Microsoft cuts profit predictions

3rd-quarter earnings fall 2 cents shy of analysts' forecast

April 19, 2002|By BLOOMBERG NEWS

REDMOND, Wash. - Microsoft Corp. reported yesterday that its fiscal third-quarter sales and earnings rose less than forecast. The world's largest software maker reduced estimates for this quarter and fiscal 2003.

The results were released after yesterday's close of trading. Shares fell 26 cents to $56.37 in regular trading but then sank more than $3.50 in extended trading.

Net income in the period that ended March 31 rose to $2.74 billion, or 49 cents a share, from $2.45 billion, or 44 cents, a year earlier, the company said. Sales rose 13 percent to $7.25 billion from $6.4 billion.

Analysts had expected a profit of 51 cents a share on sales of $7.34 billion.

Microsoft said it would miss analysts' sales and profit estimates for the fiscal fourth quarter ending in June and for the year starting in July. Microsoft has said worldwide demand for software has been slow to pick up as the U.S. economy rebounds from a recession that began in March 2001.

"It's pretty disappointing," said Noah Blackstein, manager of the $200 million Dynamic Power American Fund. He plans to sell the fund's 40,000 Microsoft shares today. "They missed the numbers and they guided lower, and the stock's going to follow the earnings."

Sales in the fiscal fourth quarter, which ends in June, will be $7 billion to $7.1 billion, the company said. Analysts had been expecting $7.65 billion. Profit this period will be 41 cents to 42 cents a share, compared with the average analyst forecast of 44 cents.

Profit for the fiscal year beginning in July will be $1.89 to $1.92 a share, Microsoft predicted. Analysts had expected an average of $2.01 a share. Sales will be $31.5 billion to $32.4 billion, Microsoft said, less than forecasts of $32.6 billion.

Analysts estimates for the third fiscal quarter had included a 10-cents-a-share gain from the sale of Microsoft's stake in Internet travel service Expedia Inc. Instead, Microsoft had a 15-cent gain from the Expedia sale, as well as 14 cents in expenses that analysts hadn't included in their estimates.

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