Microsoft Earns Record Revenue, Still Gets Little Love

Reports smaller losses for online services unit

Poor Microsoft, even when it delivers record revenue and meets analyst expectations, it still gets snubbed by Wall Street.

In the last quarter (the first of its 2012 fiscal year), the company said earnings rose 6 percent year over year to $5.7 billion, or 68 cents per share, as analysts expected. It also announced record first-quarter revenue of $17.37 billion, a 7 percent increase from the same quarter of the previous year.

But Microsoft’s performance wasn't enough to please Wall Street. In after hours trading, shares in the company fell almost 1 percent to $26.88.

During a call with analysts Thursday, the company’s CFO Peter Klein said it saw revenue growth across all segments and broad-based demand across geographic regions, including Europe (an area in which even Google saw softness last quarter).

“We started fiscal year 2010 with good momentum,” he said.

Market share in the U.S. for search engine Bing grew to 14.7 percent and Xbox, the company’s constant success story, was the top-selling gaming console in the U.S. for the ninth consecutive month.

Another brighter-than-expected spot for the company was reported double-digit (19 percent) revenue growth and smaller losses in its Online Services division, the historically money-losing unit that includes Bing.

On the call, the company acknowledged that the unit still posted losses and said its “number one priority” is to resolve the monetization issue. Despite high-fixed costs, Microsoft said, it's trying to grow revenue per search and manage profitability as best it can.

Pointing to the company's success with Xbox, BGC Partners analyst Colin Gillis said, "The message is they want…to grow this business and keep feeding it until it grows. They have a good track record on that."

But he added, "one quarter doesn't make a data point."

In terms of the larger picture for Microsoft, he said it was important to keep its performance in perspective. While some on Wall Street were disappointed with its earnings report, he said, "They did all this in what is arguably a difficult PC environment."

"It's a record revenue quarter for them, for a first quarter," he said. "They get very little love for setting records."

Microsoft also touted its $8.5 billion acquisition deal with Skype that closed last week.

Given the recency of the acquisition, Klein declined to elaborate on how the Internet calling service will be weaved into Microsoft's products, saying that teams were making plans "in the building, as we speak."

But, he said, "The opportunities are increasingly exciting across the portfolio of our products."