Microsoft's earnings increase 54% Figures partly driven by sales of Windows 95

January 19, 1996|By N.Y. Times News Service

SAN FRANCISCO -- Microsoft Corp. reported yesterday that its earnings rose 54 percent in its fiscal second quarter, driven in part by sales of Windows 95. The results exceeded Wall Street estimates and set the stage for a continued rally in the technology stocks.

Microsoft reported its results after the close of the market. In Nasdaq trading, Microsoft shares closed at $87.625, up $2.75, on a strong day for technology shares after IBM posted positive results.

Analysts said they were reassured by the consistency with which Microsoft had been beating expectations for its earnings.

"The surprise was that there was no surprise, and perhaps that was what people were looking for after the controversy in the quarter regarding the Internet and the adoption rate for Windows 95," said Christopher J. Galvin, analyst with Hambrecht & Quist.

He referred to earlier reports that Microsoft lacked a strategy to take advantage of the growing popularity of the Internet, the global computer network, and that its new operating system, Windows 95, was not selling at the rate some analysts had expected.

For the quarter, which ended Dec. 31, Microsoft had earnings of $575 million, or 90 cents a share, up from $373 million, or 60 cents a share, in the comparable period a year earlier. Analysts had forecast a profit of about 84 cents.

The results for the most recent quarter included a nonrecurring gain of 3 cents a share from the sale of stock in the British publisher Dorling Kindersly. Revenues rose 48 percent, to $2.20 billion, from $1.48 billion in the second quarter of 1995.

"It was a pleasing quarter," said Greg Maffei, Microsoft's treasurer. "People have often speculated, including us, about a desktop saturation, a slowing down of desktop software sales. We are not seeing it."

He said Microsoft had not published a sales goal for Windows 95, so any shortfall from estimates was the result of someone else's inflated expectations.

For the first six months of the fiscal year, the company earned $1.1 billion, or $1.68 a share, compared with $689 million, or $1.10 a share, a year earlier.

With revenues of $672 million, such sales were up 75 percent from the second quarter of the prior year. Retail sales of Windows 95 have not grown as rapidly.

Revenues from retail upgrades to Windows 95 were $180 million in the second quarter, down from $260 million in the previous three months, a drop that was expected.

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