Microsoft sees 4Q profit drop but raises outlook

SEATTLE - Microsoft on Thursday posted a 23.5 percent drop in quarterly net profit, but raised its outlook for the current fiscal year as orders for upcoming products exceed expecations, lifting its shares by 6 percent.

The company also announced a new share buyback program that includes a US$20 billion tender offer scheduled for next month and an authorization for up to US$20 billion in additional buybacks through 2011.

The software maker reported a net profit of US$2.83 billion, or 28 cents per diluted share, for its fiscal fourth quarter ended June 30. A year ago, Microsoft delivered a net profit of US$3.7 billion, or 34 cents per share, boosted by a tax gain.

Fourth-quarter revenue rose 16 percent to $11.8 billion.

Excluding a legal charge, Microsoft earned 31 cents per share. On that basis, analysts, on average, had forecast Microsoft to report a profit of 30 cents per share on revenue of US$11.6 billion, according to Reuters Estimates.

Microsoft caught investors by surprise in April when it revealed plans to invest an additional US$2.6 billion to fund its flagging Web operations and other new businesses. The move dampened optimism that new products and an online strategy shift would bear fruit this business year.

In the current year, Microsoft expects to earn between US$1.43 and US$1.47 per share. Its previous forecast was US$1.36 to US$1.41 per share.

Since the company reported fiscal third-quarter earnings on April 27, the stock has fallen about 16 percent versus a 5 percent decline on the S&P 500 index.

But Microsoft shares were up 6.1 percent at US$24.25 in after-hours trade after closing at US$22.85 on Nasdaq.

Copyright 2006 Reuters.

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