Here’s How Microsoft Beat Wall Street’s Expectations

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Steve Ballmer

The years of Microsoft (NASDAQ:MSFT) Chief Executive Officer Steve Ballmer’s tenure have been come to be known as the “lost decade” by technology writers and industry experts. Ballmer has taken a great deal of criticism for the poor performance of Microsoft’s stock since he assumed the leadership position in January 2000; the stock has lost more than 35 percent of its value in the past 14 years, a symptom of Microsoft’s inability to keep up with the changing technological trends. Since its software populates the majority of the world’s personal computers, Microsoft has suffered as a result of the shift in consumer and business spending to tablets and smartphones and away from personal computers.

At one time, the company dominated the tech industry, but since 2000, competition from rivals like Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) — companies better positioned to profit off technology’s turn to mobile computing — has left Microsoft playing catch up. The company’s key releases in search and in tablets have fallen flat, or at least short of surpassing the competition. With each passing product launch, those competitors are pulling farther and farther ahead. Further, long-time business writer Kurt Eichenwald, in his August 2012 Vanity Fair piece, described Bill Gates’s successor — Ballmer — as the responsible party. Now, with Ballmer looking for his own replacement, the question of leadership has captured the imagination of technology analysts to such an extent that the company’s second fiscal quarter earnings were almost overshadowed by the absence of news on Microsoft’s search for a new chief executive officer.

Even though Microsoft has fallen behind its competitors, it is important to remember the maker of the Windows operating system is still a very profitable company, and its financial results for the last quarter of 2013 prove that point. Both revenue and profit beat Wall Street’s expectations; sales soared to $24.52 billion in the second fiscal quarter, an increase of 14 percent from the year-ago quarter and well above the consensus estimate of $23.5 billion. Operating income totaled $7.97 billion while net income came in $6.56 billion, pushing earnings to 78 cents per share. Comparatively, analysts had forecast Microsoft to generate earnings of 67 cents per share.

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