Microsoft Fiscal Q1 Rev Beats, EPS In Line

Microsoft (MSFT) this afternoon reported fiscal Q1 revenue slightly ahead of expectations, and profit in line with consensus.

Revenue in the three months ended in September rose to $17.37� billion, yielding EPS of 68 cents.

Analysts on average were expecting $17.24 billion and 68 cents a share.

Microsoft’s Windows & Windows Live division saw revenue rise 2%, year over year, to $4.87 billion from $4.79 billion a year earlier.

Business division revenue rose 8% to $5.62 billion from $5.22 billion a year earlier, despite a difficult year-over-year comparison with the year-earlier’s Microsoft Office introduction. Server & Tools revenue rose to $4.25 billion from $3.86 billion.

The company said operating expenses will rise this year to a range of $28.6 billion to $29.2 billion, in part as a result of the inclusion of expenses for its acquisition of Skype. The results of Skype will start to be included in the company’s income statement this quarter, Microsoft said. That is up from a prior range of $28 billion to $28.6 billion. Last fiscal year, Microsoft’s operating expenses were about $27 billion.

CFO Peter Klein remarked, “We saw customer demand across the breadth of our products, resulting in record first-quarter revenue and another quarter of solid EPS growth. Our product portfolio is performing well, and we�ve got an impressive pipeline of products and services that positions us well for future growth.”

Microsoft said $11.2 billion remained in the company’s $40 billion repurchase program kicked off in 2008. The company bought back $1.93 billion of its stock last quarter, down from the year-earlier’s $4.4 billion.

Microsoft shares were down 29 cents, or 1%, at $26.75 in late trading.

Microsoft will hold a conference call with analysts at 5:30 pm, Eastern, and you can catch it here.

Update: During a brief chat following the results, Microsoft’s investor relations director Bill Koefoed was kind enough to take a few minutes to chat by phone.

Koefoed noted that the 2% rise in Windows revenue contained some brighter spots in PC sales. Overall consumers PC sales were up 14% when “netbooks” shipments of Windows are left out of the equation. Netbook units carrying Windows fell 50%, year over year, he pointed out. Total business PC Windows shipments rose 5% to 6%.

The Business Division was helped by 25% growth in Microsoft’s “Lync” collaboration products, which, while only in the “hundreds of millions” on a revenue basis nevertheless sets up Micrsosoft well to exploit opportunities presented by Skype. He said Microsoft’s “Dynamics” product for backoffice software saw revenue rise in the “high teens” on a percentage basis.

Regarding the Yahoo! (YHOO)/Microsoft partnership for keyword search, Koefoed said the two “still have the monetization problems we had last quarter,” but that progress is being made. Much of the heavy lifting for further progress rests on Microsoft’s shoulders, and Koefoed said the company has “the right people working on it” and will make further progress.

Update 2: During the conference call, CFO Klein said that this quarter, the Windows division will continue to be “impacted” by the same market dynamics as the last few quarters, with emerging markets outpacing developed markets. The Business Division will see “transactional” revenue lag the PC market, while “multiyear licensing revenue,” roughly 60% of its total, will increase by “mid to high single digits” on a percentage basis.

The Server and Tools division will see transactional revenue track the global hardware market, he said, while multiyear revenue will increase by “low double digits.”