$1.3B Xbox Payout Fails To Hurt Microsoft
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A billion-dollar payout to disgruntled Xbox owners shaved $0.08 off Microsoft’s earnings per share in its fourth quarter, but the company still managed to deliver a solid set of financial results.

A billion-dollar payout to disgruntled Xbox owners shaved $0.08 off Microsoft’s earnings per share in its fourth quarter, but the company still managed to deliver a solid set of financial results.

And the whole of fiscal 2007 was Microsoft’s first $50bn year, the company reported yesterday.


Revenue for the three months ended June 30 was up 13% at $13.37bn, and net income was up 7% at $3bn. EPS without the eight-cent Xbox charge was $0.39, a 26% increase.

The growth was due to “strong OEM revenue growth driven by strong demand for Windows Vista,” investor relations boss Colleen Healy said during a conference call.

All but one of Microsoft’s five business divisions managed double-digit sales growth in the quarter.

The Client business, which includes Windows, was up 14% at $3.81bn, with revenue from OEMs, i.e. PC makers, up 11% and the Premium versions of Vista at 72% of the total.

 

 

Server & Tools was up 15% at $3.08bn.

The Online business, which includes the Live and MSN branded properties and is one of Microsoft’s smaller businesses, was up 19% at $690m.

The Business segment, which now includes the Office cash cow, was also up 19% at $4.63bn.

The red-headed stepchild for the quarter was the gaming business, where the Xbox resides. Its revenue was down 10% to $1.16bn. But Microsoft expects a pick-up in the current quarter due to the September release of the next instalment of the popular Halo series of games.

Xbox was also a drag on earnings, due to Microsoft’s surprise decision last month to splash out $1bn keeping gamers happy by fixing their broken consoles.

The charge covers the cost of extending warranties to three years and repairing or replacing the growing number of Xboxes that inexplicably stop working.

Microsoft hasn’t said precisely what the problem is, other than it was a design flaw that could not be blamed on a component supplier or other third-party.

For the full fiscal year, Microsoft saw revenue of $51.12bn, a 15% increase. EPS was $1.42, or $1.49 excluding the charges, which would have been 17% growth.