Microsoft Announces Strong Quarterly Profits
Revenue Growth Rate Slows to Lowest Level Since 1996
April 22, 1998 04:15 PM
REDMOND, Wash., April 22 /PRNewswire/ -- Microsoft Corporation MSFT today announced net income of $1.34 billion, and earnings per share of $0.50 for the quarter ended March 31, 1998, a 25% increase over the $0.40 earnings per share reported for the corresponding quarter last year. Revenues totaled $3.77 billion, an 18% increase over the $3.21 billion during the same quarter last year.
"We are gratified that the quarter's results confirm that consumer demand remains strong for Microsoft's products that enable people to be more productive, communicate more easily and access information on the Internet," said Greg Maffei, chief financial officer. "But it is critical to note that our growth has slowed for each of the last four quarters, and we are likely to experience slower growth for the balance of calendar 1998."
"Business fundamentals continued strong across most geographies, especially North America, fueled by the continued strong adoption of Office 97 by large and small customers alike on a worldwide basis. We remain concerned about our business in the Far East, although there is some evidence that the business there is not getting weaker," noted Steve Ballmer, executive vice president.
Momentum continued to build for sales and deployments of Windows NT(R) Server and the BackOffice(R) suite of products. Microsoft announced new or enhanced alliances with Amdahl, Digital Equipment, NCR, and Wang in order to assist these companies in building their Microsoft technology skills and to jointly offer new products and services to help our largest customers migrate more quickly to the Microsoft platform in their enterprises. Developer support continued to build as well, as the number of applications available for Microsoft(R) SQL Server 6.5 has quadrupled over the past 18 months. Plus, Microsoft's upcoming release of SQL Server 7.0 was met with tremendous industry support at a sold-out Developer Workshop in Los Angeles, with 2000 attendees, representing 1200 companies from around the world.
Windows NT Workstation continues to post impressive growth as recent industry analyst reports show that workstations equipped with Windows NT more than doubled in 1997. According to a 1997 study conducted by Deloitte & Touche for Digital Equipment Corporation, the average three-year Total Cost of Ownership (TCO) for technical workstations running Windows NT Workstation is 37% less than for comparable machines. The findings suggest that for a group of 25 technical workstations, three-year savings in TCO would amount to almost $1 million.
During the quarter Microsoft Office 98 Macintosh Edition was introduced and drove two outstanding months for our Macintosh Office business, as the product has been very well received by Mac enthusiasts and the press. Office 98 demonstrates Microsoft's commitment to Macintosh customers and our reinvigorated relationship with Apple.
Subsequent to the end of the quarter, Microsoft and Sony Corporation announced plans to begin collaboration to create a convergence between the personal computer and consumer AV electronics platforms. To facilitate this convergence the two companies plan to cross-license key technologies including Microsoft's Windows CE operating system and Sony's Home Networking Module.
"Consumer enthusiasm for the Windows operating system has never been stronger. Customers want computer products that are affordable, reliable, simple to use, and for which the widest possible range of choices exist for third-party hardware, software, solutions and services," said Bob Herbold, chief operating officer. "We are pleased to be taking Windows to an exciting new level of performance with the soon-to-be-released Windows 98."
This press release contains statements that are forward looking. These statements are based on current expectations that are subject to risks and uncertainties. Actual results will vary because of factors such as PC shipment growth; technological shifts; customer demand; competitive products and pricing; product mix, ship schedules, life cycles, and terms and conditions; litigation; and other issues discussed in the Company's Form 10-K.
Founded in 1975, Microsoft is the worldwide leader in software for personal computers. The company offers a wide range of products and services for business and personal use, each designed with the mission of making it easier and more enjoyable for people to take advantage of the full power of personal computing every day.
NOTE: Microsoft, BackOffice, Windows and Windows NT are either registered trademarks or trademarks of Microsoft Corporation in the United States and/or other countries.
Other products and company names mentioned herein may be the trademarks of their respective owners.
Microsoft Corporation
Income Statements
(In millions, except earnings per share)
Three Months Ended Nine Months Ended
Mar. 31 Mar. 31
1997 1998 1997 1998
Revenue $3,208 $3,774 $8,183 $10,489
Operating expenses:
Cost of revenue 297 317 843 883
Research and development 492 597 1,409 1,791
Acquired in-process technology 0 0 0 296
Sales and marketing 750 829 2,112 2,493
General and administrative 101 104 268 305
Total operating expenses 1,640 1,847 4,632 5,768
Operating income 1,568 1,927 3,551 4,721
Interest income 119 190 316 489
Other expenses (84) (60) (179) (181)
Income before income taxes 1,603 2,057 3,688 5,029
Provision for income taxes 561 720 1,291 1,896
Net income 1,042 1,337 2,397 3,133
Preferred stock dividends 7 7 8 21
Net income available for common
shareholders $1,035 $1,330 $2,389 $ 3,112
Earnings per share (A):
Basic $ 0.43 $ 0.55 $ 1.00 $ 1.29
Diluted $ 0.40 $ 0.50 $ 0.92 $ 1.17
(A) Earnings per share for the three and nine months ended March 31, 1997
have been restated to reflect a two-for-one stock split in February
1998
Microsoft Corporation
Balance Sheets
(In millions)
June 30, 1997 Mar. 31, 1998
Assets
Current assets:
Cash and short-term investments $ 8,966 $12,322
Accounts receivable 980 1,055
Other 427 358
Total current assets 10,373 13,735
Property, plant, and equipment 1,465 1,416
Equity investments 2,346 4,122
Other assets 203 272
Total assets $14,387 $19,545
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 721 $ 908
Accrued compensation 336 225
Income taxes payable 466 527
Unearned revenue 1,418 2,463
Other 669 746
Total current liabilities 3,610 4,869
Stockholders' equity:
Convertible preferred stock 980 980
Common stock and paid-in capital 4,509 6,984
Retained earnings 5,288 6,712
Total stockholders' equity 10,777 14,676
Total liabilities and
stockholders' equity $14,387 $19,545
Microsoft Corporation
Channel and Product Group Revenue
(In millions)
Three Months Ended Nine Months Ended
Mar. 31 Mar. 31
1997 1998 1997 1998
Channels
United States and Canada $ 938 $1,110 $2,509 $ 3,071
Europe 799 849 1,857 2,332
Other International 511 582 1,328 1,658
OEM 960 1,233 2,489 3,428
Total revenue $3,208 $3,774 $8,183 $10,489
Product groups
Platforms $1,675 $1,965 $4,352 $ 5,545
Applications & Content 1,533 1,809 3,831 4,944
Total revenue $3,208 $3,774 $8,183 $10,489
SOURCE Microsoft Corporation
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