revenue growth was unimpressive
regards
MICROSOFT CORP. (MSFT) 83 1/8: The MSFT earnings report gave us a sense of deja vu after last week's Intel (INTC) report. As always, the company beat estimates, reporting Q3 EPS of $0.35 vs an estimate of $0.32. The whisper range was $0.34-0.35, so this report offered no significant surprises on the bottom line. As with Intel, however, revenue growth was unimpressive, at 14.8% year/year, which was the second slowest year/year growth rate this decade. Also as with Intel, Microsoft issued cautious statements about future revenues, saying that "we remain guarded about growth in 1999, given the likelihood that organizations will lock down their systems infrastructures due to year 2000 concerns." Bulls will note that MSFT is always cautious about future prospects, but it is notable that their caution appears justified this time around, as revenue growth is indeed slowing. Still, it is hard to get too down on Microsoft, as there are plenty of encouraging trends as well. Sales of the database platform, SQL Server 7.0, are off to a great start, up 50% year/year. And Microsoft can also look ahead to top line boosts from Office 2000, which will be available in June, and of course Windows 2000, which is scheduled for release sometime next year. These new offerings have the potential to boost MSFT revenue growth back into the 20-30% range next year. We could see some near term softness in MSFT stock -- it is trading down 1 1/8 to 82 on Instinet -- but don't look for it to last long, as there will probably be a anticipatory rally ahead of the June 10 Office 2000 release.
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