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To: 2MAR$ who wrote (484)	1/21/2001 11:04:54 PM
From: 2MAR$	Read Replies (1) \| Respond to of 762

MSFT ($61) shares rise on optimism for 2001 By Bloomberg News January 19, 2001, 1:50 p.m. PT update REDMOND, Wash.--Microsoft shares rose almost 10 percent Friday, after the software maker reported fiscal second-quarter earnings that met reduced expectations and reiterated its forecast for this fiscal year. The stock closed regular trading up $5.50 to $61. • Get the "Big Picture" • Related News • Message Boards Quote Snapshot MSFT 61.00 5.50 · Real-Time Quotes Enter symbol: · Symbol Lookup Quotes delayed 20+ minutes Microsoft, which gets about two-thirds of its sales from personal-computer software, last month cut forecasts for the quarter and year ending in June after consumers and businesses reduced spending because of slowing economic growth. Microsoft yesterday said it expects to meet those reduced targets for the full year, though it is guarded about the economic outlook. "The expectation is that the worst could very well be over and that results from here continue to go higher," said George Godfrey, an analyst at ING Barings, who rates the shares "buy." Microsoft late Thursday reported second-quarter net income of $2.62 billion, or 47 cents a share, level with results from the same period a year earlier. Revenue climbed 7.7 percent to $6.59 billion from $6.11 billion, lifted by increased demand for Windows 2000 software for businesses. The company said third-quarter earnings will be 42 cents to 43 cents a share on sales of $6.3 billion to $6.4 billion. That's just shy of the average profit estimate of 44 cents from analysts polled First Call. The company said it will meet previous estimates for the fiscal year ended in June. "March guidance was only cut by a penny, and they stuck to the annual views," said Godfrey. "Given some of the disasters we have had...a penny is no big deal." Leading chipmaker Intel and PC maker Gateway both cut their forecasts for 2001 when they reported fourth-quarter earnings. IBM reported fourth-quarter sales and profit that beat estimates, helped by higher sales of computer servers. Analysts said they are optimistic because of growth in Windows 2000 sales and an increase in deferred revenue, which generally indicates Microsoft has signed more long-term contracts with business. The company usually recognizes revenue from those agreements over a period of a year, Godfrey said. "What's happening here is clearly Windows 2000 is gaining traction both in client and server, and the results offset the weakness in the consumer market," Don Young, an analyst at UBS Warburg, said in a statement. "Microsoft's core growth rate is better than investors realize. It's becoming clear that Microsoft can grow faster than PC demand." Young rates the shares "strong buy." Microsoft said yesterday it expects worldwide growth in PC unit sales this year to slow to about 10 percent. That growth rate was about 19 percent in 2000, according to research firm IDC. Young pointed out that the desktop computer version of Windows 2000 posted growth of 40 percent compared to this period last year, when an earlier version of Windows for business desktops was available. Sales of server software, including the server versions of Windows 2000, grew 21 percent. "Some concerns about the outlook are now taken away,'' said Boris Boehm of Nordinvest in Hamburg. Even if the economy slows down, "software is needed to make businesses more effective and keep their margins high." Copyright 2001, Bloomberg L.P. All Rights Reserved.