Despite quarterly profit, Microsoft cuts projections

The company also issued an emergency software fix for a security flaw in its Windows operating system.

Microsoft executives said the fiscal first quarter, which ended Sept. 30, started out strong but weakened in September, a trend they have seen continue. Microsoft cut its quarterly and yearly forecast and said it was reining in hiring, marketing and travel in anticipation of difficult economic times.

“We cannot control the economy, but we can control our performance,” said Chris Liddell, Microsoft’s chief financial officer.

Microsoft reported revenue of US$15.1 billion, a company record for first quarter and a 9 percent increase from US$13.8 billion in 2007. Its profit edged up 2 percent to US$4.4 billion, or 48 cents a share, compared with US$4.3 billion, or 45 cents, a year ago.

Revenue from its business division, which includes Office software, rose 20 percent to US$4.9 billion. Sales in Microsoft’s entertainment division, which includes its Xbox console, fell to US$1.8 billion from nearly US$2 billion.

Sales of Windows for personal computers rose 2 percent, less than usual, as customers bought more low-cost notebooks that generate less money per copy for Microsoft.

Microsoft said it anticipated earning 51 cents to 53 cents on revenue of US$17.3 billion to US$17.8 billion in the current quarter. Analysts surveyed by Thomson Reuters had predicted a profit of 55 cents a share on US$18 billion in sales.

Microsoft shares gained 79 cents, or 4 percent, to US$22.32, then rose slightly in after-hours trading following the release.

The Redmond, Wash., company said it expected to feel the impact of a weakening economy in nearly all aspects of the business except in its entertainment area, where its Xbox 360 game console is picking up market share.

“In some respects, Microsoft is a great macro-economic indicator because they are so big,” said Katherine Egbert, managing director of Jefferies and Co. “They are not immune.”

The security fix, which Microsoft called “critical,” is for a vulnerability that could affect computers running Windows 2000, Windows XP and Windows Server 2003. Vista and Windows 2008 machines have added protection, but the fix should be applied to them as well, security experts said Thursday.

An attacker using the vulnerability could take remote control of the affected system, Microsoft said.

The hole is not protected by standard antivirus protections and is similar to a problem discovered two years ago, raising concerns that it has been exploited by hackers for a while, said Marc Maiffret, director of professional services at The DigiTrust Group, a Los Angeles-based security consulting firm.

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