Thread ---Microsoft Corp.
Dow Jones Newswires -- June 30, 1999
DJ Microsoft Says Co 'Comfortable' With 4Q Earns View
By Cecilia M. Kang
PALO ALTO, Calif. (Dow Jones)--Microsoft Corp.'s (MSFT) chief financial officer said a change in
the way the company classifies revenue will add 1 cent a share to fourth quarter earnings and a penny
to fiscal 2000 earnings.
In a conference call Wednesday to announce accounting and disclosure changes, Chief Financial
Officer Greg Maffei said he is "very comfortable" with analysts' fourth quarter earnings estimates,
adding he expects Wall Street to raise its estimates by one penny in light of the new classification
system.
A First Call Corp. survey of analysts' estimates has Microsoft earning 35 cents a share in the fourth
quarter and $1.34 a share for fiscal 2000.
Microsoft plans to announce its fourth quarter and fiscal 1999 earnings July 19 and said its
conference call is generally unrelated to earnings.
Maffei also said the Securities and Exchange Commission has launched an investigation into the
Redmond, Wash., software company's revenue reserves.
Triggered by a January story in The Wall Street Journal, the SEC requested information on Microsoft
to review its reserves, Maffei said, adding "this investigation will not be material to our performance."
Maffei said he has been aware of the investigation for a few months and that the investigation began
around January. The accounting changes announced in the call are unrelated to the SEC investigation,
he said.
The Wall Street Journal reported in its Digits column on Jan. 14 that former Microsoft internal auditor
Charles Pancerzewski charged in a wrongful-discharge suit in 1997 that the company manipulated
hundreds of millions of dollars in its revenue reserves to make its profits appear more stable.
In the case, Pancerzewski's lawyer referred to a 1995 e-mail message from former CFO Mike
Brown to Chief Executive Bill Gates. In the e-mail, Brown wrote: "I believe we should do all we can
to smooth our earnings and keep a steady state earnings model," according to a court transcript.
Without disclosing terms, the two parties settled the case, according to the article.
Maffei declined to elaborate on the inquiry, saying it is a private review by the SEC.
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