Thread,
Ooops! The evil empire is short of revenue just like Dell.
Microsoft to Defer $400 Million in 3rd-Qtr Revenue (Update6)
(Adds investor comment in 14th paragraph and details on
drop in revenue in 9th paragraph.)
Redmond, Washington, March 11 (Bloomberg) -- Microsoft
Corp., the world's biggest software maker, said it expects sales
to fall short of estimates in its current quarter as it defers
$400 million of revenue because of a delay in the introduction of
the Office 2000 word-processing and spreadsheet program.
Chief Financial Officer Greg Maffei said $400 million must
be deferred from the fiscal third quarter ending March 31 because
it can only be recognized when customers redeem coupons for
Office 2000 that were received when paying for Office 97.
Analysts were expecting about $4.65 billion in total revenue for
the quarter. The deferred revenue will be recognized in the
fourth quarter, Maffei said.
Office 2000 was originally expected to be in stores by the
end of March, though Microsoft said in November that the product
wouldn't be widely available until the June quarter because of
continuing development work. Reaction to the revenue shortfall is
expected to be more muted than for Dell Computer Corp., the top
direct seller of PCs, whose stock tumbled last month after
reporting that revenue rose less than expected.
''I don't see any negatives and it could end up being a mild
positive,'' said Bill Whitlow, a portfolio manager with Safeco
Northwest Fund, which owns Microsoft shares. ''Maybe investment
income will be a little higher than previously thought.''
Among its upgraded features, Office 2000 relies more heavily
on the Internet than previous editions.
The revenue impact will reduce earnings per share by 8 cents
in the third quarter but that will be offset by higher than
expected investment income, Maffei said. The company still
expects to meet consensus earnings estimates of 65 cents a share
in the third quarter because of those investment gains, he said.
Microsoft has a cash hoard of more than $19 billion.
Per-share earnings in the fourth quarter will be about 8
cents higher than analysts previously expected, Maffei said.
The revenue deferral means the third quarter will see the
biggest sequential drop in quarterly revenue in the company's
history. In the second quarter, revenue totaled $4.93 billion.
PC Demand
''The business is fine and (personal computer) demand is
definitely there,'' said Maffei. ''We are seeing the usual
seasonal trend in our business,'' he said. ''Nothing more or
less.''
The briefing by Maffei follows Wall Street nervousness about
Dell and Compaq Computer Corp. amid signs of slowing PC
shipments. The software powerhouse has a reputation for managing
analyst expectations to avoid unpleasant surprises.
Office 2000 is the next generation of the popular group of
word-processing and spreadsheet software. Analysts had expected
it to be widely available in stores in the March quarter after
the company said it would be released to CD-ROM manufacturers in
the March quarter.
Microsoft expects ''good customer demand'' for Office 2000,
Maffei said.
''This is not a very large contributor to Microsoft at this
point,'' said Brett Berry, a portfolio manager with Bailard,
Biehl & Kaiser, which owns shares in Microsoft. ''With Dell it
was a pretty big cylinder in their engine.''
The Office line of software products accounted for about a
third of Microsoft's total revenue of $14.5 billion in fiscal
1998, analysts estimate.
Maffei also said Microsoft is seeing its business in Japan
improve, though it may only be a cyclical improvement in demand
because of the end of the fiscal year.
''Japan does appear to be getting a little better,'' he
said.
Shares of Redmond, Washington-based Microsoft rose 1/16 to
161 7/16. The disclosure on Office 2000 and Microsoft's revenue
was made after the close of regular U.S. trading.
The stock has doubled over the past year though it's down
from its record high of 175 on Jan. 29.
Brian H.
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