Microsoft’s Second-Quarter Earnings Dip Despite Windows 8 Lift

SAN FRANCISCO (AP) -

Microsoft’s latest quarterly earnings slipped, even as the world’s largest software maker showed modest progress adjusting to a shift away from the personal computers that have been its financial foundation for decades.

The results announced Thursday are the first to include Windows 8. The program is a dramatic overhaul of the Microsoft Corp. operating system that powers most PCs. Windows 8 came out Oct. 26 with slightly more than two months left in Microsoft’s fiscal second quarter.

Microsoft is counting on Windows 8 to help the company extend its franchise into tablet computers while still reaping revenue from a new breed of PCs. The redesigned software displays applications in a mosaic of interactive tiles instead of a staid menu. It can be controlled by touching a display screen, as well as the traditional method of using a keyboard and a mouse.

Although sales of Windows 8 haven’t been as impressive as investors hoped, revenue in Microsoft’s Windows division climbed 24 percent from the previous year. That includes sales that had to be deferred from earlier quarters because the purchases were made before Windows 8’s release.

When Windows 8 finally hit the market, Microsoft also unveiled its own tablet computer, Surface, as a showcase for the operating system. Microsoft didn’t disclose Thursday how many Surface devices were sold in the October-December period.

“I don’t think they want to provide that because it won’t be impressive,” technology analyst Patrick Moorhead said.

Analysts have estimated that Microsoft sold 750,000 to 1 million of the Surface units during the quarter, far below the nearly 23 million iPads that Apple said it shipped during the same period.

Microsoft booked its Surface sales in the Window division, accounting for some of the gains from the previous year. The Redmond, Wash., company is trying to get the Surface into more hands by releasing the device in 14 more countries and coming out with a more sophisticated version that can handle all Microsoft programs. The new model, called Surface Pro, will debut Feb. 9. The one already out runs a streamlined version of Windows 8 called RT.

BGC Financial analyst Colin Gillis said he still has faith in Microsoft because the company “has multiple revenue streams that are still very nice businesses.”

But another Microsoft division that includes another big moneymaker — the company’s Office suite of software — didn’t fare as well. Revenue in the Office division declined 10 percent, a shortfall that may have spooked some investors. Analyst Josh Olson of Edward Jones believes many of Microsoft’s corporate customers may have held off on buying Office because a new version of that program is scheduled to come out early this year.

Microsoft earned $6.4 billion, or 76 cents per share, during the final three months of the year. That was down 4 percent from $6.6 billion, or 78 cents per share, a year earlier.

The company’s total revenue rose 3 percent from last year to $21.5 billion. The earnings were a penny above the average estimate of analysts surveyed by FactSet, while the total revenue fell below analysts’ projections by about $100 million.

Microsoft’s stock shed 43 cents, or 1.6 percent, to $27.20 in Thursday’s extended trading, after the release of results. The stock has remained stuck below its price before Windows 8 and Surface came out, signaling that investors aren’t pleased with the products’ performance so far.