revenue in the Microsoft Business Solutions unit was roughly flat.

The company's balance of unearned revenue - seen as a predictor of future sales - rose slightly from the prior quarter, to $7.97bn from $7.78bn.

The company's cash balance dropped significantly following the company's one-time $3-per-share payout. Microsoft ended the quarter with $34.5bn in cash and short-term investments, down from $64.4bn three months earlier.

Microsoft said that during the three-month period, the company repurchased 23.6 million shares of its stock for a total of $655m, a lower level than repurchases in the year-earlier period, when the company bought back 30.5 million shares for $830m. The company announced plans to step up the rate at which it repurchases shares, though for the past two quarters it has bought back less stock than in the comparable year-earlier periods.

Ina Fried writes for CNET News.com. CNET News.com's David Becker contribute to this report.