July 19 (Bloomberg) -- Microsoft Corp., the world's biggest software maker, said fourth-quarter earnings rose 7.3 percent, held back by more than $1 billion in costs to fix faulty Xbox video-game consoles.
Net income increased to $3.04 billion, or 31 cents a share, from $2.83 billion, or 28 cents, a year earlier, the Redmond, Washington-based company said in a statement distributed by PR Newswire today. Sales advanced 13 percent to $13.4 billion, beating analysts' estimates.
The repair expenses eroded gains from new Windows and Office programs. Xbox unit sales fell short of Microsoft's original forecasts for the year and the business has lost more than $5 billion in five years, reigniting debate about whether Microsoft should be taking on Sony Corp. and Nintendo Co. at all.
``You have yet another misstep here with the Xbox,'' said Sarah Friar, an analyst at Goldman, Sachs & Co. in San Francisco with a ``buy'' rating on the stock.
Profit met the 31-cent average estimate of 12 analysts surveyed by Bloomberg. Sales projections averaged $13.3 billion.
Shares of Microsoft added 2 cents to $31.53 in extended trading after the report. They had gained 59 cents to $31.51 as of 4 p.m. New York time in Nasdaq Stock Market composite trading. They have risen 5.5 percent this year, lagging behind rivals such as Oracle Corp., Google Inc. and Apple Inc.
Laggard
Microsoft said profit in the quarter that began July 1 will be 38 cents to 40 cents a share on sales of $12.4 billion to $12.6 billion. Analysts anticipated earnings of 38 cents a share and sales of $12.4 billion, the survey showed.
The company raised its forecasts for this year, though the projections still trail analysts' estimates. Profit will be $1.69 to $1.73 on sales of $56.8 billion to $57.8 billion, compared with an average analyst estimate of $1.72 and $57.9 billion. Microsoft in April forecast profit of $1.68 to $1.72 and sales of $56.5 billion to $57.5 billion.
The new Windows Vista and Office 2007, which went on sale broadly on Jan. 30, fostered growth of more than 10 percent in the company's two biggest divisions. The company also benefited from rising sales of programs for server computers, where its growth is outpacing the total market.
Xbox has been the laggard. Microsoft said this month an ``unacceptable'' number of its Xbox 360 machines are experiencing a complete shutdown customers call the ``red ring of death,'' after the circle that appears on defective consoles. Chief Executive Officer Steve Ballmer, 51, extended the warranty and Microsoft is reimbursing users who have already paid for fixes.
The repairs cut profit by about 8 cents a share, according to Friar. At least eight analysts reduced their earnings per share projections after the announcement July 5, lowering the average estimate by 7 cents.
The company has sold (read: shipped to retailers) 11.6 million consoles as of June 30, missing its forecast for sales of 12 million amid competition from Kyoto, Japan-based Nintendo's Wii. This week, Microsoft said Vice President Peter Moore, who oversees the Xbox business, is leaving to take a job at Electronic Arts Inc.
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