Microsoft profits surpass estimates

Sales of Office 2000, Windows NT boost quarterly revenue

July 20, 1999|By BLOOMBERG NEWS

REDMOND, Wash. -- Microsoft Corp., the world's biggest software maker, reported yesterday that its fiscal fourth-quarter profit jumped 62 percent, beating estimates, on strong sales of its Office 2000 group of business software.

Earnings for the period that ended June 30 climbed to $2.20 billion, or 40 cents a share, from $1.36 billion, or 25 cents a share, a year earlier. The average analyst estimate was 36 cents a share.

Revenue rose to $5.76 billion in the quarter, from $4 billion a year earlier.

Microsoft, whose Office product line commands nearly 90 percent of the office-productivity software market, benefited from the introduction of 2000, the latest upgrade to the group of word processing, spreadsheet and presentation programs. Windows NT, the industrial-strength version of the flagship computer operating system, also was a major growth driver.

It was a "solid quarter," said William Epifanio, an analyst at J. P. Morgan Securities Inc., who has a "buy" rating on Microsoft.

Microsoft warned that its revenue growth rate will decline in fiscal 2000, which began July 1, due to slowing personal computer demand, uncertainty surrounding the Year 2000 bug and global economic conditions, Chief Financial Officer Greg Maffei said in a statement.

Shares of Microsoft fell $1.0625 yesterday to $98.375 in trading of 39.6 million shares, making it the most active stock in U.S. trading. The stock closed at a record $99.4375 on Friday.

With the latest results, Microsoft has beat earnings forecasts for the past seven quarters.

The landmark antitrust trial involving Microsoft, which ended last month, had no discernible effect on the bottom line, analysts said.

Also yesterday, Microsoft agreed to sell its Sidewalk online entertainment guide to rival Ticketmaster-CitySearch Inc. for about $283 million in stock, intensifying the software company's pullback from money-losing Internet businesses.

The sale underscores that Sidewalk, launched in 1997, never lived up to the initial fanfare that it would become a potent rival to local newspapers, grabbing advertising and classifieds. Microsoft spent heavily to promote and expand Sidewalk into 77 cities, offering guides to restaurants, local events and other information, but investment costs outpaced revenues.

"It's tough to make money in that market," said Steve Kirsch, chairman of Go Network, the Walt Disney Co.'s network of Web sites.

Ticketmaster-CitySearch, which serves 33 cities, is hoping to sell a lot more tickets to Internet visitors to its sites.

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