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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: sciAticA errAticA who wrote (32440)	4/25/2003 1:50:06 PM
From: sciAticA errAticA	Read Replies (1) \| Respond to of 74559

Microsoft sees flat economy No. 1 software firm expects slow growth over next 12 months, but says it can expand product lines. April 25, 2003: 7:42 AM EDT SAN FRANCISCO (Reuters) - Microsoft Corp. Chief Executive Steve Ballmer said he saw no signs of a strengthening global economy within the next 12 months, but added that the world's largest software maker sees opportunities even without an upturn. Speaking to Reuters in an interview Thursday, Ballmer also touched on the issue of expensing stock options, saying the company has an "ongoing dialogue" with its peers in technology but did not give any indication on where Microsoft stood in the debate. On the sidelines of the launch of Microsoft's latest server software product, Windows Server 2003, Ballmer described the economic outlook with a typically cautious tone. "From what we've seen in the market we are expecting things to remain slow in terms of growth over the course of the next 12 months," he said. Redmond, Wash.-based Microsoft reported higher quarterly earnings last week that pushed its cash to $46 billion but issued an earnings outlook for its next fiscal year to June 2004 that fell slightly short of analysts' forecasts. "I'm not sure if we have better clarity than anyone else in the world," Ballmer said, "I'm not sure we're even all that clear on where the economy is going." While Microsoft has always been considered a high-tech bellwether stock, whose value kept on rising and turned many Microsoft employees into millionaires, analysts argue that it has become more dependent on the health of the global economy, rather than outpacing "old economy" companies via innovation. Asked if Microsoft were more exposed to the swings of the world's economy because of its size, Ballmer said: "We are a sufficient part of the overall information technology (IT) spend, which is tied to the world economy." "Our stock is certainly tied to what goes on in the global economy," Ballmer added. But he also said there were still big opportunities in technology to justify viewing Microsoft as a growth company. "It's not fair to be pigeonholing us as either tech or sort of old economy," he said. He pointed to the launch of Microsoft's latest server software, the firm's most important bid yet to convince large businesses it can deliver security, affordability and reliability for critical computing tasks. In the past, such product launches typically generated further growth for Microsoft as customers upgraded software, and in turn fueled an ever-increasing stock price. Like many technology firms, Microsoft has long used stock options, which give recipients the right to buy shares at a fixed price, to attract and keep software engineering talent. Earlier this year, however, new rules were formulated requiring companies to treat stock options as a regular expense, pitting the accountants against the technology industry, which has also followed Microsoft's lead in using stock options as a key worker incentive. Craig Barrett, chief of Microsoft's closest technology partner, Intel Corp., added more fuel to the debate this week by suggesting CEOs may refuse to certify financial results if stock option expensing was forced upon them. "We have said we do understand the economic rational (of expensing stock options), but we are also the member of an industry that is confronting the issue," Ballmer said. Ballmer gave no indication whether Microsoft would side with its technology peers, adding "we're trying to work through our thoughts inside the industry. We have an ongoing dialogue with other industry participants on the issue." money.cnn.com