Dennis ---this is what I heard from the CFO during the conference call---Microsoft Corp.
Dow Jones Newswires -- July 23, 1999
DJ Microsoft's Maffei Continues Cautious Theme To Analysts
By Paula L. Stepankowsky
This story was originally published Thursday.
SEATTLE (Dow Jones)--Continuing his cautious tone set after Microsoft Corp.'s (MSFT) earnings release Monday, Chief Financial Officer Greg Maffei said it will be difficult for the company to outdo fiscal 1999 results in fiscal 2000.
At its annual meeting with Wall Street analysts, Maffei fleshed out in more detail why he's cautious about the year ahead.
Among the reasons for caution, he said, are slowing PC shipments, saturation of the company's Office product, the timing of the Windows 2000 release, increased competition and international economic uncertainty.
The trend toward sub-$1,000 PCs will make it less likely that computer makers will want to pre-load Microsoft's software before the units are sold. Buyers of cheap PCs, who will likely use them for the Internet, are also less likely to buy additional software from Microsoft.
Office 2000, which the company released recently, is off to a great start, Maffei said, but he said the growth rate is smaller than the growth rate in PC sales overall. He said the company will see more upgrades as a percentage of unit sales for office rather than sales of new products, something that will continue the trend toward declining revenues per unit for Office.
While Windows 2000, the successor to Windows NT, will be an important product and is likely to be released in calendar 1999, it's unlikely to produce a dramatic increase in revenue in the 2000 fiscal year, Maffei said.
He said as the company's revenue is more tied to three-year licensing agreements, revenue expectations must be reduced as customers, who already have the latest products, question how much they should pay to buy more.
The company is making a large investment in consumer and commerce products, but Microsoft is still looking for profitability in those areas. The company will also continue to invest heavily in other companies to align itself for growth in broadband and Internet applications.
"As we do more of these things, they are a drag on current earnings," Maffei said. "We're not getting paid the coupon we would get if we were investing the cash."
He said again that the company is considering a tracking stock for its Internet properties and that the senior management team is currently debating the issue.
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