How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 490.06

+0.7%

3:59 PM EST

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To: JC Jaros who wrote (47963)	7/18/2000 5:44:49 PM
From: Eric Wells	Read Replies (2) of 74651

JC - I believe there are three reasons why operating income for quarter is less than it was for the corresponding quarter of last year (June, 30, 1999): 1. In the June 1999 quarter, Microsoft recorded $200 million in revenues from the Office 2000 Technology Guarantee program - this was revenue that actually occurred in the previous quarter (March 1999) - but Microsoft did not record the revenue until the product shipped in the June 1999 quarter. 2. Sales and Marketing expense are significantly higher this quarter than for the same quarter last year. This is most likely due to the launch of Windows 2000. The company incurs spikes in marketing expense with any major product launch. Although Windows 2000 technically started shipping last quarter, a great deal more marketing and advertising for the product most likely occurred this quarter - and thus, the large sales and marketing number. Sales and marketing expense for Windows 2000 will taper off as time goes on, while revenue will increase (provided the product does well). 3. I would guess that revenue from current versions of SQL Server and Exchange is drying up as businesses wait for the next releases of these products (version 2000). It could be argued that with the timing of product launches, this was a bit of a slow quarter for Microsoft, while the same quarter last year was very strong. Windows 2000 has not been out long enough for massive large scale deployments by businesses - but I would guess that if the product is good (which I think it is), we could see greater revenue from Windows 2000 over the next couple of quarters. Taken these factors into account, this looks like a pretty good quarter to me. And even if they do realize $1.1 billion in investment gains (pre-tax) - well, that's more cash to invest in the future of the company. Disclosure: long MSFT. Thanks, -Eric Wells

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