Ibexx & All,
Microsoft Issues Strong New Earnings Warning [DJ - 7/25/97]
Microsoft Corporation (NASDAQ: MSFT) today issued its stongest warning to date regarding prospects for the fiscal year ending June 30, 1998.
"Both revenues and earnings will be down sharply in the current fiscal year", stated Greg Maffei, Microsoft's Chief Financial Officer. "You'd all better dump this dog as soon as possible," commented Mr. Maffei, at the same time expressing high confidence in the long-term prospects for his company.
{In a later phone interview, CFO Maffei clarified that his reference to revenues and earnings being down for FY98 was as compared to FY99. "But our growth rate in revenues will be really crummy," added Mr. Maffei.) (In a later later phone interview, Mr. Maffei clarified that he was referring to earned (non-deferred) revenues. "The other revenues don't count," he explained.)
Microsoft had previously announced that it was planning to increase its Research and Development headcount some 32% this fiscal year (from 8,800 to 11,600). Today, however, CFO Maffei stated Microsoft's intention to transfer all of these new employees to the Office of the Treasurer. "They will all be developing advanced new methods to disguise our revenues and earnings," stated Mr. Maffei. "This is a major challenge, but if we don't do it, our stock price may continue to soar."
In a separate interview, Bill Gates, the Microsoft chairman, stated his confidence in the company's plan, adding that he was going to devote his full-time efforts during the current fiscal year to aiding in this effort. "Let's face it, our competitors now are toast. Our only real challenge for the future is to hide earnings," he said, adding that he is doubling the size of his new home as a temporary storage area for unhidden revenues.
Reaction to the announcements was swift. Rick Sherlund, a well regarded software analyst, who notably has a record of being right at least some of the time, commented: "I believe their warning and will keep my estimates low. After all, they're the ones who control the books, and I do want to keep my job.
In market action, Microsoft common stock was down sharply on the announcement. Trading volume was very high, with over 20 million shares changing hands. Late in the day, however, the stock had recovered all of its losses, following a large block purchase trade which some rumors attributed to Microsoft Corp. "We don't comment on the timing of stock buybacks or other market participation activities," stated Mr. Maffei. Mr. Maffei refused further comment, excusing himself in order to party.
In other related news, after the market close, Microsoft Corporation announced that all of its product lines were experiencing record growth rates. Mr. Maffei declined direct comment. |
