Tue. Oct. 20, 98===Microsoft Earnings Up 154 Percent=======
SEATTLE (AP) _ Microsoft Corp. (MSFT - news) reported a 154 percent rise in first-quarter earnings that the software maker attributed to
surprisingly strong overseas demand for its new Windows 98 operating system.
In announcing its earnings Tuesday, Microsoft said Windows was particularly strong in Japan despite the country's economic recession.
Microsoft said it earned $1.68 billion, or 62 cents per diluted share, in the three months ended Sept. 30, up from $663 million, or 25
cents per diluted share, in the same period a year earlier.
Revenue rose 26.3 percent to $3.95 billion from $3.13 billion.
The results for the just-ended quarter reflected a one-time gain of $160 million from the sale of the software subsidiary SoftImage. In
the first quarter of 1997, Microsoft had a write-off of $296 million related to the purchase of WebTV Networks.
Even when taking those charges into account, profits were $1.52 billion or 56 cents a share, up 58 percent from $959 million or 36
cents a share a year ago.
The numbers ''look terrific,'' said Rick Sherlund, an analyst with Goldman Sachs in New York. ''It was a blowout quarter and they gave
very upbeat guidance for the next quarter as well.''
Greg Maffei, Microsoft's chief financial officer, told analysts in a conference call that revenues and earnings should remain healthy
through the end of Microsoft's fiscal year, which ends June 30. He said earnings per share for the second quarter should be at least 35
percent higher than in the same period of 1997, which would make them about 57 cents a share, up from 421/2 cents a year earlier.
Analysts are estimating an earnings of 52 cents a share for the second quarter, according to Zacks Investment Research.
On top of Microsoft's revenues, the company has amassed a ''phenomenal'' $17.2 billion in cash and short-term investments, and has
no debt, Sherlund said.
Microsoft brought out Windows 98, its upgrade for its key operating system that runs most personal computers, on June 25. To date,
more than 10 million copies have been sold, either as retail packages or with new computers.
Pieter Knook, Microsoft's vice president for Asia, said in a statement, ''the retail acceptance of Windows 98 was quite strong in Japan.''
The company also said demand for Windows 98 was strong in several European countries.
Maffei said that while revenue growth has slowed for the company's business software suite Office 97, it still posted strong results.
The results were released after the close of stock trading. Microsoft stock closed down $2.683/4 to $100.25 a share on the Nasdaq Stock
Market.
The earnings were posted as Microsoft's lawyers defended it in a federal court in Washington, D.C., against the government's landmark
antitrust lawsuit against the world's largest software manufacturer.
The government contends Microsoft used its influence as the maker of Windows to try to dominate other software markets. Microsoft
says that while it played hard against competitors, it played fair.
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Microsoft Announces First Quarter Revenue and Income Solid demand from Europe and Japan drives results
Redmond, Washington— October 20, 1998 - 1:30 p.m. PDT — Microsoft Corporation today announced revenue of $3.95 billion for the fiscal first quarter ended September 30, 1998, a 26% increase over the $3.13 billion reported in the comparable quarter of last year. Net income reached $1.68 billion including a $160 million one-time gain on the sale of Softimage. This compares to the previous year's net income of $663 million which included the previously announced $296 million write-off of acquired in-process technology related to the purchase of WebTV Networks, Inc. Excluding these noncontinuing items, net income rose to $1.52 billion compared to the previous year's net income of $959 million, and earnings per share grew to $0.56 from $0.36.
"Demand was stronger than anticipated due to the successful launch of Microsoft® Windows® 98 in Japan and several European countries," said Greg Maffei, chief financial officer. "While revenue growth has slowed in Office 97, the product continued to post strong results and customer adoption of Windows NT® Workstation is at an all-time high."
"The retail acceptance of Windows 98 was quite strong in Japan as it provided consumers with new functionality to upgrade their PCs," said Pieter Knook, vice president, Asia region. "While we're pleasantly surprised by the strength of business this past quarter, the outlook remains tepid."
Since its launch on June 25th, worldwide demand for the Windows 98 operating system has resulted in more than 10 million customers acquiring either a Windows 98 retail upgrade, or a new Windows 98-based PC. Customer satisfaction remains high and PC makers continue to report lower support costs with Windows 98 than with Windows 95.
Also during the quarter Microsoft announced the shipment of Microsoft Office 2000 beta 1 to a record 20,000 customers and Solution Providers, providing an early opportunity for evaluation of the next version of the world's best-selling productivity suite.
On the server side, Microsoft Exchange continued its excellent momentum shipping more than 3 million clients for the 3rd consecutive quarter. Microsoft Exchange shipped more client licenses than Lotus Notes for the first half of calendar year 1998 according to both IDC and the Electronic Mail and Messaging Systems Newsletter. Microsoft SQL Server™ reflected similar momentum, posting a record quarter in revenues. Microsoft also announced the upcoming launch of SQL Server version 7.0 on November 16th at Comdex. Along with the gains in scalability and reliability in SQL Server 7.0, Microsoft and Compaq announced an initiative to integrate high availability features previously available only in Tandem's NSK, Digital UNIX, and the Open VMS operating system into future versions of Windows NT. Beta 2 code for Windows NT 5.0 operating system was broadly distributed this quarter to more than 250,000 developers, technical beta sites, and channel partners worldwide via the Microsoft Developer Network. Additionally, Microsoft announced worldwide availability of the Microsoft Visual Studio® 6.0 development system, the complete suite of development tools for building scalable enterprise solutions.
During the quarter, Microsoft released an updated version of MSN™ and announced plans to launch local MSN portals in 24 additional countries and regions, making it the most widely distributed portal in the world. The network includes several products that are leaders in their respective categories -- including news (MSNBC), automotive (MSN CarPoint™), email (MSN Hotmail) and games (MSN Gaming Zone) -- with a total reach of over 34%, meaning that one-third of all unique users of the Web access an MSN site in the average month according to Media Metrix. The announcement of a one-year $60 million deal with search providers AltaVista, Lycos, Infoseek, and Snap underscores the value of MSN as a distribution point for some of the Internet's best established brands and reinforces the status of MSN as one of the leading portal brands on the Web.
"We believe the breadth of these results reflects our dedication to the basic principle of continually listening to customers, innovating our products, and keeping the focus on making the best software we can to improve people's lives at work, home, and school," said Bob Herbold, chief operating officer. |
