Microsoft insulated from market ills

By John Fontana
Network World Fusion, 04/21/99

Seemingly immune from the recent ebb and flow of the high-tech market, Microsoft on Tuesday posted a 40% gain in earnings for its fiscal third quarter.

The software giant's net income was $1.92 billion, a diluted earnings per share of 35 cents for the quarter that ended March 31. The earnings compare to $1.34 billion and 25 cents per share in the same quarter a year ago.

Analysts had estimated earnings would be 32 cents per share.

Revenue totaled $4.33 billion, a 15% increase over the $3.77 billion for the same quarter last year. Microsoft also reported $350 million from investment gains in the quarter.

Microsoft officials attributed the favorable numbers to Windows NT Workstation migrations, and strong sales of its Office productivity suite and its server applications. The company also said results in Asian markets, which have been hurting most vendors, were much improved.

"Financially and operationally it was a very nice quarter," said Greg Maffei, Microsoft's chief financial officer. The quarter overshadows the problems PC makers, most notably Compaq and Hewlett-Packard, have been experiencing.

Microsoft reported $2.05 billion in revenue from its platforms group, up from $1.6 billion over the same quarter last year. The group includes Windows NT and its other operating system software. It also reported $1.94 billion in revenue from its applications and tools group, a 4% growth over last year. The group includes desktop applications, server applications and developer tools.

Microsoft shows no signs of slowing down.

SQL Server 7.0 was released in December and shipments for the quarter were up 50% over a year ago. Office 2000 will ship to large customers this month and be generally available in June. Last month, the company launched Internet Explorer 5.0. A new version of the BackOffice suite, which includes the latest version of all its integrated components, will ship shortly, according to Microsoft officials. Also last month, the company launched its electronic commerce strategy around Microsoft BizTalk, an XML-based framework for business-to-business commerce over the Internet.

Maffei did, however, warn that Microsoft remains guarded about growth in 1999 since enterprise infrastructures are likely to be locked down due to year 2000 concerns.

Shares of Microsoft were up 2 1/8 to 83 1/8 at the close of trading Tuesday, but the stock dropped off nearly 15% for April.