Friday March 12, 7:56 am Eastern Time
Cs First Boston Reiterates Microsoft at Strong Buy
and:
Microsoft CFO sees strong worldwide demand for PCs
Reuters, Thursday, March 11, 1999 at 23:17
(Updates throughout with analyst comments)
By Martin Wolk
SEATTLE, March 11 (Reuters) - Microsoft Corp. (NASDAQ:MSFT)
Chief Financial Officer Greg Maffei said Thursday worldwide
demand for personal computers remains strong despite a typical
seasonal slowdown in sales.
"We've seen some preannouncements, some rumors of
preannouncements, some speculation that the PC business is
falling apart," Maffei said in a conference call with analysts.
"All evidence that we see suggests that is not true."
The conference call, which was open to reporters, was
called on short notice mainly to discuss how the company would
account for the final copies of Office 97 now being shipped to
customers with coupons good for a free upgrade to Office 2000.
But Maffei also said he wanted to calm concerns expressed
by some investors about the overall market for personal
computers.
"There is a seasonal slowdown just like every year," Maffei
said. "The business is fine. The revenue side is coming in just
as we expected and we're quite happy with the progress of this
quarter."
Maffei said Microsoft earnings for the current fiscal third
quarter should be in line with expectations despite plans to
defer $400 million in revenue for accounting reasons, Maffei
said.
While the news was seen as neutral, Maffei's bullish
comments on the state of the computer market could carry some
weight in the surging stock market, analysts said.
"It will be seen as a positive," said Chris Galvin of
Hambrecht and Quist. "The indications were that December was a
good quarter and March wasn't. Now it may not be as bad as many
were fearing."
Maffei said the $400 million in so-called unearned revenue,
related to the forthcoming release of the Office 2000 software
package, would be offset by an increase in investment income.
That will allow the company to meet the Wall Street
consensus estimate for its current fiscal third quarter,
currently at 65 cents a share, according to First Call,
compared with 50 cents a share a year earlier.
The "vast majority" of the unearned Office revenue will be
recognized in the fourth quarter, resulting in an earnings
increase of about 8 cents a share, he said.
The new version of Office, Microsoft's hugely profitable
package of word processing and spreadsheet software, will be
released to manufacturing by the end of March and widely
available in the next quarter, Maffei said.
As it has done with past versions of Office, Windows and
other software shipped with such coupons, Microsoft will report
much of the Office 97 revenue as "unearned revenue" on its
balance sheet for the current quarter.
Maffei said analysts who had been projecting revenue for
the current quarter at $4.6 billion should reduce their
projections accordingly to $4.2 billion. He noted, however,
that Microsoft has been typically conservative in its guidance
and could "achieve a little upside" on the revenue front.
Still, the revenue figures represent an expected sequential
slowdown from the second quarter, when Microsoft exceeded all
estimates with revenues of $4.94 billion.
Maffei also said the company is seeing a slight increase in
computer shipments in Japan and is benefiting from an
improvement in foreign exchange rates. |
