Microsoft posts higher earnings, splits stock

Microsoft Corp. said revenue increased 10 per cent in its second fiscal quarter to US$8.54 billion, a fraction less than analysts had been expecting but still higher than any quarter in its history. It also announced a two-for-one stock split and an annual dividend for its shareholders.

Net income came in at US$2.55 billion for the period ending Dec. 31, including a US$282 million charge for investment impairments and a US$126 million credit related to a favourable tax court ruling, the company said. That was up from net income of US$2.28 billion in the prior year’s second quarter, Microsoft said in a statement Thursday.

The company characterized its results as “solid” in every business, but also warned that it doesn’t expect global IT spending to pick up any time soon.

“We’re pleased to deliver solid results in a challenging global economic environment,” Microsoft Chief Financial Officer John Connors said in a conference call. “Corporate IT spending continues to be tepid, but we were delighted to see our server platforms doing well despite that weakness.”

Microsoft also announced an annual dividend for shareholders and said its board has approved a two-for-one stock split. The dividend of US$0.16 per share (pre-split) is payable March 7 to shareholders of record on Feb. 21. As a result of the split, shareholders will receive an additional share for each share they hold on Jan. 27, the company said.

Declaring a dividend shows the board’s confidence in Microsoft’s long-term growth opportunities and financial strength, Connors said in the statement. At the same time, he acknowledged several risk factors that investors should be aware of, including the threat posed by the Linux operating system.

“Linux continues to be a threat to our server business. The ramifications of free software to our business model should be obvious to everybody,” he said.

The company ended the quarter with cash and short-term investments totalling US$43.4 billion, up from US$38.7 billion at the end of the June quarter six months earlier.