Microsoft reports first-quarter revenue of $17.37 billion, up 7%

Microsoft has reported its earnings for its first fiscal quarter. Revenue totaled some $17.37 billion, a 7% increase year over year. Operating income totaled $7.2 billion, with net income clocking in at $5.74 billion. Diluted earnings per share was $0.68. Microsoft stock is down a fraction of a percent in after hours trading.

Microsoft called the quarter “driven by solid business and consumer demand.” The Microsoft Business Division reported an 8% increase in revenue, while Windows and Windows Live division only managed a 2% rise.

The reported earnings roughly matched investor expectations. It seems unlikely that the company will suffer, or enjoy, a stock price swing. The company did have positive words for the future, despite the quarter being rather sedate in terms of surprises: “Our product portfolio is performing well, and we’ve got an impressive pipeline of products and services that positions us well for future growth.”

Perhaps oddly, earnings per share, at sixty eight cents, is exactly what we expected when we wrote a preview piece on this report earlier this week. In fact, we used the street estimate of 17.25 billion dollars in revenue as our guidestick, so Microsoft did manage to exceed that slightly.

Of all the Microsoft segments, the Server and Tools team took the cake, booking a 10% rise in revenue over the past year, and its sixth consecutive quarter of “double-digit revenue growth.”

On the whole, this was a quarter of steady, if somewhat stodgy growth for Microsoft. If it wants to get its stock moving, it had best look towards a blockbuster Christmas. As we noted before: “As of this moment, Microsoft’s PE ratio is back under ten. Oddly, given that the company’s EPS growth rate is roughly ten, in a way the firm’s PEG ratio is on track (roughly, obviously). Microsoft needs to ignite an engine of growth somewhere, or it’s stock is likely set to stay where it is: stuck.”

The full Microsoft report:

REDMOND, Wash. — Oct. 20, 2011 — Microsoft Corp. today announced record first-quarter revenue of $17.37 billion for the quarter ended Sept. 30, 2011, a 7% increase from the same period of the prior year. Operating income, net income, and diluted earnings per share for the quarter were $7.20 billion, $5.74 billion, and $0.68 per share, which represented increases of 1%, 6%, and 10%, respectively, when compared with the prior year period.

“We saw customer demand across the breadth of our products, resulting in record first-quarter revenue and another quarter of solid EPS growth,” said Peter Klein, chief financial officer at Microsoft. “Our product portfolio is performing well, and we’ve got an impressive pipeline of products and services that positions us well for future growth.”

Since July, Microsoft reported a number of product and business highlights, including:

• The Microsoft Business Division reported $5.62 billion in first quarter revenue, an 8% increase from the prior year period which included the launch of Office 2010. Revenue from Microsoft’s productivity server offerings – including Lync, SharePoint, and Exchange – grew double-digits, and the Dynamics business grew 17% in the quarter.
• The Server & Tools segment posted $4.25 billion in first quarter revenue, a 10% increase over the prior year period and the sixth consecutive quarter of double-digit revenue growth. Microsoft also unveiled a developer preview of “Windows Server 8” at the BUILD developer conference in September.
• Windows and Windows Live Division revenue was $4.87 billion, a 2% increase over the prior period, in line with the PC market. Windows 7 momentum continued with over 450 million licenses sold since launch. At the BUILD conference, Microsoft showcased and released a developer preview of the next major release of Windows, “Windows 8.”
• Windows Phone 7.5 released with a broad array of new features, and received favorable reviews.
• Bing organic US market share grew 350 basis points year over year to 14.7% while Bing-powered US market share, including Yahoo! properties, was approximately 27%. The company also showcased the increasing integration of Bing across other products such as Xbox and Windows Phone.
• Xbox was the top-selling gaming console in the US for the ninth consecutive month. The company launched the Gears of War 3 game with over three million copies sold in the first week, and announced plans to roll out the next generation of TV entertainment on Xbox LIVE with nearly 40 content providers starting this holiday season.
• Microsoft completed its acquisition of Skype.

“We had another strong quarter for Office, SharePoint, Exchange, and Lync, and saw growing demand for our public and private cloud services including Office 365, Dynamics CRM Online, and Windows Azure,” said Kevin Turner, chief operating officer at Microsoft. “With a great set of consumer products like Windows 7 PCs, Windows Phone 7.5, Xbox and Kinect, we are excited about the holiday buying season.”