Microsoft reports 31% Q1 profit growth, shares fall as Windows 7 revenue slips
Microsoft's (NASDAQ:MSFT) shares dropped on Friday despite posting a better-than-expected third quarter profit, as the company also recorded a rare slip in sales of its Windows operating system.
For the first three months of 2011, the company reported yesterday net income of $5.23 billion, or $0.61 per share, compared to $4 billion, or 45 cents per share, a year ago. Earnings from the most recent quarter included a $0.05 tax benefit.
Revenue rose 13% to $16.43 billion, even as sales of Windows 7 fell 4% in the face of competition from new tablet computers, which rely on other operating systems.
Analysts expected earnings of $0.56 per share on revenue of $16.19 billion.
The company's business unit saw sales growth of 21% year-over-year, on strength of Office 2010, as well as SharePoint, Exchange, Lync and other services.
"We delivered strong financial results despite a mixed PC environment, which demonstrates the strength and breadth of our businesses," said CFO Peter Klein.
Indeed, Microsoft's entertainment division posted a whopping 60% increase in revenue, fueled by Kinect for Xbox 360, as well as continued strong Xbox 360 console sales.
Servers and tools revenue rose 11%, while online services sales grew 14%.
Despite the better than expected results, Microsoft's profits fell below Apple's for the first time in more than two decades.
Shares in the company were down more than 4% on Friday morning to trade at $25.59 as of 11:29am EST.
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